The materials on this Web site have been prepared by Cuevas Kuinlam, Márquez & O’Neill, for information purposes only and are not legal advice. This information may not reflect current amendments or legal developments and is general in nature. Nothing set forth in this site should be construed as providing legal advice regarding an individual situation. Users of this web site should not act upon this information without seeking professional legal counsel.

MINIMUM WAGE

    Act No. 180 ordains that the minimum wage fixed by the Fair Labor Standards Act (FLSA) as amended and ifsubsequently amended, will apply automatically in Puerto Rico to all workers covered by the Act. Enterprises or activities that are not covered by the FLSA are therefore exempt from the federal minimum wage and will pay a minimum equivalent to the seventy percent (70%) of the prevailing federal minimum wage.

VACATIONS AND SICK LEAVE

    Workers will accrue vacation leave in one and one fourth (1 ¼) day ratio per month and sick leave at a one (1) day ratio per month. In order to receive these benefits an employee must work a minimum of one hundred and fifteen (115) hours per month. In addition the use of vacation and sick leave days must be deemed as time worked for the purpose of accrual. Both licenses shall be accrued as of the regular working day in the month that the accrual occurred. For employees whose schedules fluctuate, a regular workday will be determined dividing the total amount of regular hours worked in the month by the total amount of days worked by the employee . For those employees whom working hours could not be determined they shall be computed on the basis of eight (8) regular working hours a day. Finally, new employees may start enjoying their vacation license after completing their first year of service. Vacations will be granted annually, but in a manner in which the normal business operation will not be interrupted, therefore it is the employer whom establishes the corresponding vacation turn. In case where the employee ceases working, the employer will liquidate the total accumulated amount up to date even if less than a year. The act also provides for special agreements and requests to be mutually agreed upon by the parties in advance for the vacation license.

    For sick leave purposes, the Act also provides that the unused days can be accumulated up to a maximum of fifteen 15. On the other hand, except for extreme circumstances, the employee must notify the employer about his/her sickness as soon as a need to be absent may be predictable, but not later than the same day of absence.

    The Act also mandates all employers to maintain records of all the names and addresses of their employees as well as the hours worked. These records must contain a day-by-day description of the employee’s starting time and when his/her shift ends. Although the statute obligates the employer to keep such records for a maximum period of only three years, in certain cases the Court may order back pay dating as far back as the last ten years. Therefore, we strongly recommend that these records be kept for at least that period. Additionally, violations refusals and/or reticence to comply with the Act are deemed as a misdemeanor and punished by fine and/or imprisonment.

    Finally, employees whose duties are those of an executive, administrator or professional are exempt from the vacation and sick leave provisions of the statute or the Decree.

WORKING HOURS – MEAL HOURS

    Act No. 379 of 1948 establishes a regular work week of 40 hours and a regular work day of 8 hours. Under this Puerto Rico law, every employer who is also covered by the federal Fair Labor Standards Act, must pay at a rate of time and a half for every hour worked in excess of eight (8) inside a 24 hour period. Additionally, all hours worked in excess of forty (40) during the regular workweek, must also be paid at a time and a half rate. A carefully designed work week, should avoid the payment of overtime compensation.

    Amendments approved in 1995 provide the opportunity for the establishment of flexible schedules. Such provision is dependent upon agreement between the employee and the employer. The law imposes stiff penalties for the employer that discriminates against an employee for not accepting the aforementioned schedule. These include double penalties and reinstallation. Also strict requirements must be followed for the establishment of this type of schedule.

    Article 15 of the Act, mandates a lunch break for each employee. It is required for this hour to be awarded after the conclusion of the third, but before the sixth consecutive hour of work. In other words, an employee cannot be required to work more than five consecutive hours without a meal break. Amendments approved in 1995 allow for the shortening of the meal hour to a minimum of thirty (30) minutes. This can only be achieved by way of mutual agreement between the employer and the employee, and for the convenience of both. In the particular case of croupiers, nurses and security guards, the meal time can be reduced to twenty (20) minutes, but similarly with prior written consent from employee.

    In cases where the employee is required to work during the aforementioned lunch break, he/she must be compensated at double his regular wage rate.

