Employment 2020

Last Updated September 08, 2020

Puerto Rico

Law and Practice

Authors



Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C. has attorneys in its labour and employment law department that practise in all areas of labour and employment law in the private and public sectors. Their practice includes representing clients in connection with the negotiation and administration of collective bargaining agreements; operating as trial counsel in federal and Puerto Rico courts, before administrative agencies and in labour arbitration and National Labor Relations Board cases; and client counselling regarding compliance with Puerto Rico and federal employment discrimination statutes, employment terminations, federal and state wage and hour laws, workers' compensation, employee benefits and other laws governing matters of employment. Clients include employers in the aerospace, airline, IT services, manufacturing, construction, health, retail services, solid waste, and insurance or insurance claims industries. Members of the department also represent clients in business-related immigration procedures before the United States Citizenship and Immigration Services and US Consulates around the globe.

Over the past year, there have been a number of developments in the area of labour and employment-related legislation in Puerto Rico. 

Law No 83

On 1 August 2019, the Puerto Rico government enacted Law No 83, which creates unpaid leave of up to fifteen days for employees who are, or have family members who are, victims of domestic violence, gender-based violence, child abuse, sexual harassment in the workplace, sexual assault, or aggravated stalking, in order for the employee to address the situation and/or seek assistance, as long as the employee is not the perpetrator of the conduct. Under this statute, employers must:

  • provide the special leave to any qualifying employee who requests it;
  • keep all information and/or documents relating to an employee who requests the leave strictly confidential; and
  • provide employment reservation to any employee who becomes absent as a result of using the special leave, and reinstate them to their position at the conclusion of the leave.

Employers are also required to advise employees of their rights and obligations under this law as part of their workplace rules and protocols.

Law No 150

Subsequently, on 8 October 2019, Law No 150 was passed, with the purpose of protecting employees from discrimination or adverse employment decisions based on their credit information. As a result, employers and potential employers are prohibited from:

  • terminating, denying benefits or compensation, promoting, refusing to hire, or otherwise discriminating against an employee or applicant on the basis of their credit information or credit history;
  • verifying or investigating the credit history of an employee or applicant; or
  • ordering or obtaining from a credit agency the credit history of an employee or applicant for employment. 

Certain positions – such as management-level positions, finance positions, positions of public trust, and positions for which a credit record is permitted or required by law, among others – are exempted from this prohibition. However, if an employer intends to request or consider the credit history of an employee or applicant for employment under one of the exceptions, the employer must obtain the employee or applicant’s written consent in advance.

Law No 90

In a notable development, on 7 August 2020, the government of Puerto Rico enacted Law 90 to prohibit workplace harassment (commonly referred to as “mobbing”). Previously, workplace harassment had not been recognised under the law in this jurisdiction.

The “Law to Prohibit and Prevent Workplace Harassment in Puerto Rico” (our translation), applies to all employees in the private and public sectors, including temporary and fixed-term employees. It defines the term “workplace harassment,” and requires employers to take affirmative steps to reduce and eliminate it, including adopting and implementing anti-harassment policies. It also requires employers to address and investigate all allegations of workplace harassment. 

The new law provides a non-exhaustive list of the conduct and actions that shall be considered unlawful workplace harassment. The term “workplace harassment” is defined as malicious conduct that is unwanted, repetitive and abusive, arbitrary, unreasonable or capricious, not related to legitimate business interests, and that infringes on constitutionally protected rights, such as the protection against attacks on the employee’s reputation or private life, or risks against the employee’s health and integrity. Some examples include:

  • jokes regarding an employee’s physical appearance;
  • disregarding an employee’s work-related opinions or ideas in a humiliating way;
  • imposing multiple disciplinary actions that are determined to be reckless; and
  • making public comments regarding an employee’s private or family life.

The law provides, as a remedy, double the amount of any damages caused to the employee.

Pursuant to the law, the employer shall be liable for the actions of its supervisors and other employees who engage in workplace harassment, when the employer, its agents, or its supervisors “knew or should have known” of the improper conduct, unless the employer can prove that it took immediate and appropriate action to stop the conduct. This defence is not available when it is determined that the employer itself engaged in the prohibited conduct. This law also establishes that the workers’ compensation immunity for work-related injuries will not apply when it is determined that the condition suffered by the employee was prompted by a pattern of workplace harassment. It also authorises the State Insurance Fund to recover expenses incurred in providing treatment to the employee in such situations. Opposing, denouncing, or participating in investigations related to workplace harassment will be considered protected activity under Puerto Rico’s Anti-Retaliation statute, Law No 115-1991.

The employee must exhaust both internal remedies within the company and external remedies with the Alternate Dispute Resolution Bureau of the Judicial Branch through a mediation process as a prerequisite to filing a lawsuit in court. The Puerto Rico Department of Labour and Human Resources will issue regulations and guidance within 180 days of the enactment of the law.  Consequently, employers must adopt policies and protocols prohibiting workplace harassment, including a procedure for employees to raise complaints. This law went into effect immediately upon its enactment.

In addition, there have been significant changes resulting from the COVID-19 pandemic, which are discussed in 1.2 COVID-19 Crisis.

As a result of the COVID-19 crisis, the local government has implemented a variety of measures, both temporary and permanent, to address the situation.

COVID-19 Leave

One of the first measures implemented was to allow hourly employees to exhaust accrued paid leave (including sick leave and vacation) during the time that they were without work as a result of the lockdown in order to minimise the economic impact of the lockdown on individuals forced to stay at home. Employers were also directed to adopt flexible leave policies consistent with public health guidance in connection with the pandemic and were required to liberally grant requests for remote working arrangements, work schedule adjustments, and other forms of reasonable accommodation related to COVID-19. Remote working arrangements have been strongly encouraged for employees who are able to do so.

In addition, on 9 April 2020, the Governor of Puerto Rico signed into law Act No 37, a permanent amendment to Article 6 of Act No 180 of 27 July 1998 (Puerto Rico’s Minimum Wage, Vacation and Sick Leave Act), which sets forth that, during a state of emergency declared by the Governor of Puerto Rico or the Secretary of Health, any employee who suffers, is suspected of suffering, or has been exposed to the illness or epidemic for which the state of emergency was declared shall be entitled to an additional five days of paid leave once they have exhausted all other leave to which they are entitled. Subsequently, on 16 April 2020, the Puerto Rico Secretary of Labour issued Circular Letter No 2020-02, requiring all employers who furlough or reduce the regular working hours of any employee in connection with the COVID-19 emergency to notify them in writing of this fact, and advise them of their eligibility for unemployment benefits.

COVID-19 Workplace Protocol

The Puerto Rico Department of Labour and Human Resources, together with the Puerto Rico Occupational Safety and Health Administration (PR-OSHA) has also issued guidance requiring all employers to implement a COVID-19 Workplace Protocol and submit a copy of the same to the Puerto Rico Department of Labour together with a self-certification affirming that the protocol had been distributed to all employees and proper training has been provided regarding the same. In order to be PR-OSHA compliant, workplace protocols must be contained in a written document, unique to the particular workplace, which takes into consideration the specific tasks carried out there, the physical structure of the workplace, and the workforce specific to that location. 

The protocol should include general information regarding COVID-19 (definition, manner of transmission, symptoms, etc) and recommendations issued by local, state, national and international health bodies regarding controls to avoid spreading and transmission of COVID-19. The protocol should also detail the process of monitoring and screening employees before they enter the workplace, and explain the protocols to follow in the event that an employee exhibits symptoms of COVID-19 or tests positive for the same. The policy should also explain what measures will be implemented to facilitate social distancing (for example, increased distance between work stations or staggered shifts); as well as include the methods that will be implemented for maintaining proper hygiene (such as routine disinfecting of work areas, use of hand sanitiser, and hand washing); and indicate the type of personal protective equipment deemed necessary for the employees, and that shall be provided, free of cost, by the employer. 

