Employment 2022

Last Updated July 06, 2022

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.

Status of Labour Reform

On 22 June 2022, Governor Pedro Pierluisi signed into Law House Bill 1224 to modify the changes implemented under the Labour Reform Act to “restore” employees’ rights. In its current version, House Bill 1244 calls for specific modifications to Law No 4 of 26 January 2017, including:

  • less burdensome requirements for accrual of vacation leave;
  • longer tolling periods for employment-related claims;
  • shorter probationary periods;
  • a more beneficial statutory severance formula in wrongful discharge cases (including reinstatement as a remedy, which has never been available under Puerto Rico law); and
  • extending employment reservation in the case of work-related accidents or illnesses from 12–24 months.

However, the new law was met with disapproval from the Fiscal Control Board under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). On 19 July 2022, the day before the law was to go into effect, the Fiscal Control Board formally objected to the law and instructed that its enforcement be suspended, as it contends that the changes it enacts are contrary to its objective of liberalising the employer-employee relationship under Puerto Rico law. The current administration has stated its intention of defending the law. The outcome of this controversy is uncertain, and will impact the guidance provided in this chapter. For an in-depth review of the recently-enacted legislation and its potential ramifications, please see the Puerto Rico Trends and Developments chapter in this Guide.

COVID-19

Puerto Rico is still under a state of emergency first declared on 12 March 2020 due to the COVID-19 pandemic. 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 in connection with the COVID-19 pandemic was to allow hourly employees to exhaust accrued paid leave (including sick leave and vacation) while they were without work due to lockdown orders, so as to minimise the economic impact of the lockdown on individuals forced to stay at home. This measure was only for the duration of the local stay-at-home orders. Employers have also been directed to adopt flexible leave policies consistent with public health guidance and have been required to liberally grant requests for remote working arrangements, work schedule adjustments, and other forms of reasonable accommodation related to COVID-19. Remote working has been strongly encouraged for employees who are able to do so. In addition, employers who furlough or reduce the regular working hours of any employee in connection with the COVID-19 emergency are obliged to notify them in writing of this fact and advise them of their eligibility for unemployment benefits.

In addition, on 9 April 2020, the Governor of Puerto Rico signed into law Act No 37, a permanent amendment to Article 6 of Puerto Rico’s Minimum Wage, Vacation and Sick Leave Act (Law No 180-1998), which provides an additional five days of paid leave for any employee who becomes infected, is suspected of being infected, or is exposed to any disease for which the Governor or the Secretary of Health has declared a state of emergency. This leave is available after all other paid leave has been exhausted.

COVID-19 workplace protocols

All employers doing business in Puerto Rico are currently required to have a COVID-19 Workplace Protocol in place which complies with guidance issued by the Puerto Rico Department of Labour and Human Resources and the Puerto Rico Occupational Safety and Health Administration (PR-OSHA). The workplace protocol must be contained in a written document, unique to the workplace, taking 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 to avoid transmission of COVID-19. The protocol should also describe the process for monitoring and screening employees before they enter the workplace, and the protocols to follow if an employee exhibits symptoms of or tests positive for COVID-19. It should also explain social distancing measures (for example, increased distance between workstations or staggered shifts); as well as those 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 vaccine mandates

Puerto Rico’s mask mandate was lifted with effect from 10 March 2022, and masks are no longer required indoors or outdoors. Likewise, vaccine mandates were eliminated, and the Puerto Rico Department of Health was charged with issuing recommendations as to vaccination of certain populations and within certain industries. However, employers are free to implement and maintain stricter COVID-19 measures, including the use of masks in their establishments and requiring vaccination of their employees. All employers must have a designated official to continuously evaluate and monitor the workplace and identify new risks and needs related to the COVID-19 pandemic.

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

White-Collar Employees

As Puerto Rico is subject to US federal law, 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 1 January 2020 increase of the FLSA salary basis, an exempt 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 their terms and conditions of employment.

The Labour Reform Act of 2017 (Law No 4-2017) amended most of the major employment laws that apply to private-sector employees. Employees retained prior to the enactment of the law are grandfathered, according to certain specific provisions of the law. Accordingly, the changes mainly affect employees hired after the law was passed. Although Law No 41-2022 undoes many of the changes enacted by Law No 4-2017, the Fiscal Control Board’s formal position as to the same has left its enforceability in question.

