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KEY DEVELOPMENTS FOR 2024

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Increase to the minimum wage and to the compensation threshold to be considered an exempt employee

Recent legislative developments have increased the minimum wage in Puerto Rico. Act No. 47-2021 applies to all workers covered by the Fair Labor Standards Act (“FLSA”), and has increased the minimum wage for these workers, whilst additionally establishing automatic minimum wage increases for the following year, going from $9.50 per hour from 1 July 2023 to $10.50 from 1 July 2024. At the federal level, the United States Department of Labor has proposed raising the FLSA's annual salary-level threshold to $55,068 from $35,568 for white-collar exemptions to overtime requirements and to $143,988 from $107,432 for highly compensated employees. The Department is also proposing automatic hikes every three years to the overtime threshold. Consequently, employers may have many employees whose salary falls between the current and proposed thresholds, thus losing their exemptions. This effect would be more keenly felt due to financial controls under the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”).

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Rights of pregnant workers

The Pregnant Workers Fairness Act (“PWFA”) requires, as of 27 June 2023, employers to provide reasonable accommodations for job applicants and employees with known limitations related to pregnancy, childbirth, and related medical conditions. The PWFA applies to “covered employers” which are defined as private and public sector employers with at least 15 employees, Congress, federal agencies, employment agencies, and labour organizations. It does not replace federal, state, or local laws that provide greater protections to workers affected by pregnancy, childbirth, or related medical conditions. The PWFA additionally enhances existing protections for working mothers under the Maternity Leave Act and the Breastfeeding Act which require mandatory paid leave for pregnant or lactating employees.

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Reversal of employment reform legislation

The Employment Reform of 2022 (Act 41-2022) amended a substantial number of labour and employment provisions, including accrual of sick and vacation days, reduction to probationary period, Christmas bonus eligibility, presumption of unjustified dismissal, and extension of the statute of limitations for employees to commence legal actions. As a result of potential impact on the Puerto Rico Fiscal Plan, the Financial Oversight and Management Board of Puerto Rico filed a lawsuit under PROMESA, contending that the 2022 reforms were in violation of PROMESA. In 2023, the United States District Court for Puerto Rico nullified Act 41‑2022. Going forward, employers will need to reassess the benefits provided to their workforce and consider the impact the ruling will have on their operations as well as ongoing employment cases.

 

KEY DEVELOPMENTS FOR 2023

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Adoption of sexual harassment protocols

Act No. 82-2022 requires employers to implement protocols to manage sexual harassment incidents in the workplace.

Act 82-2022 also orders the creation of a government-sponsored online platform to file sexual harassment complaints. Complaints filed through the platform will be investigated by the Puerto Rico Women’s Solicitor Office or the Puerto Rico Department of Labor and Human Resources.

To comply with the Act, employers must adopt protocols with very specific and potentially onerous requirements. These requirements, in addition to the alternative proceeding available before government entities, will likely exacerbate sexual harassment litigation in the following years.

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Labor and employment reform and judicial challenge by fiscal control board

Act 41-2022 enacted a substantial number of major labor and employment reforms in Puerto Rico. However, due to the potential economic impact of Act 41-2022, the Financial Oversight & Management Board of Puerto Rico ("FOMB") petitioned for a postponement of its effective date because of potential conflicts with the Puerto Rico Oversight, Management and Economic Stability Act of 2016.

The requested postponement was not granted, and Act 41-2022 came into effect. The FOMB filed a lawsuit in federal court challenging the statute and the legislative branch’s authority to enact it. Regardless of constitutional issues, the future of this substantial labor and employment reform is uncertain. If the FOMB is successful in challenging Act 41-2022, which is a likely scenario, most of the reforms are likely to be reversed. This will result in instability and confusion related to employment rights and benefits during the transition period and in the near future.

Employers are expected to implement the reforms under Act 41-2022, monitor the ongoing litigation and, based on the outcome, implement those modifications required by law and/or reduce or increase workplace benefits.

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Discrimination due to criminal record

The PR House of Representatives unanimously approved a bill to prohibit workplace discrimination because of prior criminal convictions. The proposed legislation would amend the general discrimination statute to include as a protected class “having a prior criminal record.”

This proposed legislation, which reverts previous case law, imposes on employers a challengeable subjective analysis, likely increasing failure to hire claims. On the other hand, the wrong selection of a candidate may result in potential liability due to negligent hiring.

Employers may continue requesting certificates of criminal record, but only after a conditional employment offer is made. Moreover, employers will be required to analyse and consider additional factors to assess whether the criminal offense is directly related to the functions and duties of the position. These factors include: the time since the conviction; nature and severity of the criminal offense; nature of the position; age of the person at the time of the crime; and circumstances of the crime.

 

KEY DEVELOPMENTS FOR 2022

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Increase to minimum wage

With effect from 1 January 2022, Law No. 47-2021 increased the minimum wage in Puerto Rico from $7.25 per hour to $8.50 per hour. This new minimum wage is applicable to all workers currently covered by the Fair Labor Standards Act of 25 June 1938, as amended. Minimum wage provisions in the statute do not extend to government, agricultural, or exempt employees.