Mask Wearing and Other Measures

Presently in Puerto Rico, all persons must wear a mask or facial covering to cover their nose and mouth when outside their homes. This measure is expected to remain in place until the pandemic is brought under control. Accordingly, employers should provide masks to employees who are required to be present in the workplace. All employers must have a designated official who will continuously evaluate and monitor the workplace in order to identify new risks and needs related to the COVID-19 pandemic. 

Furthermore, on May 15, 2020, the Puerto Rico Department of Labour issued a Memorandum suspending the deadlines for proceedings before the Office of Mediation and Adjudication, the Bureau of Conciliation and Arbitration, and the Anti-Discrimination Unit until the operations of the Department are normalised. The deadlines for filing employer's quarterly tax returns for state disability tax, chauffeurs’ insurance, and unemployment were also tolled.

In addition to the local measures discussed above, Puerto Rico employers are also subject to all federal legislation related to COVID-19, as well as related guidance from the US Department of Labor, the Centers for Disease Control, and the US Occupational Safety and Health Administration.

White-Collar Employees

As Puerto Rico is subject to US federal law, in order to qualify as an exempt or "white-collar" employee, an employee must meet the requirements of the Fair Labor Standards Act (FLSA). Since Puerto Rico was exempted from the increase of the FLSA salary basis, which came into effect on 1 January 2020, the employee must earn a minimum salary of USD455 per week, or USD23,660 per year. The employee’s compensation must not be subject to reduction because of variations in the quality or quantity of work performed. The employee’s duties must also satisfy a "duties test" to determine if they qualify as a bona fide executive, administrator, professional or outside salesperson.

Employees classified as exempt or white-collar are not entitled to overtime pay. The terms and conditions of compensation for exempt employees are typically governed by contractual agreement between the employer and the employee, rather than being statutorily established, as in the case of rank-and-file employees. Parties may negotiate a broad variety of compensation and benefits, such as, for example, health, stock options, incentive plans, tax equalisation, other deferred compensation and bonuses. In line with the white-collar exemptions of the FLSA, Puerto Rico also adopted Regulation No 13 (2005), which virtually incorporated the same tests and definitions to determine exempt status.

Blue-Collar Employees

By contrast, non-exempt or "blue-collar" employees are non-management personnel who have a right to overtime pay and meal periods, as well as a host of other statutory entitlements and protections under both federal and Puerto Rico law. Consequently, there is less flexibility to negotiate the terms and conditions of employment.

On 26 January 2017, the Labour Transformation and Flexibility Act of 2017, Law Number 4 of 26 January 2017 (Law No 4), also known as the Labour Reform Act, came into effect. Law No 4 amends most of the major employment laws that apply to employees in the private sector. Employees retained prior to the enactment of the law are grandfathered, according to certain specific provisions of Law No 4. Accordingly, changes mainly affect employees hired after the law was passed.

In Puerto Rico, parties are free to enter into any employment contracts they deem appropriate, so long as the arrangement is not contrary to the law, social mores or public policy. Employers may retain full-time, part-time, indefinite and temporary employees, among others.

Pursuant to Law No 80 of May 30, 1976 (Law No 80), a temporary employee is one who is retained:

  • for a specific project or endeavour;
  • to substitute for an employee during a leave of absence; or
  • to perform extraordinary duties or those of a short duration (eg, annual inventory, equipment repairs, or loading or unloading of cargo).

Fixed-term employees are those who are retained for a specific project or a specific period of time. An employee will be deemed to be a bona fide fixed-term employee if the employment relationship lasts for no more than three years, including any renewals of the contract. That being said, exempt employees may contractually agree to be deemed fixed-term even if the total period of employment exceeds three years. Employers may also retain the services of independent contractors.

An employment agreement can be verbal. Written contracts are not required for employees hired for an indefinite period. Furthermore, after the enactment of Law No 4, contracts for fixed-term and temporary employees, as well as independent contractor agreements, are no longer required to be in writing. However, it is strongly recommended that it be done.

All non-exempt employees are presumed to have an automatic nine-month probationary period. Exempt employees are presumed to have an automatic twelve-month probationary period. Employers and employees can negotiate a shorter probationary period. There is no need for the probationary contract to be in writing.

Finally, Section 2.17 of Law No 4 provides that an employer may assign employees from other jurisdictions to work in Puerto Rico without having them deemed Puerto Rico employees, as long as they maintain an employment relationship with their foreign employer and the assignment to Puerto Rico lasts less than three years in total. In such cases, the legal and contractual rights and obligations shall be interpreted in accordance with the employment agreement, including any dispositions regarding choice of law. However, the employee will still be subject to Puerto Rico law for the purposes of income tax, discrimination laws, and workplace accidents or illnesses. If no choice of law is made in the employment agreement, Puerto Rico law will apply.

According to Puerto Rico Act Number 379 of 15 May 1948 (Law No 379), which covers non-exempt (hourly) employees, eight hours of work constitutes a regular working day in Puerto Rico and 40 hours of work constitutes a workweek. Work in excess of these minimums must be compensated as overtime.

Overtime

In general, and according to the amendments of Law No 4, extra hours are those hours that an employee works for their employer in excess of eight hours during the calendar day, in excess of 40 hours during any week, during a day when the establishment should remain closed to the public by law or in excess of the maximum number of working hours a day fixed in a collective bargaining agreement.

If the employer requires overtime, it is obliged to pay employees for each extra hour a wage rate equal to at least time and a half, or double the agreed rate for regular hours. If the industry of the employer is covered by the provisions of the FLSA, that employer will be under an obligation to pay employees for extra hours at a wage rate of no less than time and a half of the rate agreed upon for regular hours for both daily and weekly overtime, except when other standards are fixed by a mandatory decree or a collective bargaining agreement. After the enactment of Law No 4, overtime is to be paid at a rate of time and a half of the base salary rate. Employees hired prior to the law’s enactment will preserve any superior benefits they enjoyed before its passing.

Flexitime

Employers and employees can also agree to a voluntary flexible work schedule of no more than ten regular hours a day in a period of four days in a workweek, without incurring overtime liability. Any arrangement for a flexible work schedule can be revoked by mutual agreement of the parties, or unilaterally after one year. Employees may request flexibility as to the place of employment and working hours, and the employer is obliged to respond and/or provide alternatives to the employee’s request within 20 days.

Likewise, employers can allow employees to replace hours not worked for personal reasons during the workweek. These hours will not be considered overtime if they are replaced during the same workweek as the leave, and do not exceed 12 hours in a day, or 40 hours in a week.

Meal Periods

Law No 379 also provides meal periods for non-exempt employees. A meal period consists of one hour, but can be reduced to 30 minutes by mutual agreement in writing between the employer and the employee. The meal period for croupiers, nurses, and security guards, can be reduced to 20 minutes. The meal period should commence not before the conclusion of the third, nor after the commencement of the sixth, consecutive hour of work. Employees cannot be required to work more than five consecutive hours without pausing in their duties to take food. As an exception, the Secretary of Labour and Human Resources may authorise that the meal period be enjoyed between the second and the third consecutive hour of work.

The meal period shall be paid at a rate of one and a half times the base rate of pay. The meal period can be waived in cases in which the total number of hours worked does not exceed six hours in a day. Certain other provisions apply to meal periods after regular hours of work.