Definite/Indefinite Employment

In Puerto Rico, parties are free to negotiate 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. 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.

Employment Agreements

Employment agreements can be verbal. While written contracts have never been required for employees hired for an indefinite period, after the enactment of the Labour Reform Act, contracts for fixed-term and temporary employees can also be verbal. However, it is strongly recommended that these types of agreements be committed to writing, as there is typically a strong presumption that an employee has been retained for an indefinite period, and the employer bears the burden of proving otherwise.

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. Shorter probationary periods can be negotiated. There is no need for the probationary contract to be in writing, although it is recommended that probationary periods that are different from those set forth by law be documented.

Foreign Workers

Finally, an employer may assign employees from other jurisdictions to work in Puerto Rico for less than three years without having them deemed Puerto Rico employees, as long as they maintain an employment relationship with their foreign employer. In such cases, the legal and contractual rights and obligations shall be interpreted in accordance with the original employment agreement, including 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. Working hours exceeding these minimums must be compensated as overtime.

Overtime

In general, 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.

Since the enactment of the Labour Reform Act, employees who are required to perform overtime work must be compensated 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 employer’s industry is covered by the provisions of the FLSA, the employer will be required 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. However, employees hired prior to the law’s enactment will preserve any superior benefits they enjoyed before its passing, including overtime at a rate of twice their regular pay.

Flexitime

Voluntary flexible work schedules of no more than ten regular hours a day in a period of four days in a workweek are also permitted, without incurring overtime liability. Any flexible work schedule arrangement 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 absence, 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 further reduced to 20 minutes. Meal periods 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 to eat. 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 if 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

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. Employers are prohibited from deducting from the salary of any employee the day of rest. If the employer requests employees to work on their day of rest, it 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 not covered by this law.

In addition, since Law No 4 was enacted, 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 No 180 of 27 July 1998 (Law No 180), which covers non-exempt employees, provides that the federal minimum wage law (currently USD7.25 per hour) automatically applies to all employers in Puerto Rico covered by the FLSA. However, on 21 September 2021, the Governor of Puerto Rico signed into law House Bill 338, to create the Puerto Rico Minimum Wage Act. Among other things, the Puerto Rico Minimum Wage Act amends Law No 180 to create a local minimum wage that will prevail over the federal minimum wage provided by the FLSA, so long as it is greater amount. The Minimum Wage Act creates a Commission to Evaluate the Minimum Wage, ascribed to the Puerto Rico Department of Labour and Human Resources. Most significantly, however, the Act establishes a local minimum wage of USD10.50 per hour, which shall be implemented in successive steps:

  • with effect from 1 January 2022, the local minimum wage automatically increased to USD8.50 per hour;
  • with effect from 1 July 2023, the local minimum wage will be automatically increased to USD9.50 per hour; and
  • with effect from 1 July 2024, the local minimum wage will be increased to USD10.50 per hour, unless the Commission to Evaluate the Minimum Wage issues a mandatory decree to the contrary.

This statute applies to all employers in Puerto Rico who are covered by the federal Fair Labor Standards Act, excluding workers in the agriculture industry, and employees of the US federal government, employees of government agencies, municipalities, as well as employees of the legislative branches of the government of the Commonwealth of Puerto Rico. The Act also excludes employees covered by a collective bargaining agreement between a union and their employer, so long as such agreement provides equal or superior benefits. The Act shall not apply to employees classified as “administrators”, “professionals”, or “executives” under Puerto Rico Regulation No 13 regarding white-collar exemptions.

Employers who are not covered by the FLSA must pay their employees at least 70% of the prevailing federal minimum wage. However, employees who have a higher salary pursuant to a mandatory decree issued by the Puerto Rico Department of Labour and Human Resources shall receive the rate of pay established therein, notwithstanding Law No 180 or the FLSA. As discussed in 2.1 Status of Employee, the minimum wage for exempt employees in Puerto Rico is USD455 per week.

Any employee who is actively working for their employer, but is compelled to file a claim for unpaid wages, can only claim for wages owed within the three years preceding the date the action is filed. If the employee has ceased working for the employer, the claim is limited to the three years prior to the date of termination.