    To determine the regular hourly rates for the purpose of overtime calculations, as well as for compensation of work performed during lunch breaks, of employees with salaries on a monthly or fifteen-day basis, these salaries are divided by the number of regular hours worked by the employee during the month, or fifteen days in question, as the case may be.

    Employees have similar remedies available as those explained in Act No. 180, LPRA 245 (Minimum Wage) to redress any violation of the statute and the Company is subject to the same liability.

    In the case of the vacation and sick leave benefits in accordance to Act. 96, all executives, administrators and professionals are excluded.

    Finally, Act No. 379 requires every employer to affix in a visible and accessible area of the work place a printed notice specifying the number of working hours and the time to commence and conclude lunch breaks.

UNJUST DISMISSAL - PUERTO RICO INDEMNIFICATION STATUTE

    Act No. 80 of 1976, as amended in 2005, 29 LPRA 185a, regulates the discharge of an employee without “just cause” as defined in the statute. The employer’s liability to pay severance is not automatic, and arises only when employment is terminated without just cause. The employer, however, has the burden of proof to demonstrate that there was just cause for the termination.

    The employer must pay to every employee discharged without “just cause”, the following:

1. the salary corresponding to two (2) months, if the dismissal takes place within the first five (5) years of employment, three (3) months if it occurs past the fifth (5th) year up to the fifteenth (15th) year of service; and if it occurs after the 15th year of service the one corresponding to six (6) months of service.

2. For each complete year of service, if the dismissal takes place within the first five (5) years of employment, 2 weeks if it occurs past the fifth year up to the 15th year of service; and if it occurs after the 15th year of service the one corresponding to three weeks per each year of service.

    Significantly, under Act No. 80 an employee is NOT entitled to reinstatatement to his former position.

    In accordance with the law, ¨just cause¨ to terminate employment exists when:

1. an employee engages in patterns of improper or disorderly conduct;

2. an employee engages in an attitude of not performing his /her work in an efficient manner, or doing so negligently, or in violation of the product quality standards;

3. the employee repeatedly violates the employer’s reasonable rules and regulations, provided a written copy thereof has been timely delivered to the employee;

4. the termination is required because of technological or reorganization changes as well as changes of style, design or nature of the product made or handled by the employer;

5. reductions in employment are necessary because of a reduction in the volume of productions, sales or profits.

    In cases where employees are discharged for any of the reasons set forth above, the discharge must be effectuated by selecting the employee with the least amount of seniority in the affected job classification. If a recall is made within the next six (6) months, the employee must be recalled in strict order of seniority.

    Although the indemnization explained above has been held to be the exclusive remedy in cases of termination without just cause, it can also be awarded in cases where the employer incurs in tortuous conduct against the employee.

    If the employee, when hired, signs a written contract expressing the terms for a probationary work period, which should not exceed three months, then he/she can be discharged without cause during the tenure of the contract and the employer will not be liable under this law.

MATERNITY LEAVE

    Act No. 3 of 1942, 29 LPRA 467, as amended, authorizes for pregnant working women a period of eight (8) weeks, i.e. four (4) weeks before and four (4) weeks after childbirth. Employee compensation during this period is equivalent to the total amount of the regular salary that the mother would have received otherwise. However the employee may opt to take only one (1) week of prenatal rest, and may elect to take the remaining seven (7) weeks as post-natal rest, provided that she presents a medical certificate to her employer showing that she is able to work up until one (1) week before childbirth. Adopting mothers of children under five (5) years old and not yet attending school enjoy the same rights under this statute as natural pregnant mothers. Under certain circumstances the maternity leave may be extended up to twelve (12) weeks.

    In addition, the employer is bound, notwithstanding any written agreement to the contrary, to maintain the position open for the employee. Finally, the employer cannot without “just cause” discharge a pregnant woman. A decrease in the amount of work resulting directly from the pregnancy shall not be considered “just cause”.

    Any employer who discharges a pregnant woman in violation of the aforementioned law shall be liable for a sum equal to double the amount of the calculated damages. In addition, the employee is entitled to reinstatement to her former position.