Day of Rest

In addition, Puerto Rico Law Number 289 of 9 April 1946 (Law No 289) provides that all non-exempt employees shall have the right to one day of rest for every six working days. No employer shall be allowed to deduct from the salary of any employee the day of rest. If the employer requests employees to work on the day of rest, the employer is obliged to pay those employees for the hours worked on the day of rest at a rate of time and a half the wage rate agreed upon for regular working hours.

Administrators, executives, and professionals, as well as other employees or industries not covered by the FLSA or Law No 379, as amended by Law No 4, are exempted from Law No 289.

As a result of Law No 4, employers are no longer required to pay employees a minimum of USD11.50 per hour for working on Sundays. However, commercial establishments that, prior to Law No 4, were required to remain closed during Good Friday and Easter must still remain closed.

Minimum Wage

Puerto Rico’s Minimum Wage, Vacation and Sick Leave Act, Law Number 180 of 27 July 1998, (Law No 180), which covers non-exempt (hourly) employees, provides that the federal minimum wage law, which in turn provides for a minimum wage of USD7.25 per hour, automatically applies to all employers in Puerto Rico that are covered by the FLSA. The law also provides that employers who are not covered by the federal statute must pay their employees at least 70% of the prevailing minimum wage. Those employees who have a higher salary pursuant to a mandatory decree issued by the Puerto Rico Department of Labour and Human Resources shall continue to receive those higher salaries. The minimum wage for exempt employees in Puerto Rico is USD455 per week.

In cases under this statute, an employee who is working with the employer can only claim the salary to which they are entitled for any reason during the three years prior to the date the action is filed. In the event that the employee has ceased working for the employer, the claim shall only include the last three years prior to the date on which they ceased to work for the employer. It is illegal to terminate and rehire, or substitute current employees in order to obtain the benefits to the amendments to Law No 180.

Law Number 160 of 19 September 2014 amended Puerto Rico’s Law No 180 to include additional penalties to employers who violate the obligations set forth in this law. Also, through this amendment, authority has been given to the Office of Mediation and Adjudication of the Puerto Rico Department of Labour and Human Resources to entertain salary claims under Law No 180.

PROMESA

Despite the above, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), effective 30 June 2016, amended the FLSA to allow the Puerto Rico Governor, with the approval of the Oversight Board, to set a minimum wage of no less than USD4.25 an hour for workers under the age of 25 who first became employed after the enactment of the Act, for a period of four years, or until the termination of the Oversight Board. Employers may not take any action to oust current employees for the purpose of hiring individuals at the reduced hourly rate. Any employer engaging in such conduct will be deemed to have violated the non-retaliation provisions included in the FLSA.

Bonuses

Pursuant to Law Number 148 of 30 June 1969 (Law No 148), Puerto Rico also provides for a Christmas bonus to employees who work 700 hours between October 1st and September 30th of the bonus year. The maximum statutory bonus under Law No 148 is 6% of salaries up to USD10,000 or USD600. The bonus must be paid between November 15th and December 15th. For employees hired after the enactment of Law No 4, the minimum number of hours to qualify for the Christmas bonus has increased to 1,350 hours between October 1st and September 30th of the bonus year.

Employers who employ more than 20 employees within a 26-week period between October 1st and September 30th of the following year will pay a Christmas bonus of 2% of the salaries earned with a cap of USD600, while employers who employ fewer than 20 employees during the relevant period will pay a bonus of USD300. Newly hired employees will be entitled to 50% of the bonus during the first year of employment.

Forms of Payment

Under Puerto Rico Law Number 17 of 17 April 1931 (Law No 17), as amended by Laws Number 74 of 1 May 1995, and 213 of 26 December 2007, employers may effect payment of salaries to employees in the form of cash, cheques, direct deposits, electronic transfers or payroll credit cards to each employee’s bank account, in payroll intervals not to exceed 15 days. Employers must obtain the employee’s prior voluntary written authorisation in order to be allowed to make payments in direct deposit or electronic transfer transactions. These transactions must be made effective the same day. If the payment of wages is made by direct deposit or electronic transfer, each employee must receive a pay slip from the employer acknowledging that the corresponding payment has been deposited in the employee’s bank account and the date of the deposit. The deposit must be available to employees on the regular pay day. Moreover, the salary payments can be made to the employee at the workplace or can be paid in commercial establishments belonging to the employer. Law No 17 applies to non-exempt (hourly) employees.

An employer that in any way affects the employment of an individual because the employee has not authorised the payment of salaries by direct deposit or electronic transfer shall be held liable and, if found guilty, shall be subject to a penalty.

Deductions

The law allows employees to file a complaint with the Secretary of Labour and Human Resources requesting the posting of a bond by the employer if it makes payments with cheques drawn against insufficient funds, or if the employer’s bank account has been closed. Employers are not allowed to make any payroll deductions from the employee's wages unless the employee authorises the employer in writing. Deductions are limited to the following purposes:

  • a bona fide medical insurance plan;
  • the purchase of savings bonds issued by the government of the United States of America or by the government of the Commonwealth of Puerto Rico;
  • the purchase of shares of stock or payment of loans and interest or other debts the employee may have with any credit union of Puerto Rico;
  • payments towards a pension, Individual Retirement Account (IRA), savings, retirement or insurance plan;
  • when the employer advances any amount of money to the employee, the employer may deduct that sum from the salary of the employee which corresponds to the week in which the advance was made;
  • contributions to qualified charitable institutions of Puerto Rico;
  • contributions of employees to any plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA); and
  • contributions or payments for any insurance plan or policy or savings, retirement, pension or any combination of such plans.

Maternity Leave

Furthermore, under Puerto Rico Law Number 3 of March 13, 1942 (Law No 3), all female employees who give birth or adopt a child are entitled to receive 100% of their salary during the statutory eight-week maternity leave.

White-Collar Work

The only limitation for executives is the payment provided by the white-collar exceptions of the FLSA which, as applied to Puerto Rico, provide for a minimum salary of USD455 per week.

Vacation and Leave

In general, Law No 180 allows employees to accrue one and a quarter days of vacation leave and one day of medical leave per month, for each month in which the employee works at least 130 hours, for employees retained prior to 26 January 2017. Law No 180 has numerous requirements that regulate the use of vacation and sick leave. Certain mandatory decrees, which are still in effect, could provide for greater or lesser vacation and sick leave benefits.

All employees are required to work 130 hours to accrue vacation and sick leave. Newly hired employees will accrue a minimum of half a day's vacation leave per month during the first year of employment. The employee will then accrue three quarters of a day's vacation leave from the second to the fifth year of employment. From the sixth to the fifteenth year of employment, the employee will accrue one vacation day per month, and one and a quarter days of vacation leave after the 15th year of employment. Sick leave is accrued at a rate of one day per month, regardless of years of service.

Medical leave

Under Law Number 251 of 31 December 2015, Puerto Rico also allows employees to use up to five days of medical leave in connection with the illness or medical treatment of a child, parent, spouse, person of advanced age or with a disability, or under the employee’s custody or tutelage.

On 31 January 2018, Puerto Rico passed Law Number 28, which establishes special leave for employees with catastrophic illnesses. Subject to certain requirements, Law No 28 provides six additional paid days off per year for public and private sector employees who suffer any of the following catastrophic illnesses: AIDS, tuberculosis, leprosy, lupus, cystic fibrosis, cancer, haemophilia, aplastic anaemia, rheumatoid arthritis, autism, post-organ transplant complications, scleroderma, multiple sclerosis, amyotrophic lateral sclerosis (ALS) and chronic renal disease (stages three, four and five). An employer may not consider the use of this special paid leave as an unfavourable factor in an employee’s performance evaluation or take adverse actions against employees for taking this leave, such as reducing their work hours, reclassifying their position, or changing their shifts or schedule.