Employers who violate statutory wage obligations are subject to fines and penalties. The Office of Mediation and Adjudication of the Puerto Rico Department of Labour and Human Resources has jurisdiction to entertain salary claims under Law No 180.

It is worth noting that on 19 May 2021, the Governor of Puerto Rico created an Advisory Board on the Minimum Wage, tasked with evaluating the local minimum wage as it relates to current cost of living on the island, and rendering a report with their recommendations within 90 days. There is also legislation under consideration in both chambers of the Puerto Rico legislature which would increase the minimum wage in Puerto Rico above the current federal minimum under the FLSA.

PROMESA

Since 30 June 2016, the PROMESA, has 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, whichever occurs first. Employers are prohibited from terminating 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.

However, based on the Governor’s 19 May 2021 Executive Order and the approval of the Puerto Rico Minimum Wage Act, discussed above, there appears to be little appetite to implement a wage reduction of this nature.

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 1,350 hours between October 1st and September 30th of the bonus year. For employees retained before the enactment of Law No 4, the minimum number of hours worked to be eligible for the bonus is 700 hours between October 1st and September 30th of the bonus year. The bonus must be paid between November 15th and December 15th.

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, employers may effect payment of salaries to non-exempt 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 to make payments in direct deposit or electronic transfer transactions. When payment of wages is made by direct deposit or electronic transfer, each employee must receive a pay slip from the employer acknowledging that the payment has been deposited in the employee’s bank account and the date of the deposit. The deposit must be available to employees on their regular pay day. Salary payments can also be made to the employee at the workplace or can be paid in commercial establishments belonging to the employer. Exempt employees are not subject to this statute.

An employer that in any way affects the employment of an individual because the employee does not authorise the payment of salaries by direct deposit or electronic transfer shall be subject to fines and penalties. Employees are also permitted 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.

Deductions

Employers are not allowed to make any payroll deductions from the employee’s wages without the employee’s written authorisation. 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.

Vacation and Medical Leave

In general, all non-exempt employees are required to work 130 hours to accrue vacation and sick leave. Employees retained after the enactment of Law No 4 will accrue a minimum of half a day’s vacation leave per month during the first year of employment; three quarters of a day’s vacation leave from the second to the fifth year of employment; one day per month from the sixth to the 15th year of employment, 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. Employees retained prior to the enactment of the Labour Reform Act continue 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, regardless of years of service. 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. Employers may provide greater benefits if they so desire. However, it is illegal for employers to terminate and rehire or substitute current employees in order to provide inferior benefits based on the Labour Reform Act’s amendments to Law No 180.

Puerto Rico law allows employees to use up to five days of accrued 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. In addition, subject to certain requirements, public and private sector employees who suffer any of the following catastrophic illnesses can receive up to six additional paid days off per year: 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).

It is important to note that Law No 180, as amended, prohibits employers from using justified medical absences as efficiency criteria in an employee’s yearly performance evaluation. Under the law, employees are entitled to use their sick leave in such cases as is necessary and warranted. Therefore, it is a violation of that right for employers to establish an internal policy which allows them to treat justified medical absences in the same manner as unjustified or irresponsible absences, creating a negative impression of the employee when they are considered for a pay increase, a promotion, or other job-related benefits. An employer may not consider the justified use of medical leave as an unfavourable factor in an employee’s performance evaluation or take adverse action against employees for taking leave, such as reducing their work hours, reclassifying their position, or changing their shifts or schedule.

Exempt employees are not covered under Law No 180. Accordingly, the terms of their vacation and medical leave are contractually negotiated or established by employer policy.

Maternity Leave and Working Mothers

Maternity is perhaps the most protected condition covered by Puerto Rico labour laws. Under Puerto Rico Law Number 3 of March 13, 1942 (Law No 3), all female employees who give birth or adopt a child under the age of five are entitled to receive 100% of their salary during the statutory eight-week maternity leave. Law No 3 applies to all employees, exempt and non-exempt. The Puerto Rico Department of Labour and Human Resources has issued regulations regarding statutory maternity leave.

Furthermore, 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.

