The Employment Law Review: Puerto Rico

Introduction

Puerto Rico is a jurisdiction that is highly protective of employees' rights and legislation is liberally interpreted in their favour. From rights established in the Constitution of Puerto Rico, such as the right to privacy, to more than a dozen statutory leaves of absence and numerous categories protected from discrimination, employers doing business in Puerto Rico encounter a jurisdiction rich in employment legislation.

As an unincorporated territory of the United States, Puerto Rico's dual legal system is characterised by coexisting US federal laws and local legal provisions. Thus, Puerto Rico enjoys US constitutional, legal and regulatory protections, many of which extend to the employment context. A similar duality applies to Puerto Rico courts of law – claimants have access to Puerto Rico state courts of general jurisdiction and the US District Court for the District of Puerto Rico, a federal court of limited jurisdiction. Decisions by the US District Court are subject to appeal before the First Circuit Court of Appeals in Massachusetts and subsequently to the US Supreme Court.

The Puerto Rico Department of Labor and Human Resources (PRDLHR) is responsible for the administration of public policy relating to labour and employment legislation, occupational safety, unemployment insurance benefits, re-employment services and human resources training. The divisions of the PRDLHR, with which employees commonly file administrative claims, include the Bureau of Employment Norms, the Office of Mediation and Adjudication and the Anti-Discrimination Unit. Under a work-sharing agreement, the latter is the state counterpart to the US Equal Employment Opportunity Commission that handles discrimination complaints.

To further facilitate access to the judicial system, employees in Puerto Rico count on a special proceeding to file employment-related lawsuits in state courts pursuant to Act No. 2 of 17 October 1961, as amended. This statutory, summary proceeding provides for the expeditious handling of claims, and imposes strict requirements and severe consequences on employers.

Year in review

While dealing with the continuing covid-19 pandemic, Puerto Rico's government enacted new laws and policies in 2021 to address minimum wage, harassment in the workplace and the protection of employees who use medical cannabis. Government efforts also sought to relax lockdown restrictions to allow the return to in-person working while imposing mandatory vaccination and similar safety requirements. These actions have included executive orders and guidelines published by the executive branch and agencies that continue to change to address different risk levels resulting from the spread of covid-19 and its new variants.

The following is summary of key developments during the past year.

On 3 February 2021, the PRDLHR published its Guidelines on Workplace Harassment in The Private Sector Private Sector in Puerto Rico in compliance with Act No. 90 of 7 August 2020, which established a strong and vigorous public policy against workplace harassment. The PRDLHR published the Guidelines as a resource for private sector employers to implement the necessary protocol to handle and address internal complaints of workplace harassment as required by Act No. 90. The Guidelines do not have the force of law, nor create substantive or procedural rights, nor impose obligations.

Act No. 15 of 29 July 2021 protects employees who are authorised medical cannabis patients from workplace discrimination. The Act establishes that this protection will not apply if the employer proves that the use of medical cannabis by the employee (1) poses a real threat to persons or property, (2) interferes with the employee's performance of essential duties or (3) may expose the employer to the possibility of losing a licence, permit or certification relating to federal laws, regulations, programmes or funds. Furthermore, the employee is not covered by this protection if they he or she uses medical cannabis in the workplace without the employers' written consent.

Act No. 47 of 21 September 2021 increased the minimum wage in Puerto Rico from US$7.25 to US$8.50 an hour with effect from 1 January 2022. The Act also provides for further increases to US$9.50 by 1st July 2023 and to US$10.50 by 2024. These last two hourly minimum wage increases are contingent on the approval of the Minimum Wage Evaluation Commission, a working group created within the PRDLHR by the law with quasi-legislative authority. This Commission will be responsible for approving or adjusting the wage increase by taking into consideration work conditions, benefits, cost of living and other factors. The new minimum wage does not apply to agricultural workers, administrators, executives, professionals, employees covered by a collective bargaining agreement establishing a higher wage rate, or government employees who are governed by special provisions.

The following are some of the salient executive orders issued by the Governor of Puerto Rico during 2021 laying out vaccine requirements and reopening guidelines for employers.

  1. Executive Orders EO-2021-058, EO-2021-062, EO-2021-063 and EO-2021-064, issued between 28 July 2021 and 19 August 2021, established vaccination and testing requirements for employees in various industries, including the executive branch, healthcare, tourism, education and others. These Executive Orders required employees to be fully vaccinated against covid-19 but allowed those who qualified for an exemption for medical reasons or for having a sincerely held religious belief, or who refused to be vaccinated, to furnish a weekly negative test or a positive test result from the past three months along with the pertinent documents showing the person's recovery, including a letter from a certified healthcare provider or a government health official certifying that the person has recovered and is fit to be in a public place.
  2. Executive Order EO-2021-075 of 15 November 2021 groups all the covid-19 provisions included in previous Executive Orders and repeals Executive Orders EO-2021-58, EO-2021-062, EO-2021-063 and EO-2021-064. In addition to requiring quarantining and isolation in certain cases, establishing limitations to mass gatherings and establishing measures that individuals must meet, EO-2021-075 provides for mandatory vaccination in the industries included in previous Executive Orders and for employers with 50 or more employees. EO-2021-075 includes specific provisions for the healthcare and education sectors, which are more restrictive than those previously established as it does not allow individuals who refuse to have the covid-19 vaccine and do not qualify for a medical or religious exemption to present a weekly negative test or a positive test result from the past three months with documentation accrediting their recovery. Per EO-2021-075, employees working at hotels, motels (paradores), lodgings, restaurants (including fast food outlets, food courts and cafeterias), bars, food kiosks (chinchorros), small cafeterias, sport bars, theatres, cinemas, stadiums, convention and activity centres (whether indoor or outdoor) that sell alcoholic beverages or prepared food, beauty salons, barber shops, aesthetics salons, spas, gyms, child care centres (including Head Starts and Early Head Starts), supermarkets, minimarts (including establishments authorised by the Women, Infants and Children programme (WIC)), casinos and convenience stores at gas stations, and those employees whose employers have 50 or more employees must comply with the following:
    • furnish proof of being fully vaccinated against covid-19 with a vaccine either approved or authorised by the US Food and Drug Administration or included in the emergency use list issued by the World Health Organization;
    • have a test for covid-19, at their own expense, every seven days and furnish the negative result of that test at least every seven days; or
    • furnish a positive covid-19 result from a test performed within the past three months, along with the pertinent documents accrediting the person's recovery, including a letter from a certified healthcare provider or a government health official certifying that the person has recovered and is fit to be in a public place.
  3. Executive Orders EO-2021-082 and EO-2021-087 require that employees in the healthcare and education sectors, as well as first responders and those working in restaurants (including fast food outlets, food courts and cafeterias), bars, food kiosks (chinchorros), small cafeterias, sport bars, supermarkets, minimarts (including WIC-authorised establishments), and convenience stores at gas stations, receive a booster shot so as to be considered fully vaccinated against covid-19.