On 27 January 2018, Puerto Rico passed Law No 60 to amend Article 6 of Law No 180 in order to forbid employers from using justified medical absences as efficiency criteria in an employee’s yearly performance evaluation. Law No 60 sets forth that employees are entitled to use their sick leave in such cases as is necessary and warranted. Therefore, it is a violation of that right, guaranteed by law, for employers to establish an internal policy which allows them to treat justified medical absences in the same manner as unjustified or irresponsible absences, thereby creating a negative impression of the employee when they are considered for a pay increase, a promotion, or other job-related benefits.

Maternity leave

Maternity is perhaps the most protected condition covered by Puerto Rico labour laws. Under Law No 3, working mothers are entitled to eight weeks of paid maternity leave and employment reservation. Law No 3 applies to all employees; exempt and non-exempt. Paid maternity leave is also available to women who adopt a child under five years of age. The Puerto Rico Department of Labour and Human Resources has issued regulations pursuant to Law No 3. In addition, Puerto Rico’s breastfeeding law, Law No 427 of 16 December 2000 (Law No 427), requires a safe, private and hygienic space for employees who are nursing or extracting breast milk. Law No 427 entitles breastfeeding mothers to a break of one hour for each working day, which may be divided into two 30-minute or three 20-minute breaks, for up to one year after the employee’s return from maternity leave. Mothers who work part-time, but for more than four hours a day, are entitled to a period of 20 minutes to nurse or extract breast milk. Law No 4 also establishes a USD3,000 penalty for violations of the law.

Disability and accidents

As to disability, Puerto Rico’s Workmen’s Accident Compensation Law, Law No 45 of 18 April 1935 (Law No 45), provides up to twelve months of leave with reservation of employment for work-related accidents or conditions. All employees must be insured for work-related accidents through the State Insurance Fund, a state monopoly created for this purpose. Failure to insure employees or late payment of the insurance premiums can result in stiff penalties. However, an insured employer will have immunity against lawsuits for work-related accidents.

Puerto Rico’s Short Term Non-Occupational Disability Law, Law No 139 of 26 June 1968 (Law No 139 or SINOT by its initials in Spanish), provides up to one year of leave with reservation of employment for temporary disability not connected with employment. Law No 139 also provides for certain weekly payments for up to six months. Employees can be insured through the Puerto Rico Department of Labour, through a private insurance company, or can be self-insured. Furthermore, similar to the Americans with Disabilities Act (ADA), local law provides that leave may be a form of reasonable accommodation.

For employers with 15 employees or fewer at the time of accident or disability, the employment reservation provided by Law No 45 and Law No 139 is six months.

Puerto Rico Law No 138 of 26 June 1968 also creates statutory protection for individuals involved in automobile accidents. Under the statute, the Administration for Compensation for Automobile Accidents (ACAA), a Puerto Rico public corporation, is charged with providing health services and employment reservation for victims of automobile accidents. The period of employment reservation under the ACAA is six months. In addition, Puerto Rico law provides, under specific circumstances, statutory leave for employees summoned as witnesses in criminal cases, serving as jurors, receiving treatment for substance abuse, and participating in sports-related activities.

Religion

Finally, employers have an obligation to accommodate the religious practices of their employees. While this is not a source of statutory leave, it does require employers to reach agreements with their employees to provide accommodations that reasonably allow them to observe their religious practices, so long as it is not unduly burdensome for the employer to do so. In the event that the religious accommodation includes any period of leave, Law No 4 does not require that such leave be compensated.

The Family and Medical Leave Act (FMLA) applies in Puerto Rico just as in any other US state.

Confidentiality and Non-disparagement

In general, there are no restrictions on well-crafted confidentiality and non-disparagement policies in Puerto Rico. However, Puerto Rico is subject to the same restrictions and limitations imposed by agencies such as the National Labour Relations Board (NLRB) to regulate employee comments on social media.

Covenants not to compete are enforceable in Puerto Rico, under general freedom of contract principles, as long as they comply with certain requirements. In fact, Section 2.15 of Law No 4 sets forth a general obligation that all employees have a duty of loyalty and must refrain from competing with the business activities of their employer during the course of their employment, even in the absence of a written non-competition agreement.

For a covenant not to compete to be valid in this jurisdiction, it must be made in writing, in exchange for adequate consideration, and must not impose an undue burden on the employee. The non-competition clause must be tailored to the employer’s legitimate need to protect its business in terms of duration, geographic limitation, and clients affected. Typically, a non-competition agreement must not exceed twelve months, although longer periods have been found valid for shareholders and consultants. Non-competition agreements may not be against public policy. If the non-competition clause is part of the original employment agreement, no independent consideration is required. However, if the non-competition clause comes into force after the individual has become employed, adequate consideration must be provided. What constitutes "adequate" consideration varies by industry, position, and by the employee’s overall compensation package.

Under general freedom of contract principles, non-solicitation of employee provisions may be valid. Such provisions are generally included in non-competition agreements, separation agreements and settlement agreements.

However, the Puerto Rico Constitution and the case law of the Puerto Rico Supreme Court provide for the right of every employee to choose and resign freely from their employment. In the absence of a valid non-competition agreement, or an employment contract for a fixed period of time, any employee is free to resign and work for any other employer, including a competitor.

There is no data protection authority or overarching law that governs information privacy in Puerto Rico. There is only a Citizens Advice Bureau on Information Privacy Protection within the Puerto Rico Department of Consumer Affairs (DACO from its Spanish initials), created by Law Number 112 of 7 October 2009, the duties and responsibilities of which are primarily advisory. Accordingly, Puerto Rico’s privacy regime is limited in scope as it lacks a uniform rule of law or structure to protect individuals’ privacy concerns. Nonetheless, the following laws relating to data privacy could also have an impact on the employment relationship:

  • Law Number 111 of 7 September 2005,Sections 4051 et seq (Citizen Information of Data Banks Security Act or CIDBSA);
  • Law Number 39 of 24 January 2012, Sections 4061 et seq (Notification of Privacy Policies Act or NPPA); and
  • Law Number 234 of 19 December 2014, Sections 4181 et seq (Consumer Personal Information Destruction Act or CPIDA).

Employment of foreign workers in Puerto Rico is governed by US immigration law.

All foreign employees are subject to the registration requirements of US immigration law.

Puerto Rico employees in the private sector can obtain union representation pursuant to the provisions of the US National Labour Relations Act (NLRA) and the procedures of the NLRB. Employers in the airline industry are regulated by the Railway Labor Act (RLA), a US statute that covers employees in the air transportation and railway industries. Employers in the private sector, usually small employers that fall out of the scope of the NLRA, and public corporations that do business as private corporations, such as public utilities, are covered by the Puerto Rico Labour Relations Act, a statute which resembles the NLRA. 

Under the NLRA, employees can organise or join a union to negotiate (with their employer) matters pertaining to wages, hours, and other terms and conditions of employment. They can also discuss matters related to union organisation and working conditions with co-workers. Moreover, employees can engage in concerted action which can include strikes and pickets, depending on the purposes of such activities. Accordingly, employees have a right to union representation at investigatory interviews. They also have a right to union representation during disciplinary procedures and arbitration.

The percentage of union representation in the private sector in Puerto Rico is in single digits. Certain industries have traditionally been organised – such as the maritime industry, hotels, casinos, transportation, and hospitals – but even in those strongholds unions have lost ground in recent years.