Finally, Puerto Rico 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. Breastfeeding mothers are entitled 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. Employers who fail to comply are subject to a penalty of USD3,000.

Disability and Accidents

Puerto Rico Law No 44 of 2 July 1985, (Law No 44), was enacted a few years before the Americans with Disabilities Act (ADA) and was later amended to further align with it. Under the statute, both public and private institutions are prohibited from discriminating against persons with physical or mental disabilities. This prohibition extends to 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, Law No 81 of 27 July 1996, focuses on the implementation of reasonable accommodation measures. Violations will result in fines and other remedies.

Puerto Rico’s Short Term Non-Occupational Disability Law, Law No 139 of 26 June 1968 (Law No 139, or SINOT from its initials in Spanish), provides up to one year of leave with reservation of employment for temporary disability not connected with employment, as well as 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, local law provides that leave may be a form of reasonable accommodation.

As to work-related 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.

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 also creates statutory protection for individuals involved in automobile accidents. 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.

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

Religion

Employers in Puerto Rico also have an obligation to accommodate the religious practices of their employees. While this is not a source of statutory leave, employers are required 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 to do so. If the religious accommodation includes any period of leave, such leave need not be compensated.

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 generally enforceable in Puerto Rico, subject to certain requirements. In fact, since the enactment of the Labour Reform Act, 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 non-competition agreement.

However, non-competition agreements must be consistent with public policy. The Puerto Rico Constitution and the case law of the Puerto Rico Supreme Court establish 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, any employee is free to resign and work for any other employer, including a competitor.

For a covenant not to compete to be valid in Puerto Rico, 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. Generally, the more parity that exists between the negotiating parties, the more likely it is that the agreement will be deemed valid.

If the non-competition clause is part of the original employment agreement, no independent consideration is required. However, if the clause is added 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 are typically valid. Such provisions are generally included in non-competition agreements, separation agreements and settlement agreements.

There is no data protection authority or overarching law that governs information privacy in Puerto Rico; only a Citizens Advice Bureau on Information Privacy Protection within the Puerto Rico Department of Consumer Affairs (DACO from its Spanish initials), 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. See 2.2 Contractual Relationship (Foreign Workers) for discussion of the legal and contractual rights and obligations of such workers in Puerto Rico.

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 Labor 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 outside 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. Employees have a right to union representation at investigatory interviews, as well as 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, union representation has continued to decline.

The most active and combative union representation is presently limited to government-sponsored corporations such as 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.

Please refer to 6.1 Status/Role of Unions.

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

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, states that good cause for the discharge of an employee from an establishment is understood to be one of the following.

  • 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, as just cause refers to any reason related to the proper and normal operation of the establishment.

Wrongful Discharge Compensation

Law No 80 provides a formula for statutory indemnity in cases of wrongful discharge. For employees retained after 26 January 2017, the formula for such indemnity is three months of salary, plus two weeks for every completed year of service, capped to a maximum of nine months of salary. This formula does not apply to employees hired prior to the enactment of Law No 4, who would still be entitled to claim under the prior, more beneficial indemnity formula.

For employees retained prior to the enactment of Law No 4, statutory severance is calculated as follows:

  • 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, a wrongfully terminated employee retained prior to the enactment of the Labour Reform Act would be entitled to a progressive indemnity equivalent to one week for each year of service if the discharge occurred within the first five years; 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.

The indemnity shall be calculated based on the highest rate of salary earned by the employee during the three years immediately preceding their discharge. Law No 4 clarifies that the term “basic salary” excludes certain benefits such as deferred compensation, income from tips that surpasses the federal minimum wage, and disability payments. Furthermore, the 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. No payroll deductions, except for social security, shall be made on such an indemnity. As of the enactment of Law No 4, payments under Law No 80 are 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

There has been ongoing discussion regarding the derogation of Law No 80 in the context of the negotiations between the government of the Commonwealth of Puerto Rico and the Fiscal Oversight Board established by 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. However, this position has been met with intense resistance from the Legislative Assembly of Puerto Rico, which has now voted against repealing the statute twice. Furthermore, as discussed in 1.1 Main Changes in the Past Year and in the Puerto Rico Trends and Developments chapter in this Guide, Law No 41-2022 would undo the severance caps implemented under the Labour Reform Act in favour of a more generous formula. However, the outcome of the dispute between the Fiscal Control Board and Governor Pierluisi’s administration on this issue remains to be seen.