    Period for Breastfeeding or to Express Breast Milk:

    Act No. 472 of December 2000, as amended, grants all working mothers who return to work after enjoying maternity leave the opportunity to nurse their children for one (one) hour during each full-time working day. This period may be divided into two thirty (30) minute sessions or three twenty (20) minutes ones, to where the child is being cared for, if the company or employer has a child care center in its facilities, or to express breast milk at the place provided for such purposes in the workplace. In case of a small business employer, as defined by the Federal Administration of Small Businesses, the sursing time is not to exceed half (1/2) an hour for a full working day. This period will be awarded to the employee for a maximum of twelve (12) months, from the time the working mother returns to her duties.

    However, those mothers who wish to enforce the right to breastfeed her child, shall submit to her employer a medical certificate to that effect. The certificate should be submitted not later than the fifth (5th) day of each term, and shall certify that said mother has been nursing her baby.

PAYROLL DEDUCTION

    Act No. 17 of 1931, 29 LPRA 171, as amended, prohibits all deductions from wages and salaries of the employees except:

1. when the employee authorizes in writing to deduct from his/her paycheck certain specified amounts for payment of medical and hospital services;

2. when the employee authorizes in writing to deduct from his/her paycheck a certain sum for the purchase of bonds issued by the United States or Puerto Rico’s government;

3. when the employee authorizes in writing to deduct from his/her paycheck a certain amount for the purchase of shares or stocks or payment of loans or other debts to a credit cooperative;

4. when the employee authorizes in writing to deduct from his/her paycheck payments for union membership fees pursuant to a collective bargaining agreement;

5. when an employee authorizes in writing to deduct a certain amount for payment of any pension, savings, retirement, life, accident, health and hospital insurance plan or any combination of these plans;

6. when the employer has awarded any certain amount of money in advance (less than the total salary of the employee), the employer shall have the right to deduct such amount from employee’s paycheck, relating solely to the week in which the advance was made.

7. When the worker authorizes his/her employer in writing to deduct from his/her salary a specific amount for purchasing shares of stock issued by the corporation or company for whom he/she works. Some regulations apply for the disbursements.

8. When the worker authorizes his/her employer in writing to deduct from his/her salary a certain quantity as payment for his/her tax debt.

9. When the worker authorizes, voluntarily and in writing, his/her employer to deduct from his/her salary a determined sum to contribute to charitable institutions of the Commonwealth and/or to the schools of the community attached to the Department of Education.

    Any other deduction not listed above, is unlawful and constitutes a misdemeanor. In addition, when incurring in such actions the employer is liable to pay for twice the amount of money unlawfully deducted.

SAFETY

    Act No. 16 of 1975, creates occupational safety and health standards which requires the employer to adopt one or more measures, safeguards or personal safety equipment in order to provide safe and healthful employment. The Department of Labor and Human Resources of Puerto Rico administers the statute and promulgates rules and regulations relating to the protection of the safety and health of the employee for particular industries.

In addition, there are similar federal procedures that must be implemented and effectuated.

WORK-RELATED ACCIDENTS

    Act No. 45 of 1935, as amended, creates a State Insurance Fund to provide medical and hospital services and compensation to employees who suffer work-related accidents or illness. All employers must pay a premium established by the State Insurance Fund for every industry and/or classification. This is a compulsory insurance program where each employer pays the premium established for its particular industry or classification.

    The “exclusive remedy” established by the State Insurance Fund covers all employers who pay the premium. It mandates that an employee address all work-related injuries with said Fund and cannot institute legal action against the employer for damages caused by work-related accidents.

    However, if an employer does not pay the total amount of its premium, the State Insurance Fund will still provide certain benefits to the affected employer, but will then institute legal action against the employer for all benefits extended to the employee. Moreover, the employee can also sue the employer for any damages suffered and not covered by the benefits received from the State Insurance Fund.

    An employer is also responsible for the payment of all premiums on behalf of his independent contractor to the State Insurance Fund in the event that the independent contractor fails to make such payment.