As a United States territory, Puerto Rico is also subject to the US Department of Labor's Occupational Safety and Health Administration Emergency Temporary Standard (ETS) published on 4 November 2021. The ETS requires, among other things, that covered employers develop, implement and enforce a mandatory covid-19 vaccination policy, with an exception for employers that instead establish, implement and enforce a policy allowing employees who are not fully vaccinated to elect to undergo weekly covid-19 testing and wear a face covering at the workplace. After various groups and states challenged the ETS, it is currently being reviewed by the US Supreme Court.

Significant cases

i Solidary liability between employer and employees

In Pérez, et al. v. Lares Medical Center, Inc,2 the Puerto Rico Supreme Court, applying the vicarious liability regime in the employment context, held as a matter of first impression that there is proper solidary liability between an employer and its employees, which is distinguished from the improper solidary liability that ordinarily exists between joint tortfeasors outside the employment context. Therefore, it is not appropriate to reduce an award for damages compensation imposed on an employer for vicarious liability under Article 1803 of the 1930 Puerto Rico Civil Code for the negligent acts of an employee who was not brought to suit as co-defendant. Accordingly, a plaintiff injured by the negligent acts of an employee in the exercise of his or her duties can collect the entire remedial compensation from the employer. In these cases, the employer may, under Article 1804 of the 1930 Puerto Rico Civil Code, recover from the employee that caused the tort the amount that the employee would have had to satisfy.

ii Order to disclose non-parties' medical records subject to interlocutory review

In Diaz Santiago v. Pontifica Universidad Católica de Puerto Rico,3 the Puerto Rico Supreme Court considered whether a challenge by a defendant employer of a lower court order for the disclosure of non-parties' medical records could be subject to an otherwise limited interlocutory review in an employment action brought against the defendant pursuant to the summary proceeding provided for in Act No. 2 of 17 October 1961. Relying mainly on privacy concerns and mandates and constitutional rights, the Supreme Court held that the challenge of the order to disclose medical records of certain students (alleged victims of sexual harassment) and who were not parties to the suit brought against the University owing to the dismissal of the alleged harasser was warranted as it met the standard of a review that pursued the avoidance of a gross injustice. Although interlocutory review is very limited in cases under Act No. 2's summary proceeding, it was permitted in this case where the review was intended to avoid a serious injustice, such as the full and unprotected disclosure of confidential medical records of non-parties.

iii Violation of right to privacy a just cause for termination as first offence

In Indulac v. Central General de Trabajadores,4 the Puerto Rico Supreme Court determined that an employee's violation of the constitutional right to privacy of a co-worker after installing a hidden camera in the co-worker's office for secret surveillance is sufficient reason for termination of employment on the first offence under Act No. 80 of 30 May 1976 (known as the Unjust Dismissal Act). The Supreme Court concluded that installing the hidden camera was a form of invasion of the co-worker's privacy, stalking and harassment.

iv Calculation of damages when there are multiple causes of action

In Santiago Ortiz v. Real Legacy Assurance Company, Inc,5 the Puerto Rico Supreme Court determined that, in a lawsuit that accumulates claims under Act No. 80 of 30 May 1976, as amended, and under Act No. 100 of 30 June 1959, as amended, and the compensation for severance payment received or awarded needs to be deducted, the deduction will be made after the imposition of the double penalty provided by Act No. 100.

v University an employer according to the law

In UPR v. Unión Bonafide de Oficiales de Seguridad de la Universidad de Puerto Rico,6 the Puerto Rico Supreme Court held that the University of Puerto Rico is a public corporation included in the definition of corporate instrumentality in Article 2(11) of the Puerto Rico Labor Relations Act, Act 130 of 8 May 1945, as amended, also determining that the university is an employer under the terms of Article 2(2) of this statute.

vi Executive Order requiring executive branch employees to be vaccinated is upheld

In Rodriguez-Vélez v. Pierluisi Urrutia,7 the US District Court for the District of Puerto Rico held that Governor Pedro Pierluisi's Executive Order mandating that all government employees be vaccinated against covid-19 is constitutional and valid under federal law. The Court held that, during the covid-19 pandemic, the government's interest to protect the community's health and safety is paramount and that this executive action was implemented, subject to certain exceptions, for those who do not wish to be vaccinated after unsuccessfully attempting less restrictive measures.

vii Continuity of employment constitutes consent to a valid arbitration agreement

In Aponte v. Pfizer Pharmaceuticals, LLC,8 the Puerto Rico Supreme Court held that continuity of employment constitutes a valid form of tacit consent to an arbitration agreement that is found to be valid under the Federal Arbitration Act, which only requires that the arbitration agreement be in writing and does not require for it to be signed by both parties. In this case, the arbitration agreement established that the form required for its acceptance was the continuation of the employees in their employment for 60 days after being notified of its terms. Based on the above, the Court validated the parties' exclusive arbitration agreement under the Federal Arbitration Act and limited the plaintiffs' ability to use any other process to present their claim.