Notice Periods and Termination Procedures

There are no required notice periods under local law. However, under 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 lay-offs, as such terms are defined by law.

Union-free employers are at liberty to establish reasonable procedures for progressive discipline and employment terminations. However, any internal rules, regulations and policies adopted by the employer must be provided to employees in writing. Courts in Puerto Rico have jurisdiction to determine whether an employer’s policies are reasonable and whether employment termination is justified. The burden of proof in wrongful discharge cases falls on the employer.

Employers with unions are required to comply with the terms and conditions of the applicable collective bargaining agreement prior to implementing terminations, including any internal disciplinary procedures or appeal processes for terminations that may have been adopted.

Please refer to 7.1 Grounds for Termination (Notice Periods and Termination Procedures).

Law No 80, discussed therein, 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, it is still settled that, in certain circumstances, it is warranted. Typically, summary dismissal is reserved for incidents or behaviour of a kind that would make it imprudent to await their repetition, or 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, summary dismissal has been upheld in cases of workplace violence, sexual harassment and falsification of employment documents or records (including providing false information on a job application).

Termination agreements are permitted in Puerto Rico. However, like any contract, 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 prospectively 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, please refer to 8.2 Anti-discrimination Issues.

Employees in Puerto Rico are also entitled to protection from workplace harassment (also referred to as “mobbing”), pursuant to Law No 90-2020. 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 to the employee’s reputation or private life, or risks to the employee’s health and integrity). However, to constitute unlawful workplace harassment, the conduct in question must truly be unrelated to the employer’s legitimate business interests. Accordingly, reasonable actions directed to ensure the proper operation of the workplace will not be considered mobbing, even if they are unpleasant, unpalatable, or unpopular to employees.

Employers are required to have anti-mobbing policies in place, as well as investigate allegations of workplace harassment and take corrective measures if the allegations are substantiated. It is worthwhile noting that, while other prohibited forms of harassment require evidence that they are perpetrated by a superior towards a subordinate, such as quid-pro-quo sexual harassment, unlawful mobbing can take place by and between employees of any rank. Workplace harassment by third parties and non-employees is also prohibited. 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.

Unlike other local discrimination and harassment statutes, employees 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.

Puerto Rico law also provides whistle-blower protections, discussed in 8.2 Anti-discrimination Issues (Whistle-Blowing).

As discussed in 7.1 Grounds for Termination, just cause for termination is required under Puerto Rico law. 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 under a written employment agreement, what constitutes adequate cause for termination shall be determined by the contract.

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 their resignation meet the criteria for an involuntary discharge.

In addition to the protections established by federal discrimination statutes, under Puerto Rico laws, employees are protected from discrimination based on age, race, colour, creed, sex, disability, sexual orientation, gender identity, social or national origin, social condition, political affiliation, religious ideology, authorised use of medical marijuana, 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 these conditions.

Specifically, under Puerto Rico Law No 100 of 30 June 1959 (Law No 100), any employer (public or private) who refuses to hire a person; discharges or discriminates against an employee regarding their salary, terms or conditions of employment; or classifies its employees in any manner which tends to deprive a person of employment opportunities or affect their status as an employee based on any 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 because the person in question is married to another employee of the employer.

All public and private employers are also required to develop and implement a protocol to avoid and/or manage episodes of domestic violence in the workplace.

Damages and Compensation

Since 2017, compensatory and punitive damages in discrimination cases under local law are capped 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 500 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.

All discrimination cases under Puerto Rico law are adjudicated using a burden-shifting framework like the one employed under Title VII.

Discrimination on the Basis of Sex and Sexual Harassment

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 because of sex. The main purpose of this law is to guarantee the equal right to employment for women as well as men, while prohibiting discrimination and imposing penalties for the same. The prohibition of discrimination on the basis of gender applies equally to public and private-sector employers. In furtherance of pay equality between genders, employers are also specifically prohibited 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) prohibits sexual harassment in the workplace and establishes responsibilities and penalties in connection with the same. Sexual harassment is defined 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. Employers are required to take the following measures to maintain a workplace environment that is free of sexual harassment:

  • explain to supervisors and employees that there is a strong policy against sexual harassment;
  • create awareness of sexual harassment;
  • provide 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.