The most active and combative union representation is presently limited to government-sponsored corporations such as the Puerto Rico Power Authority, the Puerto Rico Aqueduct and Sewer Authority, the State Insurance Fund, certain state-sponsored medical facilities and public transportation.

The framework and requirements for union elections in the private sector are provided by the NLRB rules and regulations, just as in any other US state or territory.

Please refer to 6.1 Status/Role of Unions.

Under the NLRA, employees can organise or join a union to negotiate matters pertaining to wages, hours, and other terms and conditions of employment.

Employers with unions must comply with the requirements of the applicable collective bargaining agreement, in particular with the grievance and arbitration procedures, prior to implementing terminations.

Puerto Rico is a for-cause jurisdiction. Just cause for termination is required in Puerto Rico. Law No 80 of 30 May 1976, (Law No 80), which covers employees hired for an indefinite period of time, states that good cause for the discharge of an employee from an establishment is understood to be:

  • That the worker indulges in a pattern of improper or disorderly conduct.
  • That the employee continues in a pattern of deficient, inefficient, unsatisfactory, poor, tardy or negligent performance; this includes non-compliance with the employer’s quality and safety standards, low productivity, lack of competence or ability to perform the work at reasonable levels as required by the employer and repeated complaints from the employer’s customers.
  • The employee’s repeated violations of the reasonable rules and regulations established for the operation of the establishment, provided a written copy thereof has been provided to the employee in good time.
  • The full, temporary, or partial closing of the operations of the establishment, provided that in those cases in which the company has more than one office, factory, branch, or plant, the full, temporary, or partial closing of operations of any of these establishments shall constitute just cause for discharge under the law.
  • Technological or organisational changes, as well as changes of style, design, or the nature of the product made or handled by the establishment and/or changes in the services rendered to the public.
  • Reductions in employment made necessary by a reduction in the anticipated or prevailing volume of production, sales, or profits at the time of the discharge, or for the purpose of increasing the productivity or competitiveness of the establishment.

This list is not exhaustive, and just cause refers to any reason that relates to the proper and normal operation of the establishment. For example, in 2019, the Puerto Rico Supreme Court held that a criminal accusation against an employee for off-duty criminal conduct may put at risk the safety, order, and efficiency of an employer’s operation, and may be just cause for termination under Law No 80.

Wrongful Discharge Compensation

Law No 80 provides a statutory formula in cases of wrongful discharge. Such an amount is considered to be an indemnity and consists of the sum of two payments. Law No 128 of 7 October 2005 amended the statutory formula provided by Law No 80. Accordingly, any employee who is discharged from his or her employment without good cause shall be entitled to receive from his or her employer, in addition to any salary earned, an indemnity consisting of the following:

  • two months' salary, if the termination occurs within the first five years of service;
  • three months' salary, if the termination occurs after five years and before 15 years of service; or
  • six months' salary, if the termination occurs after 15 years of service.

In addition to this indemnity, the employer must also pay to the employee a progressive indemnity equivalent to one week for each year of service if the discharge occurred within the first five years of service; two weeks for each year of completed service if the discharge occurred after five years, and until 15 years; and three weeks for each year of completed service if the discharge occurred after 15 years of service. Law No 4 reduces the formula to a basic indemnity of three months of salary, plus two weeks for every completed year of service, and caps it to nine months of salary. The cap of nine months does not apply to employees hired prior to the enactment of Law No 4; those employees will be entitled to claim under the prior indemnity formula.

The computation for the indemnity for wrongful discharge shall be paid on the basis of the highest rate of salary earned by the employee during the three years immediately preceding their discharge. Law No 4 clarifies the definition of the term “basic salary” to exclude certain benefits such as deferred compensation, income from tips that surpasses the federal minimum wage, and disability payments. Also, that computation shall be based on the highest number of regular working hours of the employee during any period of 30 consecutive calendar days within the year immediately preceding the discharge. In addition, no payroll deductions, except for social security, shall be made on such an indemnity. Law No 4 amends the Puerto Rico Internal Revenue Code to make payments under Law No 80 tax-exempt.

The Puerto Rico Department of Labour and Human Resources has issued extensive guidelines regarding the interpretation of Law No 80.

Potential Repeal of Law 80

Currently, Law No 80 is one of the most important statutes to consider when establishing the employer-employee relationship in Puerto Rico. That being said, the derogation of Law No 80 is currently an ongoing discussion in the context of the negotiations between the government of the Commonwealth of Puerto Rico and the Fiscal Control Board established by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The Fiscal Oversight Board is strongly in favour of eliminating Law No 80 and making Puerto Rico an "at-will" jurisdiction, arguing that this will incentivise hiring and, consequently, stimulate the economy. This position has been met with intense resistance from local congress, which has now voted against repealing the statute twice. It remains to be seen whether Law No 80 will ultimately survive and, if so, in what form.

Notice Periods and Termination Procedures

There are no required notice periods under local law. However, under federal law, specifically the Worker Adjustment and Retraining Notification Act (Warn Act), covered employers must provide affected employees, certain government entities and officers, as well as union representatives, with 60 days' advance notice of plant closings and mass layoffs, as such terms are defined by law. Please refer to 7.2 Notice Periods/Severance for further discussion.

Union-free employers are at liberty to establish reasonable procedures for progressive discipline and employment terminations. Law No 80, however, requires that internal rules, regulations and policies adopted by the employer must be provided to employees in writing. Case law from the Puerto Rico Supreme Court provides for the courts to determine if such work rules are reasonable. The court system in Puerto Rico has jurisdiction under Law No 80 to determine whether an employment termination is justified. However, the Puerto Rico Department of Justice’s opinion is to the effect that the burden of proof in wrongful discharge cases falls on the employer.

As discussed above employers with unions are required to comply with the terms and conditions of the applicable collective bargaining agreement, in particular with the grievance and arbitration procedure, prior to implementing terminations. There are no required internal procedures or appeal procedures for terminations. However, once the employer has adopted particular internal rules, regulations, and policies and implemented a progressive discipline and a termination procedure, it must follow those procedures. There is case law to that effect.

There are no required notice periods under local law. However, under the Warn Act, a 60-day advance notice of plant closings and mass layoffs is required for covered employers.

The aforementioned Law No 80 establishes statutory severance for terminations without just cause. All out-of-court payments should be made in exchange for a separation or settlement agreement and full release.

Summary dismissal is not favoured in Puerto Rico. However, Law No 80, its guidelines, and interpretative case law have recognised that, in certain circumstances, summary dismissal is warranted. Such cases are usually reserved for infractions or behaviour of a kind that it would make it imprudent to await its repetition. Typically, summary dismissal is reserved for incidents that lay bare a clear and undoubtable condition of character that carries with it either actual or potential grave consequences or reveals an attitude not susceptible to change. For example, the Puerto Rico Supreme Court has upheld summary dismissal in cases of workplace violence, sexual harassment and falsification of employment documents or records (including providing false information on a job application).

Releases in connection with termination agreements are permitted in Puerto Rico.

Releases are contracts under Puerto Rico law. Accordingly, they cannot contravene laws, morals, or public order. Moreover, consent to them cannot be obtained by duress or undue pressure. Releases must be supported by adequate consideration.

Under Law No 80, employees cannot waive and release their right to sue their employer for wrongful discharge in an employment contract. However, employees are permitted to settle Law No 80 claims as part of the termination process.

Regarding the protection of certain classes of employees, as discussed in 8.2 Anti-discrimination Issues in more detail, employees are protected from discrimination on the basis of age, race, colour, creed, sex, disability, sexual orientation, gender identity, social or national origin, social condition, political affiliation, religious ideology, being a victim or being perceived as a victim of domestic violence, sexual aggression or stalking, serving or having served in the armed forces of the United States or holding veteran status. Employers cannot take any adverse employment action because of any of the aforementioned conditions.