    The employer, also, must reserve the job of the affected employee for a period of twelve (12) months from the date of the accident; provided that the job has not been eliminated from the operation of the employer. However, the law establishes a presumption that the job has not been eliminated from the operation of the employer if the same is still vacant or has been occupied by other workers. It will be deemed vacant if the job was covered by another worker within a thirty day period from the date the affected employee solicits his/her reinstatement.

    Finally, the employer must keep record of all work related accidents or sickness and must also report such matters to the State Insurance Fund.

NON-OCCUPATIONAL HAZARDS

    The law in Puerto Rico establishes a compulsory non-occupational hazards insurance program payable by the employer either to the corresponding government agency or to a private insurance company. Under this statute the employer must reserve the job of the injured employee for six (6) months.

CHRISTMAS BONUS

    Under Act No. 148 of 1969, 29 LPRA 801, any employer, with one or more workers within a period of twelve (12) months commencing October 1 of any calendar year, up until September 30 of the subsequent calendar year, must pay to those employees who have worked 700 hours or more during this period (or 100 hours or more in the case of longshoremen) a bonus equivalent to three percent (3.0%) of the employee’s total salary, up to a maximum of ten thousand dollars ($10,000.00) for the 2006 bonus, a 4.5% of the employee’s total salary, up to a maximum of ten thousand dollars ($10,000.00) for the 2007 bonus and a 6% up to a maximum of ten thousand dollars ($10,000.00) for the 2008 bonus. If the enterprise or company employs fifteen (15) employees or less, the bonus amount will be an equivalent of 2.75% of the total salary earned, up to a maximum amount of ten thousand ($10,000.00) for the 2007 bonus; and a 3% of the total salary earned, up to a maximum amount of ten thousand ($10,000.00) for the 2008 bonus. However, the total amount to be paid for bonus concept shall not exceed the 15% of the employer’s net revenues within a period starting from September 30 of the past year until September 30 of the corresponding bonus year.

    The payment of the bonus must be made within the first fifteen (15) days of December, each year. Said law establishes a penalty of one-half the sum of the required bonus, if the amount paid is less than that stipulated by the law, or if payment is made after the fifteenth of December. If payment is delayed more than six months, then the penalty equals the bonus’ total amount.

    If the employer has had no profits from its business, it would be exempted from paying the aforementioned bonus if, a certified general balance sheet and profit and loss statement evidencing such financial situation for the period for which the bonus should be paid is presented to Puerto Rico’s Secretary of Labor no later than November 30 of the corresponding bonus year.

HOLIDAYS

    Under Puerto Rico law, commercial establishments must close their operations during certain holidays, or pay their employees a premium wage. However, this law does not apply to services or manufacturing establishments; only to commercial establishments.

LIBEL AND SLANDER

    There is a trend to file suits for libel and slander based on the letters of termination. Thus, it is necessary to discuss the employer’s exposure to such actions.

    The Supreme Court of Puerto Rico has recently addressed this issue. It ruled that intra-company communications are conditionally privileged in nature. This privilege covers all communications made in good faith and in which the author has an interest or a duty toward other employees. It means that if it were not for the exception, the communication would have been defamatory and actionable under the proper statutes.

    The privilege is lost if the employer abuses it. It has been ruled that this occurs when such communication has been excessively published; if it has been maliciously made or if it reaches people outside the circle of those employees having a legitimate interest in the subject. Also, communications to the particular employee in question do not give rise to an action under the statute. If the privilege is lost, the employer is liable for all damages caused.

    Due to the potential large amount of money involved in these actions, we strongly recommend that, if it is decided to issue a termination letter, its context be limited to the literal definition of “just cause” contained in Act No. 80. Also, the communication should be handled only be employees obligated to do so because of their duties in the company; for example, Director of Human Resources.

INDEPENDENT CONTRACTOR

    Contractual relationships can be established to limit the responsibility and liability of the principal in relation to certain projects. The Supreme Court has ruled, however, that the existence of an independent contractor relationship alone does not release the principal from its responsibility.

    First of all, there must be a genuine contractor. Special significance is given in this determination to the degree of control that the principal retained over the work of the contractor.