Persons 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.

The rights of working mothers under Law No 3 are discussed in 2.5 Other Terms of Employment.

Military and Jury Service

Puerto Rico Law No 44 of 19 May 1976 forbids employers from dismissing or discriminating against an employee by reason of their absences in the performance of any military duty. Violations of this law are a felony, punishable with a fine not exceeding USD5,000 or by imprisonment for no more than three years, or both. The affected employee shall have the right to reinstatement without any loss of pay, as well as privileges and/or benefit rights.

Puerto Rico law also affords protection to employees from any action that adversely affects their employment in connection with their service as jurors or witnesses.

Whistle-Blowing

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.

Employers are subject to double damages, reinstatement, back pay, benefits and attorney’s fees if any employee proves that they were the victim of 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 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.

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.

Pre-dispute arbitration procedure agreements are enforceable.

In discrimination or retaliation cases, the prevailing employee may be awarded back pay, front pay, emotional and compensatory damages, attorney’s fees and/or reinstatement. 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.

Law No 41-2022: Radical Amendment to Puerto Rico’s Labour Reform Act

The Labour Reform Act

On 26 January 2017, Puerto Rico enacted Law No 4-2017, a far-reaching statute known as the Labour Reform Act, which amended most of the existing labour and employment legislation in the jurisdiction. Notably, the Labour Reform Act increased the number of hours employees must work in a month to accrue statutory vacation and sick leave from 115 to 130 hours for all employees, as well as the number of hours needed to qualify for Puerto Rico’s statutory Christmas bonus from 700 hours to 1,350 hours, with a grandfather clause for employees hired before 26 January 2017.

It also:

  • decreased the number of vacation days accrued by employees in a given year;
  • established a cap for the statutory indemnity under Puerto Rico’s Wrongful Discharge Act (Law No 80 of 30 May 1976), with a grandfather clause for employees hired before 26 January 2017;
  • instituted probationary periods of nine months for hourly employees and 12 months for exempt employees; and
  • changed the computation of daily overtime, among many other changes.

The Law also introduced unquestionably positive changes to Puerto Rico’s labour and employment legislation, such as:

  • a statutory cap on damages in employment cases;
  • a presumption in favour of independent contractor relationships; and
  • codification of employees’ duties towards their employers (such as a duty of loyalty, a duty to not compete against the employer’s business activities and an obligation to co-operate in good faith towards the successful operation of the business).

The Law also made important contributions to

  • the rights of employees in the workplace (such as the right to be free of discrimination in the workplace, the right to be timely compensated for work performed, and protection of an employees’ right to privacy, subject to the employer’s legitimate interest in protecting its business, its property, and the workplace);
  • religious accommodation; and
  • a rule requiring that local labour and employment statutes be interpreted in a manner consistent with federal legislation on the same issues.

Proponents of the Labour Reform Act argued that by reducing burdens on employers, the law would incentivise hiring and stimulate Puerto Rico’s flagging labour market. Since its enactment, the statute has been met with fierce push-back from labour organisations, who argued that it unfairly reduced employees’ statutorily protected benefits and would have the reverse effect of further dragging down the jobs market.

During the 2020 election campaign in Puerto Rico, several candidates ran on a platform that included amending the Labour Reform Act of 2017, including Governor Pedro Pierluisi, who indicated that these matters would be addressed as part of his administration’s public policy. Accordingly, it was no surprise that in the opening 2021 legislative session, there were a flurry of bills in the House intended to amend or repeal the Labour Reform Act.

Legislators introduced House Bill 3 as a full reversal of the Labour Reform Act, but ultimately a pared-down version was sent to the Governor’s desk for approval. Most notably, if passed, employers would have been faced with changes to the statutory probation period, daily overtime compensation, statutory severance for wrongful discharge (along with changes to the definition of unjust termination which had been enacted in the Labour Reform Act), among others. House Bill 3 also included provisions that would:

  • eliminate the requirement that there be consistent interpretation between federal laws and local laws that regulate the same issues;
  • reincorporate the presumption of wrongful termination in all employment termination cases; and
  • revert the commencement of meal period to no earlier than the third hour of work, rather than the second, unless there is written agreement to do so.