This opinion responds to the vigorous public policy established in Puerto Rico favouring arbitration as an alternative method for the resolution of disputes and the Supreme Court's position that any doubt as to whether or not arbitration proceedings must be resolved in favour of it as agreed by the parties.

Basics of entering an employment relationship

i Employment relationship

Employment rights can stem from an employee handbook, employment offer, collective bargaining agreement or employment contract. In general, executing an employment contract is not required to establish an employment relationship in Puerto Rico because employment agreements can be binding regardless of whether they are in writing. Under certain circumstances, it may be advisable and practical to execute a written employment agreement that establishes the terms and conditions of employment, such as base salary, benefits, responsibilities and job expectations, to name a few. Although the Labor Transformation and Flexibility Act 2017 (LTFA) increased flexibility, reducing the need to have employment agreements in writing, there are still certain specific, employment-related obligations that can only be validly established through a written agreement. The following are some examples of agreements that still need to be executed in writing:

  1. agreements with non-exempt employees to reduce the statutory meal break, to fragment the use of vacation leave, to use non-working days as part of a vacation period, to partially liquidate and pay accumulated and unused annual leave in excess of 10 days, and to accumulate annual leave in excess of one year;
  2. non-compete agreements and some other restrictive covenants; and
  3. voluntary agreements with non-exempt employees to establish alternative, weekly work schedules to fulfil a 40-hour week in no more than 10 consecutive working hours per day, without incurring daily overtime liability.

Employers are advised to expressly reserve their right to interpret unclear clauses or language in any of their agreements.

ii Probationary periods

The law authorises the hiring of new employees for an indefinite term on a probationary basis. Employees properly classified as executives, professionals or administrators are subject to an automatic 12-month probationary period. All other employees are subject to a nine-month probationary period, unless a shorter period is agreed between the employee and the employer. Generally, during the probationary period, the employer may discharge, or terminate the contract of, an employee without cause and without responsibility for the severance payment established by Act 80. The termination cannot be for discriminatory reasons.

iii Establishing a presence

A foreign company may not hire employees in Puerto Rico without being officially registered with the Department of State of the Commonwealth of Puerto Rico. Companies engaged in trade or business in Puerto Rico must register with the Department of State. Having an employee may qualify as conducting trade or business. However, a company may hire an independent contractor and, depending on the nature and extent of the duties performed by the contractor, the entity may not need to register with the Department of State.

The concept of a permanent establishment is not defined by the Puerto Rico Internal Revenue Code of 2011, as amended. Thus, tax presence in Puerto Rico is determined by whether a business is engaged in trade or business, or case by case in connection with fixed or determinable annual or periodic income. Accordingly, a corporation engaged in trade or business in Puerto Rico is subject to the normal tax on corporations pursuant to the Puerto Rico Internal Revenue Code.

Since 26 January 2017, with the enactment of the LTFA, the rights and responsibilities of an employee from another jurisdiction who (1) is assigned to work in Puerto Rico for the benefit of another employer, (2) maintains an employment relationship with the employer outside Puerto Rico and (3) is assigned to work in Puerto Rico for no more than three consecutive years, will be interpreted in accordance with the provisions of the employment contract. Notwithstanding contract provisions, the employee will be subject to Puerto Rico laws concerning income tax, employment discrimination and work-related accidents. If the parties do not stipulate the applicable law, they will be subject to Puerto Rico legal provisions. Choice of law rules under the new Civil Code should also be considered.

Companies establishing a presence in Puerto Rico must also be aware that statutory benefits are vast and include those relating to wages and hours, and, among other things:

  1. a statutory Christmas bonus;
  2. unemployment insurance;
  3. workers' accident and non-occupational disability insurance compensation;
  4. leave of absence for maternity, adoption and breastfeeding;
  5. leave for victims of domestic violence, child abuse, sexual harassment, assault, lewd behaviour or stalking;
  6. jury duty;
  7. renewal of a driving licence;
  8. participation in Olympic games and other sporting world championships;
  9. appearance as a witness in criminal cases;
  10. military duty;
  11. occupational and non-occupational disability;
  12. family medical leave;
  13. emergency sick leave; and
  14. car accidents.

Restrictive covenants

Non-compete clauses in employment contracts are valid and enforceable in Puerto Rico under general freedom of contract principles but must comply with requirements established by the Supreme Court of Puerto Rico. There is no legislation controlling this type of agreement except that the LTFA expressly recognises employees' obligation not to compete with the employer's business activity unless it is otherwise provided by law or in an agreement with the employer. To be enforceable, non-compete agreements or clauses must be in writing and comply with following requirements:

  1. non-compete clauses must relate to a legitimate interest of the employer, such as the protection of the business from the adverse effects of competition by a former employee. The prohibition cannot be extended beyond what is necessary to protect the former employer's legitimate interests;
  2. the prohibition shall not last for more than 12 months following the termination of employment;
  3. the object of the prohibition must be limited to activities similar to those performed by the employer;
  4. the non-compete agreement must specify the geographical boundaries within which the prohibition is to apply, and be limited to what is strictly necessary to avoid competition. Alternatively, it should be limited to those customers the employee personally served for a reasonable period prior to the termination of employment or during a period immediately before the termination, and who were still customers of the employer when the employee's employment ended;
  5. the employee must receive adequate consideration in exchange for the prohibition; and
  6. as required by the Civil Code, the essential elements of consent, object and cause must be present, and the employer may not coerce or exert undue pressure on the employee to accept the non-compete obligation, which must be in a written agreement.