Law No. 47-2021 also creates the commission to evaluate the minimum wage and provides that the minimum wage will increase over the next few years as follows: $9.50 per hour from 1 July 2023; and $10.50 per hour from 1 July 2024. These subsequent increases will become effective unless mandatory decrees are issued by the Commission to change them. The Commission is also tasked with creating mandatory decrees for agricultural and tipped workers and may establish provisions addressing administrators, executives, and professionals in the future.

As of 1 January 2022, all employers covered by the statute are required to increase the minimum wage as provided by law. Employers should also monitor potential developments that may impact the minimum wage in their respective industries and potential increments scheduled for 2023 and 2024.

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Amendments to the Medicinal Cannabis Act of 2017

Recent amendments to the Medicinal Cannabis Act of 2017 extend current protections to employees in the workplace. In doing so, registered and authorized patients who identify as such to their employers, will be considered within a protected classification and employers are specifically prohibited from discriminating against them in recruitment, hiring, promotions, termination or from taking any adverse action. To further protect patients and their employers, the amendment provides that an employer cannot be penalized or be refused contracts, licenses, certifications, benefits, or funds because of the hiring of these patients.

The amendments do provide four exclusions to these protections if:

• the use of medicinal cannabis represents a real threat to people or property;

• the use of medicinal cannabis by a registered and authorized patient interferes with the performance or functions essential to the position;

• the use of medicinal cannabis by a registered and authorized patient exposes the employer to lose a license, permit, any certifications relating to other laws, regulations, program of federal fund; or the registered and authorized patient uses, or is in possession of, medicinal cannabis in the workplace and/or during working hours without written authorization of the employer.

Employers will be required to treat medicinal cannabis as any other medication, and petitions by authorized patients will be very similar to requests for reasonable accommodation.

This protection must be interpreted liberally in favour of the registered and authorized patient. Furthermore, the burden of proof falls on the employer, by preponderance of evidence, to establish that the employee falls within any of the exclusions to deny the protections under the Medicinal Cannabis Act of 2017, as amended.

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Mandatory COVID-19 vaccinations for all government workers and employees working in the private and public health sectors

Executive Orders issued by the Governor of Puerto Rico have made vaccinations mandatory for all government contractors and employees working in the public or private health sectors (including hospitals, laboratories, emergency rooms, clinics, health centres, medical offices, therapy centres, blood banks, pharmacies, elder care facilities, medicinal cannabis dispensaries, and others).

The Order also makes it mandatory for all employees working at hotels, hostels, or inns to be vaccinated and any guests staying at any of these facilities (including short term rentals like Airbnb, VRBO, Join a Join, and others) must provide evidence of vaccination.

Health and religious exemptions are available if adequate evidence (for example, medical certifications or sworn joint statements), and negative test results are provided.

This shows that there is a growing movement in Puerto Rico to have all employees vaccinated. This is consistent with the strong support vaccinations are getting from the general population. Although mandatory vaccinations have yet to become the norm, private employers are establishing vaccinations as a condition of employment.

Health and religious exceptions are available and are becoming a focal point as to their specific requirements, the extent of accommodation, and testing as a viable alternative. These continue to be hot issues in 2022 and employers need to be mindful of the risks and potential pitfalls in this regard.

 

KEY DEVELOPMENTS FOR 2021

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Wrongful termination claims

Law 80 of 30 May 1976 (Law 80‑1976), provides for a mandatory severance if an employer terminates any employee hired for an indefinite period without "just cause." Law 80‑1976 provides an open list defining just cause, which includes:

• The full, temporary, or partial closing of operations.
• Technological or reorganizational changes, changes of style, design, or nature of the product made or handled by the employer and/or services rendered to the public.
• Reductions in force that are necessary due to a reduction in volume of production, sales, or profits anticipated at the time of the termination, or with the purpose of increasing the competitiveness or productivity of the establishment.

Although these provisions cover terminations and reductions related to operational considerations, including coronavirus, employers that retain some workforce are required to follow seniority by occupational classification unless there is a clear and evident difference in favour of the capacity, productivity, performance, competence, efficiency, or conduct of the compared employees. This means that unless seniority is used, failure to follow clear, evident, objective, and verifiable criteria may result in wrongful termination claims. As a rule, for employers with multiple sites or stores, each physical location is considered separate and independent for the comparative analysis. However, if there is a regular transfer of employees between locations and common and direct supervision, employees must be compared based on integrated operations. Furthermore, employers that reopen operations within six months are required to rehire the same employees following the same criteria.

These lesser‑known provisions of Law 80‑1976 related to retention and rehiring of employees, in addition to the potential failure to follow or document an alternate selection criteria, will likely result in unintentional and avoidable wrongful termination claims.