The law would have gone into effect immediately, leaving employers ill-prepared and hard-pressed to comply.

On 5 March 2022, Governor Pierluisi vetoed House Bill 3, on the grounds that it contained errors and inconsistencies as drafted. In addition, Governor Pierluisi indicated that the proposal for the law to go into effect immediately after being signed was prejudicial to employers, who would not have time to adjust their payroll systems and prepare for the dramatic changes the law contemplated. Notwithstanding this, Governor Pierluisi indicated that there were areas of consensus within the proposed statute, including establishing a fixed probationary period of six months for both exempt and non-exempt employees, creating a uniform requirement of 700 hours worked in order for private sector employees to be entitled to the local statutory Christmas bonus, and returning the requirement for monthly minimum hours worked in order to be entitled to accrue statutory vacation leave from 130 hours to 115.

After the governor’s veto, the Puerto Rico legislature wasted no time. On March 8, 2022, an overwhelming majority of the members of the House approved House Bill 1244, which included changes to address the concerns raised by Governor Pierluisi. On 20 June 2022, Governor Pierluisi signed House Bill 1244, creating Law No 41-2022.

The effect of Law No 41-2022

As discussed above, the main goal of Law No 41-2022 is to undo some of the amendments introduced by the Labour Reform Act of 2017. It also creates new benefits for certain employees. The most relevant changes introduced by Law No 41-2022 are set out below, organised by the statues that are to be amended.

Law No 4-2017 (Labour Reform Act)

Ambiguous provisions in employment contracts shall be liberally construed in favour of the employee. Employers, however, may reserve the right to interpret their own rules and policies as long as such interpretation is reasonable. 

The statute of limitation for employment contract-related claims is increased from one to three years.

The Secretary of Labour and Human Resources of Puerto Rico shall submit reports to the legislature every three months with respect to Law No 41-2022.

Law No 80-1976 (Wrongful Discharge)

The employer has the burden of proof in wrongful discharge claims.

The indemnity cap of nine months is repealed.

Employees with more than 15 years of service are entitled to claim an indemnity equal to six months plus three weeks of salary for every complete year of employment.

Employees with less than 15 years of service are entitled to claim an indemnity equal to three months plus two weeks of salary for every complete year of employment.

Courts can order a judicial deposit of the amount equal to the indemnity under the law plus 15% in attorney’s fees.

The probationary period will be automatic for the first three months for both exempt and non-exempt employees. Such period can be extended to a maximum of six if the employer notifies in writing to the Puerto Rico Department of Labour the reasons for the extension.

The probationary period provision of Law No 41-2022 is prospective. It does not affect employees hired under the probationary period provisions of the Labour Reform Act.

All voluntary payments for terminations are credited towards the Law No 80-1976 indemnity. Such payments are tax exempt up to the indemnity amount.

Amounts paid to terminated employees under profit sharing programmes or resulting from liquidation or closure, for reasons attributed to the employer (closing, partial closing, reductions-in-force, reorganisations), will not prevent employees from claiming the indemnity provided under Law No 80-1976. 

The statute of limitations is increased to three years.

Law No 100-1959 (Discrimination in Employment)

The rebuttable presumption of discrimination is reinstated, if the alleged acts are committed without just cause.

The caps for damages in cases of discrimination and retaliation established under the Labour Reform Act remain in place.

Law No 180-1998 (Vacation and Sick Leave) 

All full-time non-exempt employees will be entitled to accrue one and one quarter vacation days and one sick leave day for every month in which the employee works 115 hours.

For Puerto Rico employers with 12 employees or less, such employees will accrue one half of a vacation day and one sick leave day if they work at least 115 hours per month.

For Puerto Rico employers with 12 employees or less, such employees will accrue a quarter of a vacation day and one half of a sick leave day if they work no less than 20 hours per week but less than 115 hours per month.

Part-time employees will accrue one half of a vacation day and one half of a sick leave day if they work no less than 20 hours per week but less than 115 hours per month

Upon written request of the employee, the employer may pay the full amount or part of the accrued and unused vacation balance.