To the extent that non-disclosure agreements may limit an employee's freedom to compete, they should be evaluated under the aforementioned requirements. Furthermore, they may not (1) prohibit the employee from using the general knowledge or skills acquired during his or her tenure or training with the former employer, (2) prohibit the disclosure of information that is not confidential because it is public knowledge, nor (3) prohibit the disclosure of information properly provided to the employee by third-party sources.

Wages

i Working time

Wage and hour coverage in Puerto Rico for non-exempt employees is governed by the US Fair Labor Standards Act (FLSA) as well as local laws. Non-exempt employees in Puerto Rico are entitled to more benefits than those provided by the FLSA, which include payment for:

  1. hours worked in excess of eight hours or daily overtime;
  2. hours worked in excess of 40 hours or weekly overtime (also recognised under US federal law);
  3. hours worked during the meal break (meal-break penalty);
  4. hours worked during the seventh consecutive day or day of rest;
  5. hours worked in excess of the maximum number of working hours fixed in a collective bargaining agreement;
  6. statutory entitlement to vacation leave under Act No. 180 of 27 July 1998 (Act 180); and
  7. statutory entitlement to sick leave and emergency sick leave under Act 180.

As of 1 January 2022, the minimum hourly rate of pay is US$8.50 per hour. A staggered increase has been established for this rate to rise to US$9.50 by 1 July 2023 and to US$10.50 by 1 July 2024 for all employees covered under the FLSA, with limited exceptions. (See Section II for further information.)

Act No. 379 of 15 May 1948 (Act 379), as amended by the LTFA, coexists with the FLSA and regulates hours and days of work, overtime compensation and a mandatory meal break for non-exempt employees. Administrators, executives, professionals, computer programmers and outside sales persons, as these terms are defined by Regulation No. 13 of the PRDLHR or US Federal Regulation No. 541, are some of the occupational classifications excluded from the application of Act 379, as well as other wage and hour provisions.

On 4 April 2018, the PRDLHR issued a regulation for the application of Act 379, which establishes the requirements regarding working hours, alternative weekly work itineraries, changes to the working day, and employers' obligation to maintain employment and payroll records and compensatory time agreements. It also sets the norms applicable to meal breaks, agreements to reduce them and compensation for working during meal breaks.

Under Act 379, non-exempt employees are entitled to a one-hour unpaid meal break. This break can start after the second consecutive hour of work and, to avoid a meal-break penalty, it must also be scheduled before the beginning of the sixth consecutive hour of work. If a non-exempt employee's working day consists of no more than six hours, the meal break may be waived. If the employee works for more than 10 hours per day, the employee is entitled to a second meal break. This second meal break may be waived when a working day does not exceed 12 hours, provided the first meal break was taken.

The meal break may be reduced to 30 minutes, and in some cases to 20 minutes, by means of a written stipulation. The agreement to reduce the meal break will be effective indefinitely and cannot be terminated unilaterally until one year after its effective date. In other words, before one year expires, both parties must consent to the termination and after one year expires, either the employer or the employee can terminate the agreement unilaterally to reduce the meal break.

According to Act 379, the regular working day in Puerto Rico is eight hours and a regular working week is 40 hours. In addition, pursuant to Act No. 289 of 9 April 1946, as amended (Act 289), non-exempt employees are entitled to one day of rest for each period of six consecutive days of work. Under Act 289, one day of rest is considered to comprise 24 consecutive hours. The LTFA repealed Act No. 1 of 1 December 1989, as amended (also known as the Closing Law) and work performed on Sundays in retail establishments is no longer considered overtime work subject to premium pay. However, worked performed in retail establishments on Good Friday and Easter Sunday will still be subject to premium pay.

ii Overtime

Through company policy, employers may establish limits to the overtime work they will allow employees to perform. Any work employees perform for the benefit of the employer, however, generally requires compensation even when unauthorised.

The LTFA established a new uniform overtime rate of pay for non-exempt employees hired after 26 January 2017. The rate, which is equal to the rate established by the FLSA, consists of one-and-a-half times the regular rate of pay for hours worked in excess of eight hours during any calendar day (daily overtime), hours worked in excess of 40 hours in a week (weekly overtime) and hours worked during the meal break, the day of rest, when a commercial establishment is required to remain closed to the public, or when provided by a collective bargaining agreement.

Non-exempt employees hired prior to the enactment of the LTFA maintain superior benefits to which they were already entitled, which may include overtime compensation at double their regular rate of pay, when applicable and depending on a variety of circumstances and the industry in which they work.

iii Alternative work schedules, compensatory time and modified working conditions

The LTFA now provides for three flexible-work arrangements for non-exempt employees. First, it permits voluntary, written agreements with non-exempt employees to establish alternative weekly work schedules to fulfil a 40-hour week in no more than 10 consecutive working hours per day, without incurring daily overtime liability. Work in excess of 10 hours per day will be considered overtime.

Second, the LTFA recognises the concept of compensatory time agreements. That is, the employer may grant a non-exempt employee's request to make up hours not worked in a week because of absences for personal reasons. These compensatory hours will not be considered overtime when they are worked in the same week of the absence and do not exceed 12 hours in a day or 40 hours in a week.

Third, the LTFA created an employee's right to request changes of schedule, working hours or work location. An employee is entitled to make the request if it is in writing, he or she works 30 hours or more per week, has worked for at least one year for the employer and has not made the same request in the six months since the employer's last response to such a request. There are other requirements applicable to the response the employer must provide. Employees are not automatically entitled to a change in work conditions just because they make the request. Priority will be given to employees who are head of a family and have legal or sole custody of their minor children.