In addition, Puerto Rico law provides whistle-blower protection, which forbids employers from taking adverse employment action against any employee for providing or attempting to provide truthful, non-defamatory testimony before any administrative, legislative, or judicial forum.

As discussed in 7.1 Grounds for Termination, Puerto Rico is currently a jurisdiction that requires just cause for termination. Accordingly, any employee who believes that they have been wrongfully terminated can file a claim under Law No 80. The exclusive remedy for wrongful discharge claims is statutory severance, as calculated under Law No 80. For employees who are hired for a specific period of time under a written employment agreement, what constitutes adequate cause for termination shall be determined by the contract. Contract claims are governed by the Puerto Rico Civil Code. The statute of limitations for breach of contract claims is 15 years.

The employer typically bears the burden of proof in wrongful discharge cases. However, in cases where the employee claims constructive discharge, the employee bears the initial burden of proof to establish that the circumstances surrounding his or her resignation meet the criteria for an involuntary discharge.

Under Puerto Rico laws, employees are protected from discrimination on the basis of age, race, colour, creed, sex, disability, sexual orientation, gender identity, social or national origin, social condition, political affiliation, religious ideology, being a victim or being perceived as a victim of domestic violence, sexual aggression or stalking, serving or having served in the armed forces of the United States or holding veteran status.

Specifically, under Puerto Rico Law No 100 of 30 June 1959, (Law No 100), any employer (public or private) who discharges, lays off or discriminates against an employee regarding his or her salary, terms or conditions of employment; refuses to hire a person; or classifies its employees in any manner which tends to deprive a person of employment opportunities or affect his or her status as an employee on the basis of the aforementioned factors, will incur civil liability, which may consist of a sum equal to twice the amount of damages sustained by the employee, and will also be guilty of a misdemeanour. The law also provides the same penalties for any employer that discriminates due to the fact that the person in question is married to another employee of the employer.

In connection with the above, Law No 217 of 29 September 2006 requires all public and private employers to develop and implement a protocol to avoid and/or manage episodes of domestic violence in the workplace.

Damages and Compensation

Law No 4 amended Law No 100 to cap compensatory and punitive damages in discrimination cases pursuant to the limits established by Title VII of the Civil Rights Act of 1964. Employers who have fewer than 101 employees will have a cap of USD50,000; employers who have between 101 and 200 employees have a cap of USD100,000; employers who have between 201 and 300 employees have a cap of USD200,000 and employers who have upwards of 501 employees have a cap of USD300,000. This cap also applies in cases of retaliation.

Discrimination on the Basis of Sex and Sexual Harassment

The rights of working mothers under Law No 3 are discussed in 2.5 Other Terms of Employment. In addition, a pregnant employee cannot be penalised for any decrease in her productivity. If discrimination is found, the prevailing employee may be awarded back pay, front pay, emotional and compensatory damages, attorney’s fees and/or reinstatement. Any award of damages must be doubled.

Puerto Rico Law No 69 of 6 July 1985, (Law No 69), requires strict compliance with the constitutional guarantee that no person shall be discriminated against on account of sex. The main purpose of this law is to guarantee the equal right to employment for women as well as men, while prohibiting those who promote discrimination, fixing responsibilities and imposing penalties. Under the Act, prohibition of discrimination on the basis of sex extends to all agencies or instruments of the government of Puerto Rico. In addition, Act No 16 of March 8, 2017,, specifically prohibits employers from inquiring as to an employment candidate’s salary history, including salary, benefits, perquisites, and any other form or remuneration, or combination thereof.

Puerto Rico Law No 17 of 22 April 1988, (Law No 17) explicitly prohibits sexual harassment in the workplace, and establishes responsibilities and penalties in connection with the same. Law No 17 defines sexual harassment as any type of undesired sexual approach, demand for sexual favours and any other verbal or physical behaviour of a sexual nature, through any means, including electronic means such as emails or the use of the internet, when one or more of the following circumstances occurs:

  • when submission to such conduct becomes, implicitly or explicitly, a condition of the person’s employment;
  • when submission to or rejection of such conduct by the person becomes the grounds for decisions on the job, or regarding the job; and
  • when that conduct has the effect or purpose of interfering unreasonably with the performance of that person’s work or when it creates an intimidating, hostile or offensive working environment.

In cases of sexual harassment, the employer’s responsibility extends not only to its own actions, but also to the actions of its agents and supervisors, regardless of whether the employer knew, or should have known, about the illegal behaviour. The employer must take the following measures in order to maintain a sexual harassment-free environment:

  • explain to the supervisors and employees that there is a strong policy against sexual harassment in employment;
  • create awareness of sexual harassment;
  • give publicity in the workplace so that job applicants are aware beforehand of the policy of the business against sexual harassment; and
  • establish an adequate internal procedure to handle sexual harassment complaints.

The person responsible for acts of sexual harassment will be subject to civil liability, including a sum equal to double the amount of the damages that the action has caused the employee or job applicant, among other remedies.

Disability

Puerto Rico Law No 44 of 2 July 1985, (Law No 44), was enacted a few years before the ADA and later amended to conform further to it. Under Law No 44, private and public institutions are prohibited from discriminating against persons with physical or mental disabilities. This prohibition includes recruitment, compensation, fringe benefits, reasonable accommodation and access facilities, seniority, participation in training programmes, promotions or any other term or condition of employment.

Another local counterpart of the ADA is Law No 81 of 27 July 1996. This statute focuses on the implementation of reasonable accommodation measures. Violations will result in fines and other remedies.

Military and Jury Service

Puerto Rico Law No 44 of 19 May 1976 prevents employers from dismissing or discriminating against an employee by reason of his or her absences in the performance of any military duty. If the employer violates the provisions of this law, it will be guilty of a felony and shall be punished with a fine not to exceed USD5,000 or by imprisonment for no more than three years, or both. The employee shall have the right to reinstatement without any loss of pay, as well as privileges and/or benefit rights.

In addition to the above, there is also legislation in Puerto Rico which extends protection to jurors and witnesses from any action adverse to their employment.

Federal Legislation

Federal legislation regarding discrimination in the workplace, such as the ADA, the Age Discrimination in Employment Act (ADEA), Title VII of the Civil Rights Act of 1964, and the Equal Pay Act, as amended, also apply in Puerto Rico.

All discrimination cases under Puerto Rico law are adjudicated using a burden-shifting framework similar to that applied under Title VII.

Whistle-Blowing

There is also statutory protection for employees who complain about employer wrongdoing, whether they do so internally or to authorities or regulators. Puerto Rico Law No 115 of 21 December 1991 (Law No 115), provides protection for any employee who testifies or attempts to testify before any administrative, legislative or judicial forum. Law No 169 of 29 September 2014 extended this protection to internal complaints.

Under Law No 115, employers are exposed to double damages, reinstatement, back pay, benefits and attorney’s fees if any employee proves an adverse employment action for whistle-blowing activities covered under the law. The statute of limitations under Law No 115 is three years.

Anonymous complaint procedures are not required.

The Puerto Rico Department of Labour and Human Resources created the Office of Mediation and Adjudication (OMA) pursuant to Law No 384 of 17 September 2004. Parties can elect mediation and adjudication of their cases and other benefit claims by the OMA under Law No 80, Law No 180, and Law No 379.

The Puerto Rico Department of Labour and Human Resources also provides arbitration services. The Bureau of Conciliation and Arbitration was created to mediate in labour-management disputes, to assist parties in collective bargaining negotiations, and to provide labour arbitration services free of charge.