The statute of limitation for actions arising under Law No 180-1998 is increased to three years.

This statute of limitations also applies to claims under mandatory decrees, Law No 289-1946 (Rest Day), Law No 17-1931 (Payment of Salaries), Law No 148-1969 (Christmas Bonus), and Law No 379-1948 (Days and Hours of Work).

Law No 379-1948 (Days and Hours of Work)

Daily overtime will be the hours worked in excess of eight in any calendar day.

Employees can request a change of schedules, number of hours worked, or place of work. Employers must respond in writing. Granting such request is subject to the conditions agreed between employer and employee.

Denials in changes of schedules, number of hours worked, or place of work must be specific. If there are no alternatives available for the changes requested, the response shall state so.

Meal periods shall begin after the completion of the third consecutive hour of work and before the sixth consecutive hour of work. By written agreement between the employer and the employee, the meal period could be taken between the second and the third hour of work.

Waivers of meal periods in cases in which the employee does not work more than six hours a day are repealed.

Second meal periods can be waived by written agreement between the employer and the employee, if the workday does not exceed 12 hours, and the first meal period was taken.

Written agreements to reduce the meal period to 30 minutes are valid as long as the parties agree. Otherwise, they can be revoked at any time.

For union employees, the meal period reduction is only valid if included in the collective bargaining agreement, or by written agreement with the union.

Law No 289-1946 (Rest Day)

Students working on a seventh consecutive day of work must be compensated at double the rate for hour.

A student is defined as a person enrolled in a higher education system, university, or graduate programme.

A student employed by a microbusiness or PYMES (small or medium enterprise) as defined in Law No 62-2014, will be compensated at time and a half.

All other employees are paid at time and a half.

Law No 148-1969 (Christmas Bonus)

The minimum hours to qualify for a bonus are 700 hours during a period of 12 months comprised between October 1st and September 30th of the following year (“the bonus year”).

The bonus is equivalent to 6% of the maximum salary of USD10,000 earned by the employee, or USD600.

Employers with 12 employees or less during at least 26 weeks during the bonus year will pay a bonus equivalent to 3% of the maximum salary of USD10,000, or USD300.

For employees hired on or after 26 January 2017, the effective date of the Labour Reform Act, who work no less than 700 hours during the bonus year, the bonus will be equal to 3% of the salaries up to a maximum of USD600.

For employees hired on or after 26 January 2017, who work no less than 700 hours for an employer with 20 employees or less during more than 26 weeks in the bonus year, the bonus will be equal to 3% of the salaries up to a maximum of USD300.

Employers considered to be a microbusiness or PYMES (small or medium enterprise) as defined in Law No 62-2014, will pay a bonus to its employees who work 900 hours or more during the bonus year, equal to 3% of the salaries up to a maximum of USD600.

Employers considered to be a microbusiness or PYMES (small or medium enterprise) as defined in Law No 62-2014, with 20 employees or less during more than 26 weeks in the bonus year, will pay a bonus to its employees who work 900 equal to 3% of the salaries up to a maximum of USD300.

The payment of 50% of the bonus during the first year of employment is repealed.

Law No 28-2018 (Catastrophic Illnesses)

Bleeding conditions similar to haemophilia were added as qualifying conditions.

The employee must have worked during the previous 12 months and at least 130 hours per month to claim the benefits of the special leave.

Fiscal Control Board challenge

Law No 41-2022, was to become effective on 20 July 2022. However, in a last-minute development, on 19 July 2022, the Fiscal Control Board under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) formally challenged the law as being contrary to its objective of liberalising the employer-employee relationship under Puerto Rico law and ordered that its enforcement be suspended. In response, Governor Pierluisi’s administration has voiced its intention to defend the law and the Puerto Rico Department of Labour and Human Resources has continued to issue guidance regarding its interpretation of the statute for purposes of employers’ compliance with the same. The result has been a nightmare scenario of uncertainty for employers, who have been left questioning whether they must amend their policies to comply with Law No 41-2022 or not.

At the time of this article's publication (September 2022) the outcome of the controversy between the local government and the Fiscal Control Board remains to be seen. Employers doing business in Puerto Rico should monitor the evolving situation closely.

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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