Foreign workers

US federal law governs Puerto Rico immigration matters. There are no statutory provisions requiring employers to keep a register of foreign workers. The Federal Immigration Reform Control Act of 1986 (IRCA), however, requires employers to complete Form I-99 to confirm that hired workers (citizens and non-citizens) are authorised to work in the United States. Through the verification process, hired workers must furnish, and their employer verify, documentation that confirms a worker's identity and authorisation for employment in the United States. Employers are required under the IRCA to retain Form I-9 for a designated period and make it available for inspection by authorised government officials. Employers must ensure that all foreign workers hired are admitted in the United States as permanent residents or under work-related non-immigrant visa classifications.

Although there are no limits on the number of foreign workers a company may have, there is a limit on the number of certain work visas issued by the US government each year. Non-immigrant workers hired for temporary employment in the United States under an employment-based visa category are restricted to the activity or reason for which their non-immigrant visa was issued. The length of stay in the United States will depend on the specific employment-based visa category under which the foreign worker was authorised for employment in the United States and whether the visa category permits extensions of stay.

An individual may seek an immigration classification that permits him or her to live temporarily in the United States. The employer, or potential employer, must file a petition for non-immigrant worker before the United States Citizenship and Immigration Services on behalf of the beneficiary worker under one of the employment-based visa categories. The most common non-immigrant visa categories are:

  1. H1B (workers in a speciality occupation);
  2. H2B (temporary non-agricultural workers);
  3. L1A (intra-company transferees in a managerial or executive position); and
  4. L1B (intra-company transferees in positions requiring specialist knowledge).

In general, Puerto Rico source income paid to a foreign worker will be subject to local income tax withholdings at source and taxes under the US Federal Insurance Contributions Act. Foreign workers are fully protected under local and federal employment laws, including discrimination based on citizenship or immigration status.

Global policies

The provisions of an employee handbook and other written norms, policies or benefits are considered part of the employment contract. Once these norms and policies are established, the employee and the employer are expected to honour them.

The rules of conduct and discipline must be reasonable and non-discriminatory in content and application. Depending on the circumstances, an employee's failure to comply with rules duly notified could constitute just cause for disciplinary action, including termination of employment. Consequently, employers usually include the rules of conduct in the employee handbook and provide a copy of the rules to employees.

Although not required in general, best practice is for employers to have and distribute written basic rules of conduct, policies and procedures, as they are important tools for managing potential risks relating to employment practices and to ensure compliance with the many statutory requirements applicable in Puerto Rico.

Notwithstanding the above, local and US laws require employers to have in place and disseminate written sexual harassment and anti-discrimination policies, including prohibited conduct and a mechanism to report and investigate complaints. Similarly, under local law, employers are required to have a domestic violence protocol and policies specifically addressing gender identity, sexual orientation discrimination and workplace harassment. Employers that perform drug testing are also required to establish a policy, rules of conduct and regulations compliant with Act No. 59 of 8 August 1997 (Act 59). Also, under Puerto Rico law, employers who conduct electronic surveillance in the workplace are required to have and distribute an electronic surveillance policy.

It is not legally required, but is recommended, that these policies be in Spanish and that employers maintain evidence of their notification to and signed receipt by employees.

Parental leave

Puerto Rico Act No. 3 of 13 March 1942 (Act 3) provides for maternity leave. Under Act 3, pregnant and adopting mothers of children five years of age or younger not registered in school (and some experiencing a miscarriage) are generally entitled to eight weeks of maternity leave paid by the employer (four weeks before the birth and four weeks afterwards, but typically subject to change depending on the employee's ability to work and medical certifications). Women who have adopted children aged six years or older are generally entitled to five weeks of maternity leave from the date the child joins the family. If a pregnant employee suffers post-partum complications and is still unable to work after taking all the weeks of post-partum rest, she is entitled to additional unpaid leave of up to 12 weeks, provided that, before the expiry of the extended rest period, she provides the employer with a medical certificate confirming the facts. The employee is entitled to reinstatement at the conclusion of the original and the extended leaves of absence and double damages for violations of Act 3.

Act 3 prohibits discrimination in employment because of pregnancy, childbirth and related medical conditions. It makes it unlawful for an employer to dismiss, lay off, reduce the salary or affect other conditions of employment for the aforementioned reasons, or because of the diminished productivity or a decrease in the quality of work performed by an employee while pregnant. Puerto Rico Act No. 69 of 6 July 1985 also protects pregnant women against employment discrimination.

State law does not provide for paternity leave. However, the US Federal Family Medical Leave Act applies in Puerto Rico and entitles eligible employees (male and female) of covered employers to take 12 weeks of unpaid, job-protected leave for specified family and medical reasons, including:

  1. the birth of a child and the care of a newborn child during the first year;
  2. the placement with an employee of a child for adoption or foster care and to care for the newly placed child for the first year of placement; and
  3. to care for a child with a serious health condition.

Translation

As an unincorporated territory of the United States, the official languages of Puerto Rico are Spanish and English. Spanish is the native tongue of the vast majority of Puerto Ricans. Although English is taught as part of the academic curriculum in schools, according to estimates, a low percentage of residents in Puerto Rico are able to speak, read and write English fluently.

Notwithstanding this, there is no law that requires employers to maintain employment documents in Spanish or English. Nevertheless, many employers opt to prepare, distribute and maintain employment documents, such as employee handbooks, policies, procedures, contracts, admonishments and documents pertaining to employees' personnel records, in Spanish. This recommended practice reduces the risk of employees subsequently challenging their obligations, employers' expectations, disciplinary measures, rules of conduct, duties pursuant to policies, among other things, on grounds that they did not understand the contents of the documents.