The Anti-discrimination Unit (ADU) is another specialised forum of the Puerto Rico Department of Labour and Human Resources. Although exhausting administrative remedies is not required under Puerto Rico employment laws, the ADU mediates and conducts informal hearings in discrimination cases under Law No 100 (general anti-discrimination law), Law No 17 (sexual harassment) Law No 44 (disability), Law No 69 (sex), Law No 3 (maternity), and Law No 427 (breastfeeding).

For federal claims, agencies such as the NLRB and the Equal Employment Opportunity Commission (EEOC) have offices in Puerto Rico. Claims can be brought at federal and state levels, and class actions are available in Puerto Rico.

Pre-dispute arbitration procedure agreements are enforceable.

Pursuant to the Alternative Dispute Resolution Regulations of the Puerto Rico Supreme Court, mediation requires the consent of both parties. A party cannot be forced to mediate a case.

If discrimination or retaliation is found, the prevailing employee may be awarded back pay, front pay, emotional and compensatory damages, attorney’s fees and/or reinstatement. Under Puerto Rico’s discrimination and retaliation statutes, any award of damages must be doubled. As discussed above, Law No 4 establishes a cap for compensatory and punitive damages. The award of attorneys’ fees in favour of the prevailing employee will be 15-25% of the judgment.

Puerto Rico Law No 402 of 12 May 1950 explicitly prohibits the imposition of attorney’s fees on employees who are forced to file suit against their employers under federal or local labour and employment legislation or an employment or collective bargaining agreement. However, though unusual, some courts have held that employers can be awarded attorney’s fees if it is found that the employee’s complaint was frivolous or vexatious.

Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C.

208 Ponce de Leon Avenue
Suite 1600
San Juan, Puerto Rico 00918

+1 787 756 9000

+1 787 756 9010

seda@amgprlaw.com; mhaack@amgprlaw.com www.amgprlaw.com
Author Business Card

Trends and Developments


Authors



Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C. has attorneys in its labour and employment law department that practise in all areas of labour and employment law in the private and public sectors. Their practice includes representing clients in connection with the negotiation and administration of collective bargaining agreements; operating as trial counsel in federal and Puerto Rico courts, before administrative agencies and in labour arbitration and National Labor Relations Board cases; and client counselling regarding compliance with Puerto Rico and federal employment discrimination statutes, employment terminations, federal and state wage and hour laws, workers' compensation, employee benefits and other laws governing matters of employment. Clients include employers in the aerospace, airline, IT services, manufacturing, construction, health, retail services, solid waste, and insurance or insurance claims industries. Members of the department also represent clients in business-related immigration procedures before the United States Citizenship and Immigration Services and US Consulates around the globe.

Special Summary Proceeding for Labour Claims: A Word to the Wise

One of the most salient issues in labour and employment practice in Puerto Rico is that most cases are litigated through an expedited procedure that severely reduces the time available to answer a complaint and mandates other procedural limitations that curtail employers’ ability to defend cases. Puerto Rico Act No 2 of October 30, 1961 (Act No 2) provides for a special summary proceeding for actions filed in Puerto Rico courts in cases of wage claims, employment discrimination, retaliation, and wrongful discharge. Claims for unpaid statutory vacation and sick leave and other benefits provided by the employer, such as the statutory Christmas bonus, can also be filed under Act No 2.

In addition, this expedited procedure is the preferred method of litigation for wrongful discharge and wage claims by the Puerto Rico Department of Labour and Human Resources (PR DOL), an agency of the government of Puerto Rico which provides advice and legal representation, at no cost, to employees with claims against their employers. The PR DOL has also adopted and extended the summary proceeding of Act No 2 to cases referred to the Office of Mediation and Adjudication (OMA), an administrative branch of this government agency. This involves service of process by regular mail and an imprecise complaint form, which often creates confusion. The Secretary of the PR DOL is also authorised under Act No 2 to intervene in any action or trial filed under the Act. In order to further facilitate the filing of claims by plaintiff-employees, cases under the summary proceeding are exempt from all filing fees. This exemption benefits both employers and employees.

Time limits

In cases under the summary proceeding created pursuant to Act No 2, the employer has, in most cases, only ten days to answer the complaint, in a single responsive pleading that is not susceptible to subsequent amendment. Accordingly, the responsive allegation must include all of the employer’s affirmative defences and objections which, if not raised, shall be deemed waived. A period of 15 days is provided if the action is filed in a judicial district different from where the action is notified. The ten or 15-day period may only be extended for just cause, which must be set forth in a motion for extension of time to answer the complaint supported by a sworn statement by the defendant-employer. However, an employer risks a default judgment if the court denies the motion for extension of time, since it is within the court’s discretion to grant or deny it. Likewise, the courts will lack jurisdiction to consider an untimely or unsworn motion for additional time to answer the complaint. If the employer fails to answer, or file the answer to, the complaint after the ten or 15-day limitation period, the court will lack jurisdiction to entertain any subsequent answer and in cases of wrongful discharge and wages, will render a default judgment. The default judgment is final and cannot be appealed. The employer can request a discretionary revision of a default judgment issued under Act No 2 but the chances of obtaining such a review are slim.  In cases of discrimination or retaliation, where the remedies are in damages, courts will enter default judgment and will not allow the defendant-employer to raise any affirmative defences. At the most, employers will only have a limited opportunity to cross-examine a plaintiff during trial.

The only plausible exceptions to this drastic rule would stem from the lack of jurisdiction of the court or the removal of the case to a federal court. Employers can also raise defects in the summons and attack the validity of the service of process, but the risks of default outweigh the potential benefit of attacks on technical grounds. Therefore, many employers prefer to answer the complaint promptly, raise all possible affirmative defences, and then move to dismiss on technical grounds. However, the technical arguments must carry some weight; Courts will not dismiss cases under Act No 2 for mere defects of form in the complaint.

Service of process

Furthermore, rules for service of process in cases under the summary proceeding of Act No 2 are more flexible than in ordinary civil cases. The employee need not serve a resident agent or designated official; a plaintiff can accomplish valid service of process simply by serving a person, such as a manager or supervisor, who represents the employer. The court will then acquire jurisdiction, and any delay in answering the complaint by the employer will result in default. Due to the existence of these relaxed service of process rules under the summary proceeding, employers doing business in Puerto Rico would do well to train all managers and supervisors in the nuances of Act No 2.

Joinder and wage and hour cases

The risks Act No 2 poses for employers are highlighted by the fact that cases that could potentially cost hundreds of thousands of dollars are routinely filed under the summary proceeding it provides. To wit, exempt and non-exempt employees – as well as temporary, seasonal, and probationary employees – can invoke the summary procedure of Act No 2 and join as many labour claims as possible in a single pleading. Claims under Puerto Rico wage and hours laws, which provide as penalty double the amount sought, are also typically filed under the summary proceeding. Moreover, all employees having a common claim can be joined in a single action against the employer under the summary proceeding.

The resulting burden for the employer is considerable. For example, in wage and hour cases under Act No 2, employees can claim unpaid wages going back up to three years, but the employer has only ten or 15 days to:

  • consider the allegations;
  • inform those who need-to-know of the filing of the case;
  • review all pertinent documents;
  • interview potential witnesses;
  • evaluate the merits or lack thereof of the allegations;
  • timely answer the complaint; and
  • raise all possible affirmative defences that could apply to a case.

Even in fact-intensive cases – in which plaintiffs allege sexual harassment, retaliation, or discrimination under the myriad of conditions protected by Puerto Rico laws, including maternity leave – and seek compensatory and punitive damages, Act No 2 may be invoked and employers can be subjected to these onerous conditions.

