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4 Tips for Employers Navigating Employment Waters in Puerto Rico

by Sylmarie Arizmendi of Arizmendi & Sanfilippo

Often U.S. employers doing business in Puerto Rico assume that certain basic elements of the employment relationship are the same in Puerto Rico as they are stateside. That leads employers to expose themselves to liability because of differences in the employment laws. This article highlights four essential differences for employers to understand.

Webinar: Doing Business in Employee-Friendly Puerto Rico: New Regs and Solutions

1. Concept of just cause

The difference that befuddles most employers revolves around the concept of employment at will, which is not so “at will” in Puerto Rico. Local Law No. 80 of May 30, 1976, allows an employer to terminate an employee at will but places a price on such terminations if not based on “just cause.”

The law defines “just cause” as any reason related to the sound operation of the business, such as a pattern of negligent performance or repeated violations of written rules provided to the employee in advance. Subject to rare exceptions, terminations from a first offense are deemed unjustified.

Reductions in force resulting from economic downturns or technological changes are justified, but in such cases the layoffs must follow inverse seniority and comply with certain recall requirements.

Penalties for unjustified terminations are based on years of tenure and start at one month of salary and exceed 16 months of salary for employees with 15 years of tenure or more.

Puerto Rican law imposes another consequence on terminations without just cause: Under local Law No. 100 of June 30, 1959, they are presumed to be discriminatory. That differs from U.S. law since under Title VII of the Civil Rights Act of 1964, an employee must show discriminatory intent to prove a discrimination claim in court. In Puerto Rico, the employer must prove lack of discriminatory intent.

2. Vacation and sick leave
Another point of confusion centers on vacation and sick leave. Puerto Rico Law No. 180 of July 27, 1998, creates paid vacation and sick leave for all nonexempt employees. That law makes employer policies that provide less time off or that contain vacation caps inapplicable to Puerto Rico.

Under Puerto Rico law, employees are entitled to accrue 1.25 vacation days and one sick-leave day for each month in which they work at least 115 hours. Vacation leave accrues without limitation and must be paid upon termination. Sick leave is capped at 15 days. Incredibly detailed rules govern how to accrue, use, and pay leaves. Also, outside sales professionals aren’t considered exempt for purposes of Law No. 180.

3. More protected categories
The categories protected against discrimination under Puerto Rico law go beyond those protected under Title VII, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA). In Puerto Rico, protected categories include the following: political beliefs, political affiliation, being married to another company employee, being an actual or perceived victim of domestic violence or stalking, and more recently, being an ex-convict.

The obligations toward actual or perceived victims of domestic violence include requiring the adoption of a protocol to handle such violence when it affects the workplace as well as duties of reasonable accommodation.

Nondiscrimination duties toward ex-convicts are to be exercised in light of several factors including the degree of relationship between the crime and the job.

Finally, age discrimination, unlike under federal law, includes discrimination for being younger as well as discrimination for being older, the concept being that age should be irrelevant to employment decisions.

4. More types of overtime
Finally, though the concept of what constitutes an exempt employee generally parallels federal law, Puerto Rico has more categories of premium pay. In addition to weekly overtime, nonexempt employees in Puerto Rico are entitled to daily overtime for any 24-hour period in which they work more than eight hours. They also are entitled to overtime pay for any number of hours worked on a seventh consecutive day of work. In addition, work performed during the mandatory meal period is subject to a meal-period penalty.

Because daily overtime is computed based on 24-hour periods rather than the natural day, overtime may result from advancing the beginning of the workday or delaying the meal period. Such technical overtime may be avoided by using a flextime agreement that meets several legal requirements.

These are only four cardinal differences between federal and Puerto Rico law. There are more. Employers should therefore be wary of assuming that they can extend their employee policies to Puerto Rico without proper adaptation.

The author, Sylmarie Arizmendi, is an attorney with Arizmendi & Sanfilippo in San Juan, Puerto Rico. She and her colleague, Rosangela Sanfilippo, will copresent an interactive webinar on August 25, “Doing Business in Employee-Friendly Puerto Rico: New Regs and Solutions.”

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