In the employment context in general, translations do not require a notarial certification or the use of a certified translator. The Puerto Rico court system permits the filing of documents in Spanish or English. Documents filed in cases before the US District Court for the District of Puerto Rico must be in English or translated by a certified translator to be relied on or by stipulation of the parties in lieu of the certified translation requirement.

Employee representation

Employees have a constitutional right to organise and bargain collectively through representatives. These rights are regulated through local and US federal laws.

The principal law governing relations between unions and employers in the private sector is the National Labor Relations Act of 1935, as amended (NLRA). The NLRA created the National Labor Relations Board (NLRB) as the statute's administering body. The NLRA guarantees the rights of employees to organise and to bargain collectively with their employers, and to engage in other protected concerted activities with or without a union, or to abstain from all such activity. The NLRB has jurisdiction over cases involving certain private sector employers whose businesses engage in activities affecting interstate commerce.

Act No. 130 of 8 May 1945, as amended (Puerto Rico Labor Relations Act (Act 130)), establishes collective bargaining as a public policy. It is inspired by the NLRA and was enacted to promote collective bargaining principles, reduce certain labour disputes and to enhance economic productivity.

Act 130 created the Puerto Rico Labor Relations Board (PRLRB), a quasi-judicial body of limited jurisdiction authorised to consider and adjudicate labour disputes. The scope of the PRLRB's authority includes determination and recognition of employees' representatives and appropriate units of workers for collective bargaining, investigation of controversies regarding representation, consideration of illicit labour practices and enforcement of mediation decisions.

There is no fixed ratio of representatives to employees.

Either the Puerto Rico Regional Office of the NLRB or the PRLRB oversees union representation elections. A labour organisation interested in becoming an exclusive representative of a group of employees must file a petition of investigation and representative certification before either body. After this petition is filed, the relevant Board initiates an investigation of the case and determines whether elections are warranted. Elections are only held for 'appropriate' bargaining units of employees. To form such a unit, employees must have common interests, that is, be subject to similar policies, and terms and conditions of employment and supervisors. Elections may be held by consent of the parties, by order of the president of the Board, or by the Board via a decision and order.

Elections may be held by virtue of an agreement between the employer and the labour organisation. When the parties cannot agree on elections, the president of the Board may order a public hearing, or may order the parties to hold elections pending a public hearing. After the public hearing is held, the case is transferred to the Board so that it may resolve the issue between the parties.

When elections are to be held, the Board requires employers to post a Notice of Petition for Elections in visible places, both within and outside the employer's business. This notice must include the name of the employer, the time and place of the elections, and a detailed description of the categories of eligible and non-eligible voters of each unit.

When a labour organisation obtains the majority of votes in an election, it receives a representative certification and the union becomes the exclusive representative of the bargaining unit. As such, unionised employers must refrain from dealing directly with individual employees regarding terms and conditions of employment. The representative is given a status of immunity for 12 months following the elections. This means that no labour organisation may petition to represent the same group of employees for at least a year after elections are held.

After the union is certified, the employer and the union have an obligation to meet at reasonable times to bargain collectively in good faith with a genuine objective to reach agreements regarding mandatory subjects such as wages, hours and working conditions (e.g., overtime, vacation time, insurance and safety practices). The employer and the union may also bargain with respect to other non-mandatory subjects relating to the terms and conditions of employment. Employers are prohibited from engaging in a wide range of unfair labour practices, such as retaliation against employees for organising or supporting a union, surveillance of union activity, offering benefits to employees in exchange for opposing union activity and questioning employees about their feelings towards union activity.

In June 2018, the Supreme Court of the United States ruled that states and public sector unions may no longer extract agency fees from non-consenting employees.10 The First Amendment of the US Constitution is violated when money is taken from non-consenting employees for a public sector union; employees must choose to support the union before anything is taken from them. Accordingly, neither an agency fee nor any other form of payment to a public sector union may be deducted from an employee, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay. This change has the same effect in Puerto Rico.

Data protection

i Requirements for registration

Puerto Rico does not have a formal data protection agency or government body responsible for supervising the collection, use and dissemination of employees' personal information gathered by a public or private corporation. The right to privacy, nonetheless, is recognised under the Constitution. Additionally, local and federal laws recognise the confidential nature of certain information gathered by businesses. Depending on the nature of the information, a higher or lesser degree of confidentiality and reasonableness is applicable to employment records and employees' private data.

ii Cross-border data transfers

Companies do not need to register for the purposes of a cross-border data transfer of an employee's personal information. To the extent that records and information transferred include employees' private data, a company must take necessary steps to protect it from indiscriminate or public disclosure. The applicable standard should be that of a prudent businessperson.

iii Sensitive data

Various federal and local employment laws specify the confidential information that employers must protect from public disclosure.

The US federal Americans with Disabilities Act (ADA) and Genetic Information Non-discrimination Act, as amended, and their local counterparts, protect employees' genetic, medical and health-related information, and data in the employment context, or relating to disabilities or requests for accommodation (or both). This information must be kept in separate records. Enforcement guidance issued by the Equal Employment Opportunity Commission under the ADA, and applicable in Puerto Rico, concerning disability-related enquiries and medical examinations of employees, suggests that any medical information concerning employees' disabilities must be treated as confidential. This includes an employee's covid-19 vaccination status. Employers may share this type of information in limited circumstances with supervisors, safety personnel and government officials investigating compliance with the ADA.

Additionally, Act No. 207 of 27 September 2006 and its regulation prohibit employers from using an employee's social security number for identification purposes and requires safeguards to protect it from undue disclosure. An employer may only transfer social security numbers electronically when there are sufficient safeguards to protect their confidentiality.