    Once such a relationship is found, the principal is released from responsibility for the damages caused by the contractor except for those which were foreseeable at the time of the execution of the contract. The damages for which the principal does retain responsibility are those particular to the activity being contracted and which will cause injury to third persons unless special precautions are taken. The responsibility of the principal is therefore, assessed not by the damages caused, but by its negligence in not taking the proper precautions which allowed the injury to happen. In other words, if appropriate     precautions are taken and damages occur anyway, the principal is not responsible. These precautions do not have to be extraordinary in nature. Also, a mandate to the contractor to take precautions will not suffice.

DISCRIMINATION IN EMPLOYMENT

    In 1959 the Puerto Rico Legislature passed Act No. 100, 29 LPRA 146. By doing so, discrimination based on age, race, color, sex, social or national origin, social position, political or religious belief was prohibited in the workplace.

    Under this statute, all employees’ dismissals are presumed discriminatory. But for the presumption to be activated, “just cause” for the discharge cannot exist. Therefore, in order to prevail, the plaintiff in an action brought under Act No. 100 must carry his/her initial burden of establishing that “just cause” did not exist. Once plaintiff accomplishes the initial burden, the presumption is activated and the burden of proof shifts to the defendant. For the defendant to win, it must convince the fact-finder by preponderance of evidence that it is more likely that discrimination did not occur. An alleged victim of discrimination may choose between initiating a private action in court and filing a complaint with the Puerto Rico Department of Labor. Although the findings of the Anti Discrimination Unit of the Department are not binding, respondents are forced to attend hearings. A finding of discrimination by the Union, however, would be given substantial weight in Court and the Unit may move the Secretary of Labor to take the case to Court. At any time during the administrative proceedings the claimant could ask the Department leave to file an action in Court.

    The employees may choose to sue under the applicable federal statutes (Title VII; ADEA). These statutes also require the plaintiff to establish a prima facie case. The burden of convincing the fact-finder, however, remains always with the movant of the action. The filing of a complaint in the Equal Employment Opportunity Commission and in the Anti-Discrimination Unit of the Department of Labor of Puerto Rico is required before federal action could be commenced in Court.

    In 1991, Act No. 100 was amended to outlaw discrimination of married couples in the workplace. It covers employers with at least fifty (50) employees.

    In cases where the marriage creates a clear conflict of duties that adversely affects the performance of the Company, the employer is required to make reasonable accommodations. Only after this effort is the employer entitled to terminate the employee if the problem persists.

    An employer is subject to pay, in cases of discrimination under Act. No. 100, twice the amount of damages, including front and back pay and emotional distress.

SEXUAL HARASSMENT

    The Legislature of Puerto Rico approved legislation to deal specifically with the problem of sexual harassment in the workplace.

    This legislation defines sexual harassment as any unwelcome sexual advance, or any other verbal or physical sexual behavior, when the submission to it becomes a condition of employment or basis for employment decisions. Sexual harassment also exists when the advances or behavior create a hostile working environment.

    A victim of sexual harassment is defined as the employee directly affected or any employee or applicant affected because of favoritism towards the person accepting this illegal conduct. A victim of sexual harassment is also one who is affected by the hostile environment even though the same is not directed toward her/him.

    An employer, under this statute, is anyone who employs someone for pay. The employer may be held responsible for the acts of harassment committed by its supervisors. It could also be held liable for acts of harassment between employees or by a client toward an employee, if it knew or could have known about these acts and did nothing to correct them. The person who engages in harassment, however, is jointly and severally responsible to the victim. Nevertheless, the employer can avoid or limit this responsibility if it takes affirmative action discouraging this kind of behavior in the workplace. The employer, therefore, should:

1. clearly express to its supervisors, employees and applicants its sexual harassment policy;

2. establish an adequate procedure by which this behavior could be reported and corrected.

    When an employer is made responsible for the behavior of one of its employees, supervisors or administrators, it may hold the person liable for any loss by the Company. The employer can also discipline or refuse to provide legal representation to the person aggrieved against.

    The employer’s risks in this kind of situation consist of any or all of the common equitable remedies such as front and back pay, interest on back pay, and reinstatement in addition to double damages.

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