Preventive attachment

Moreover, in wage claims under Act No 2, a plaintiff can request and obtain a preventive, without posting bond, in an amount sufficient to guarantee the satisfaction of a judgment. Courts will grant the preventive attachment if the plaintiff files a well-pleaded complaint with sufficient allegations and grounds that the plaintiff will prevail on the merits. The plaintiff attachment must also persuade the court that if such remedy is not granted, the judgment rendered will be moot and impossible to collect.

Discovery limitations

Another highlight of Act No 2’s summary proceeding is the limitation of the use of discovery mechanisms available under the Puerto Rico Rules of Civil Procedure. In cases brought under Act No 2, an employer can only use one mechanism of discovery. For instance, most employers favour a deposition duces tecum, to examine the plaintiff and the documents, if any, that support the allegations of the complaint. Plaintiffs, on the other hand, prefer interrogatories with a request for productions of documents. Depositions of witnesses must be agreed by the parties and the court must be informed. In the absence of an agreement, a party may request that the court authorise additional depositions. However, it is up to the court to determine if such depositions are needed.

Further, during discovery, employers cannot require plaintiffs to produce documents and records that should be in their own possession. For instance, in wage cases, employers cannot ask employees for payroll documents that must be kept and maintained as required by the laws and regulations issued by the PR DOL. Moreover, all documents and investigations of the PR DOL are considered privileged and confidential and will only be revealed if the Secretary of the agency authorises the production of such information.

Counterclaims

Act No 2 also expressly prohibits employers from filing counterclaims against a plaintiff-employee. However, the Puerto Rico Supreme Court has held that in cases in which a defendant-employer has a valid counterclaim against a plaintiff-employee, the employer can file an independent action in court. One of the best examples of such counterclaims is when the defendant-employer claims that all potential actions were disposed of by virtue of a settlement and release agreement with the appropriate consideration paid to the employee. The employer can file an action for breach of contract and damages and even enjoin the employee from continuing with the labour and employment claim.

Timetable

Once the complaint is answered, a case under Act No 2 will have priority in the court’s calendar. Most courts will immediately set deadlines for discovery, dispositive motions, and the pre-trial hearing. The trial should be held promptly. Except for such matters that are in conflict with the summary nature of proceedings under Act No 2, the Rules of Civil Procedure of Puerto Rico will apply during the litigation and trial of the case. For instance, any party can ask the Court for orders to compel discovery or to continue hearings for good cause. Very recently, the Puerto Rico Supreme Court held that plaintiffs in labour and employment cases, including cases under the summary proceeding, are precluded from amending their allegations or including new allegations in opposition to motions for summary judgment. If there is a need to amend, the plaintiff must request leave from the court and then amend the allegations if and when leave is granted. This will give the employer the opportunity to raise new affirmative defences and to conduct additional discovery.

In keeping with the summary nature of proceedings under Act No 2, once the date of trial arrives, if the plaintiff fails to appear in court, the court will dismiss the action. However, on the other hand, if the employer fails to appear at the trial, the court can issue judgment and award the remedy sought.

Challenges to Act No 2 proceedings

For years, employers have challenged the inflexible, onerous summary proceeding established by Act No 2. Such challenges have included attacks on the constitutionality of the statute and its infringement on employers’ due process. However, the Supreme Court of Puerto Rico has upheld the statute and its summary proceeding time and time again. In fact, over the years, the interpretation and application of the summary proceeding have become more stringent. Recent amendments to the statute, as well as decisions by the Puerto Rico Supreme Court, have resulted in rules that prevent any party from requesting reconsideration of resolutions, partial judgments and judgments issued by a court. Other interpretations of Act No 2 prevent any party from requesting additional findings of fact after a judgment is issued. Likewise, the statute has been amended to require all parties to appeal any judgment, or to petition the intervention of the Puerto Rico Court of Appeals to review interlocutory matters, within the jurisdictional term of ten days from the entry of judgment. That being said, employers must be aware that Act No 2 provides for the imposition of sanctions on any employer that files a frivolous appeal to delay the effects of a judgment. In such cases, the Court of Appeals can assess a fine of no less than USD1,000 in favour of the plaintiff. A request for discretionary revision by the Puerto Rico Supreme Court of any judgment rendered by the Court of Appeals in a case under Act No 2 must filed within the jurisdictional term of 20 days after the entry of the judgment for which review is sought. 

In general, interlocutory appeals seeking review of orders or resolutions issued by the trial court are not favoured under the Civil Procedure Rules of Puerto Rico and the Regulations of the Puerto Rico Court of Appeals. However, in cases under the summary proceeding of Act No 2, interlocutory reviews are even more narrowly construed and will only proceed if there is a clear error that will result in a miscarriage of justice.

Despite the above, not every case filed under Act No 2 will ultimately be litigated under the summary proceeding it provides. Cases that, by their nature, are incompatible with the restrictions imposed by the summary proceeding may be converted to ordinary actions at the employer’s request. For example, complex cases in which numerous witnesses, including experts, will testify, and cases in which causes of action in torts or breach of contract have been alleged may be converted to an ordinary civil proceeding, at the court’s discretion. When a petition to convert a summary proceeding to an ordinary proceeding is filed, the burden of persuading the court that the summary proceeding is inadequate to prosecute the case lies with the employer.

Conclusion

In conclusion, employers must observe extreme caution and diligence when dealing with labour and employment claims in Puerto Rico filed under Act No 2. Employers must train all managers and supervisors to understand what service of process is, and on the perils of failing to promptly notify that a service of process has been received. Likewise, in-house counsel and the legal departments of corporations must be aware that complaints under the summary proceeding must be assigned immediately to counsel with experience in labour and employment matters in Puerto Rico in order to timely file an appropriate responsive pleading and avoid the potentially significant consequences of default.

Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C.

208 Ponce de Leon Avenue
Suite 1600
San Juan, Puerto Rico 00918

+1 787 756 9000

+1 787 756 9010

seda@amgprlaw.com; mhaack@amgprlaw.com www.amgprlaw.com
Author Business Card

Law and Practice

Authors



Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C. has attorneys in its labour and employment law department that practise in all areas of labour and employment law in the private and public sectors. Their practice includes representing clients in connection with the negotiation and administration of collective bargaining agreements; operating as trial counsel in federal and Puerto Rico courts, before administrative agencies and in labour arbitration and National Labor Relations Board cases; and client counselling regarding compliance with Puerto Rico and federal employment discrimination statutes, employment terminations, federal and state wage and hour laws, workers' compensation, employee benefits and other laws governing matters of employment. Clients include employers in the aerospace, airline, IT services, manufacturing, construction, health, retail services, solid waste, and insurance or insurance claims industries. Members of the department also represent clients in business-related immigration procedures before the United States Citizenship and Immigration Services and US Consulates around the globe.

Trends and Development

Authors



Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C. has attorneys in its labour and employment law department that practise in all areas of labour and employment law in the private and public sectors. Their practice includes representing clients in connection with the negotiation and administration of collective bargaining agreements; operating as trial counsel in federal and Puerto Rico courts, before administrative agencies and in labour arbitration and National Labor Relations Board cases; and client counselling regarding compliance with Puerto Rico and federal employment discrimination statutes, employment terminations, federal and state wage and hour laws, workers' compensation, employee benefits and other laws governing matters of employment. Clients include employers in the aerospace, airline, IT services, manufacturing, construction, health, retail services, solid waste, and insurance or insurance claims industries. Members of the department also represent clients in business-related immigration procedures before the United States Citizenship and Immigration Services and US Consulates around the globe.

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