Further, Puerto Rico's legislation prohibiting discrimination based on sexual orientation and gender identity requires employers to keep information of this nature confidential. A similar protection from disclosure is afforded to information gathered during an investigation to protect a domestic violence victim who is at risk in the workplace or is alleging discrimination, or during investigations into workplace harassment. Employers must take reasonable measures to prevent disclosure of confidential information to persons who have no need to know the information. Employers must also maintain the confidentiality of any information in respect of special statutory leave taken to tend to situations relating to domestic violence, child abuse, sexual harassment in the workplace, sexual assault, lewd acts or stalking in its grave form.

Furthermore, Act 59 requires employers who carry out drug tests on job applicants and employees in the private sector to treat the test results and related data as confidential. Also, to the extent that Form I-9 for employment eligibility contains personal information about employees, the US Citizenship and Immigration Service recommends that employers provide adequate safeguards to protect it.

Finally, the privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996 apply to employers who are covered entities in Puerto Rico.

iv Background checks

Employers can perform background checks on job applicants and current employees, subject to legal parameters established in Act No. 150 of 8 October 2019. To the extent allowed by this Act, employers must also comply with the US federal Fair Credit Reporting Act of 1970 by notifying the applicant or employee of the possibility of using their background report for employment decisions, getting their written permission and certifying compliance to the reporting agency. If an employer takes an adverse employment action based on the individual's credit report or credit history, it shall provide a copy of the report to the job applicant or employee and a notice of rights with the contact information of the consumer reporting agency. Its Puerto Rico counterpart, the Credit Reporting Agencies Act, provides similar protections.

Furthermore, employers may perform criminal background checks on employees and job applicants.

Subject to limited exceptions, areas outside the scope of review include genetic, medical and disability-related information about job applicants or current employees. Considering other categories revealed in background checks, such as filing for bankruptcy, military service or discharge records, may expose employers to discrimination claims.

Subject to limited exceptions, areas outside the scope of review include genetic, medical and disability-related information about job applicants or current employees. Considering other categories revealed in background checks, such as filing for bankruptcy, military service or discharge records, may also expose employers to discrimination claims.

Discontinuing employment

i Dismissals

Act 80 (the Unjust Dismissal Act) regulates employment termination of employees hired for an indefinite term. Puerto Rico is not an 'employment at will' jurisdiction. Thus, an indefinite-term employee discharged without just cause is entitled to receive a statutory discharge indemnity (or severance payment) based on the length of service and a statutory formula. The LTFA amended Act 80 to implement the equivalent of a nine-month salary cap to the statutory formula, applicable to employees hired on or after the enactment of the Act on 26 January 2017. Employees hired prior to the LTFA retain their rights to receive a severance payment under the prior statutory formula.

Act 80, as amended by the LTFA, defines just cause for dismissal of an employee as:

  1. engagement in a pattern of improper or disorderly conduct;
  2. failure to work efficiently, working belatedly and negligently, or in violation of quality and security standards of the product handled by the establishment;
  3. a lack of competence or inability to perform the reasonable requirements of the employer;
  4. being the subject of complaints received from clients;
  5. repeated violations of reasonable written rules established for the operation of the business, provided a written copy of the rules had been given to the employee;
  6. full, temporary or partial closure of the establishment's operations. If the employer has more than one office, factory, plant or branch, the full, temporary or partial closure of the operations of any of the establishments where the employee works will constitute just cause for termination, subject to additional considerations established by law;
  7. technological changes or reorganisations, including changes of style, design or the nature of the product made or handled by the establishment, and changes in the services rendered to the public; or
  8. reductions in employment made necessary owing to a drop in the volume of production, sales or profits, anticipated or prevalent at the time of the discharge or with the sole purpose of increasing competitiveness or productivity.

Unless an employee engages in gross misconduct (e.g., physical violence, fraud or stealing under certain circumstances), a first offence or reasons not connected to the proper and normal operation of the establishment shall not constitute just cause. Written progressive disciplinary or corrective actions are highly recommended and normally required. Generally, however, employers are not required to give written notice of dismissal to the employee in question or the government.

Act 80 provides the exclusive remedy for indefinite-term employees whose employment is terminated without just cause but does not bar independent causes of action based on torts, violation of constitutional rights or arising from other legislation prohibiting discriminatory employment and retaliation. In those circumstances, employees may be entitled to job reinstatement and other remedies for damages. Categories protected from discrimination in Puerto Rico include disability, sex, age, race, colour, marital status, political affiliation or political ideas, religious beliefs, national or social origin, social condition, pregnancy, genetic information, union affiliation, being, or being perceived as, a victim of domestic violence, stalking or sexual aggression, sexual orientation or gender identity, veteran status, and being a patient authorised to use medical cannabis. Local and US federal laws also prohibit retaliation.

The LTFA expressly allows waivers of Act 80 rights and settlement of the severance payment once the termination of employment has occurred or the intention to terminate has been notified. The waiver must be made pursuant to a valid settlement transaction agreement that complies with legal requirements.

ii Redundancies

In essence, redundancies in Puerto Rico are regulated by Act 80 and local and federal anti-discrimination and anti-retaliation statutes. Redundancies must respond to legitimate and non-discriminatory business reasons. The Age Discrimination in Employment Act has important provisions to protect employees over the age of 40 affected by different redundancy situations.

Employers must also comply with Act 80 when there are group lay-offs because of any of the following:

  1. a full, temporary or partial closure of operations;
  2. technological or reorganisation changes;
  3. changes to the style, design or nature of products;
  4. changes in the services being rendered to the public by the employer; and
  5. necessary employment reductions because of reduced production, sales or profits, or with the purpose of increasing competitiveness or productivity.

Because the above circumstances are considered just causes to terminate employment, no compensation or offers of alternative employment are required.