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Workplace harassment or bullying claims

On 6 August 2020, the Governor of Puerto Rico signed Law 90‑2020, also known as the Workplace Harassment Act of Puerto Rico. This new law establishes a vigorous public policy against all types of workplace harassment.

Law 90‑2020 provides a very broad definition of workplace harassment to include repeated conduct that is: malicious, not desired, repetitive, and abusive; arbitrary, unreasonable, and/or capricious; that falls outside the legitimate interests of the employer's company, against the employee's protected constitutional rights. The malicious conduct may be verbal, written, and/or physical, and may be performed by the employer, their agents, supervisors, and/or employees.

The new law also requires employers to take all the necessary measures to eliminate or minimise workplace harassment. Employers are also required to take action to correct any possible harassing behaviour in the workplace, create policies and provide adequate training to the workforce. The employer's obligations extend to workplace harassment by third parties if the employer knew or should have known of such conduct and failed to take immediate action to correct the situation.

Law 90‑2020, which faced staunch opposition from the private sector, will likely increase claims and complaints against employers in the years to come.

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Risk management plan—return to the workplace

Since the beginning of the COVID‑19 pandemic, the Governor of Puerto Rico has issued several executive orders with limitations or restrictions to businesses and the public in general to reduce the spread of the disease. Executive Order 2020‑87, signed on 3 December 2020, restates that employers must comply with previous orders (Executive Order 2020‑38; Circular Letter 2020‑03 of the Puerto Rico Department of Labour and Human Resources) regarding the creation of a risk management plan to control exposure in the workplace to COVID‑19 and the notification of positive test results of employees to the Puerto Rico Department of Health.

Executive Order 2020‑87 further states that employers cannot require employees returning to the workplace to provide a negative COVID‑19 test result (PCR test) as a condition to their return to work as per the guidelines of the Puerto Rico Department of Health and the Centre for Disease Control.

As businesses continue to operate under COVID‑19 restrictions, there has been an increase in inspections and fines by Government agencies. In addition to more inspections and fines, we can continue to expect claims by clients and employees when businesses fail in their duty to provide a safe environment or follow government guidelines.

 

KEY DEVELOPMENTS FOR 2020

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Paid Emergency Leave

Law 37 of 9 April 2020 amended the Minimum Wage, Vacation and Sick Leave Act of 1998 to create a new paid emergency leave. Qualified non-exempt employees that are sick, or suspected of being sick with an illness or pandemic that is related to a declaration of state of emergency, are now entitled to paid emergency leave of five days. This leave is available once the employee exhausts all other leaves and only when a state of emergency has been declared by the Governor of Puerto Rico or the Secretary of the Department of Health of Puerto Rico.

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Equal Pay Program

The Department of Labor and Human Resources of Puerto Rico approved the Regulation to Administer the Equal Pay Program, a program initially created by Law 16 of 8 March 2017. This Regulation encourages employers to create and implement equal pay policies. Employers who voluntarily participate may avoid potential liability related to previous violations and are able to obtain a certificate of compliance that is being required from Government contractors.

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Risk Management Plan and Self-Certification

Executive Order 2020-038 came into effect on 4 May 2020, which requires private employers to prepare and submit a risk management plan based on the current guidelines issued by the Occupational Safety and Health Administration (OSHA) and to file a self-certification of compliance before resuming their activities and services. The Puerto Rico Department of Labor and Human Resources subsequently issued Circular Letter 2020-03 providing specific guidelines for the creation of a risk management plan to control exposure to COVID-19 and for the self-certification required from employers. As businesses reopen, there has been an increase in inspections and fines by Government agencies. Claims that employers have failed to provide a safe environment or follow Government guidelines are also expected to increase.

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Wrongful termination claims

Law 80 of 30 May 1976 provides for a mandatory severance payment if an employer terminates an employee hired for an indefinite period of time without 'just cause'. Law 80 provides an open list defining just cause, which includes:

• the full, temporary, or partial closing of operations;
• technological or re-organisational changes, changes of style, design or nature of the product made or handled by the employer and/or services rendered to the public; and
• reductions in force that are necessary due to a reduction in volume of production, sales, or profits anticipated at the time of the termination, or with the purpose of increasing the competitiveness or productivity of the establishment.

 

Although these provisions cover terminations and reductions related to operational considerations, including coronavirus, employers that retain some of the workforce are required to follow seniority by occupational classification, unless there is a clear and evident difference in favour of the capacity, productivity, performance, competence, efficiency or conduct of the compared employees. This means that, unless seniority is used, failure to follow clear, evident, objective and verifiable criteria may result in wrongful termination claims. As a rule, for employers with multiple sites or stores, each physical location is considered separate and independent for the comparative analysis. However, if there is a regular transfer of employees between locations and common and direct supervision, employees must be compared based on integrated operations. Furthermore, employers that re-open operations within six months are required to rehire the same employees using the same criteria.

These less known provisions related to retention and rehiring of employees, in addition to the potential failure to follow or document an alternate selection criteria, will likely result in unintentional and avoidable wrongful termination claims.