Under a more flexible Act 80 after the enactment of the LTFA, if there is a group lay-off, an employer must determine who is to be discharged based on each worker's employment seniority within the affected occupational classification or their performance, efficiency or capacity. Certain rules apply to employers with multiple establishments. Act 80 also provides recall rights for six months following a group lay-off if the same or similar work is needed during that time.

Puerto Rico has no law setting notice requirements for group lay-offs. The US Worker Adjustment and Retraining Notification Act, however, requires most employers with 100 or more employees to give notification of 60 calendar days before a plant closure or mass lay-offs. Notice must be given to employees and employees' representatives, the local chief elected official and the state dislocated worker unit.

Transfer of business

Act 80 specifies the protections granted to employees and the obligations of employers when going concern is transferred.

Under Act 80, a former employer and seller is responsible for paying severance to employees who are not retained by the seller or hired by the buyer in the transfer of a business as a going concern. Act 80 mandates the buyer to retain from the purchase price an amount equivalent to the severance payments owed. If the seller does not pay severance, the buyer could then become liable towards discharged employees if deemed a 'successor employer'. A similar rule applies by virtue of case law to other employment-related liabilities towards discharged employees (e.g., unpaid wages or illegal acts or omissions by the former employer).

If the buyer chooses to transfer and continue using the services of any of the seller's employees, it can also be considered a successor employer. If a transferred employee is later dismissed without just cause, the successor employer is responsible for the severance payment, as provided by Act 80. The total years of service of the employee under the former employer and the successor employer will be considered in calculating the payment.

None of the foregoing legal doctrines will apply when a business completely ceases operations and all its employees are discharged (see Roldan v. M Cuebas).11

Outlook

An injection of millions of dollars from US federal funding for Puerto Rico's recovery from two major hurricanes in 2017, earthquakes in early 2020 and then the covid-19 pandemic less than a year later heralds a more positive outlook in the coming years. Overhauls in infrastructure and the economy, and the survival for another year of the LTFA enacted in January 2017, with the aim of levelling the playing field between employees and employers, are also signs of promising circumstances for companies, employers and employees alike, doing business or working in a Puerto Rico that is just coming out of a bankruptcy. Although the LTFA and its overhauling of Puerto Rico's employment statutory and regulatory scheme continue to dictate litigation strategies, motions practice, and compliance and preventive advice by employers' attorneys in an attempt to have a more employer-friendly application of the law in Puerto Rico, the covid-19 health crisis has drastically changed most workplace rules, policies and practices. The resulting plethora of regulatory changes, threats to the economic stability of employers, lay-offs or a lack of candidates for employment, heightened complexities in human resources and leave of absence management, and unsolved problems regarding remote working and returning to work remain the priorities for the foreseeable future. A new level of alertness and forward-thinking is required to master creativity, resilience and legal compliance in areas such as safety, health, culture, morale, productivity, work-life balance, anti-discrimination and accommodating disabilities or religious beliefs. A new era of employment-related litigation, beyond the now all-familiar LTFA issues, is already transforming employment law practice and is likely to continue in the long term.

Remote working, with all its employment-related legal considerations, is here to stay. Employers must continue to adapt policies and practices to the new virtual and remote workplace, and consider it part of their culture and an incentive or benefit aimed at attracting and retaining talent. Having experienced the virtues and hurdles of this long-distance and somewhat impersonal working style for close to two years, employers must continue to assess whether to revert to office-based and physical operations, taking into consideration, now more than ever, people's expectations regarding workplace flexibility, health and safety concerns, vaccination policies, leaves of absence, care-giving responsibilities, and related anti-discrimination and equal employment opportunity protections.

We have continued to adapt and transform legal services because of these continued major natural and legislative events. This transformation, resilience and swift adaptation to change must continue in the long term as there still exist significant events and situations, including:

  1. a relatively recently elected governor and officials as of January 2021;
  2. a wave of significant changes under a relatively new administration in the United States under a Democrat President who has reverted to more employee-friendly public policies and legislation;
  3. an economy and infrastructure that are showing signs of recovery and continue to benefit from a generous economic influx from the private and international sectors, as well as the US federal government, geared towards the renovation and reconstruction the island;
  4. an increased focus on data protection and privacy concerns and considerations as reliance on electronic devices at work continue to rise; and
  5. growing movements in favour of equality, women's rights and protection from discrimination.

There is no doubt that preventive consulting to avoid a new line of litigation and workplace conflict as a result of covid-19 and its defence will continue to be at the forefront of legal workplace priorities. The significant changes in the law that surfaced in 2021 and those expected to occur in 2022 continue to call for attention to revising and updating employee handbooks, workplace policies and practices, and management training within a new virtual and remote way of doing business in this transformed era of labour law.

Footnotes

1 Katherine González-Valentín and María Judith (Nani) Marchand-Sánchez are capital members, Patricia M Marvez-Valiente is a special counsel, Gregory J Figueroa-Rosario is a member and Gisela E Sánchez-Alemán and Nicole G Rodríguez-Velázquez are associates at Ferraiuoli LLC.

2 2021 TSPR 123.

3 2021 TSPR 79.

4 2021 TSPR 78.

5 2021 TSPR 12.

6 2021 TSPR 11.

7 21-1366 (PAD) (1 November 2021).

8 2021 TSPR 148.

9 Form I-9 is used to verify the identity and employment authorisation of individuals hired for employment in the United States. All US employers must properly complete Form I-9 for each individual they hire for employment in the United States (citizens and non-citizens). Both employees and employers (or authorised representatives of the employer) must complete the form.

10 Janus v. AFSCME, Council 31, 138 S. Ct. 2448, 2459.

11 199 DPR 664 (2018).

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