By: Luis R. Pérez Giusti and Verónica M. Torres-Torres
On September 21st, 2021, the governor of Puerto Rico, Pedro Pierluisi, signed into law the Puerto Rico Minimum Wage Act, Act 47-2021 (hereinafter the “Act”). When he made the announcement, Pierluisi
expressed that, after more than 12 years without a raise to the federal minimum wage of $7.25 per hour, now through the PR Minimum Wage Act, on January 1st, 2022, the minimum wage salary in Puerto Rico
will be raised to $8.50 per hour.
Puerto Rico public policy
Through the recently enacted Act, it is the public policy of the Commonwealth of Puerto Rico to adequate the minimum wage with the cost of living in Puerto Rico, so that no worker lives under the poverty level
and is able to earn enough income to cover his/her basic necessities, promote progress and guarantee a better quality of life.
State minimum wage
The new minimum hourly wage will be increased as follows, unless the Minimum Wage Review Commission issues a decree varying it :
• Effective, January 1st, 2022 $8.50
• Effective, July 1st, 2023 $9.50
• Effective, July 1st, 2024, $10.50
The Minimum Wage Review Commission
In addition to the wage increases, the Act also creates the Minimum Wage Review Commission (“Commission”) to carry on the public policy of the government. The Commission will be ascribed to the Puerto Rico Department of Labor and Human Resources and will be composed of seven members, among which there will be at least four economists, representatives of the workers interests and of the employers
as well, along with the PR Secretary of Labor who will represent the public interest and will preside the Commission.
The Act details the Commission’s faculties and duties in addition to the qualifications and requirements of the position. The Commission will be responsible for the implementation of the public policy adopted
by the government; and among its tasks it will prepare reports, will periodically review the minimum wage and will approve mandatory decrees that will set the adequate minimum wage, which will be revised at
least once every two years. It is important to note that, aside from the first wage increase, the change in the minimum wage will not exceed more than 25% of the minimum wage previously approved. Under the Act, the Commission shall enact a mandatory decree to set forth the minimum wage for every worker in Puerto Rico and the state minimum wage will prevail as long as it is higher than the federal minimum wage.
The Commission is authorized to enact special mandatory decrees for “Administrators”, “Professionals” and “Executives” as set forth by the Regulation No. 13 of the PR Minimum Wage Board. The Commission
shall also issue a special mandatory decree on or before July 1st, 2022, for workers in the agriculture industry, including those excluded by the Fair Labor Standards Act (FLSA), and another special mandatory decree for tipped workers.
This part of the law reverts us to the era of Mandatory Decree Board which was abolished in the 90’s. Now, with this Commission it is as it we are going back in time. So, instead of moving forward, and create some uniform rules to simplify the management of the employees, we are moving in the wrong direction.
Employees covered by the PR Minimum Wage Act
As provided by the Act, the increase to the minimum wage will apply to those employees covered by FLSA.
However, the raise will not apply to the following employees: agriculture workers, public sector employees (those working in government agencies, instrumentalities, municipalities, the judicial branch and the legislative branch). The increase will not apply also to exempt employees (“Administrators”, “Professionals” and “Executives”) as defined by Regulation No. 13 of the PR Department of Labor. Tipped
employees shall be eligible to the federal minimum wage applicable to such employees, which along with the tips received, shall be able to reach the minimum hourly wage established by the Commission.
Also, expressly excluded from the Act are those employed by the United States Government, the Commonwealth of Puerto Rico with exception to those employees who work for public agencies or instrumentalities operating as private businesses. Employees of Puerto Rico municipalities were also excluded from the Act along with those workers covered by a collective bargaining agreement as long as their wages are equal or higher than the minimum hourly wage provided by this recently enacted Act.
What the law does not clarify is what happens to those employees that work for an employer that does not fall under the jurisdiction of FLSA, which are small employers that do not sell more than $500,000.00 in goods in a year. This is one of the unanswered questions in the law.
Violations and penalties
Any employer that refuses to comply with the Act, or disregards any of the provisions of the Act, will be penalized with a fine of no less than $500 nor higher than $5,000, subject to the Court’s discretion. In recurrent cases, fines will be of $5,000 to $10,000.
Also, the employer shall incur in civil liability for an amount equal to the double of the damages suffered by the employee. In those cases in which the judge cannot determine the damages amount may, it its discretion, impose a compensation between $500 to $5,000.
Please note that this is a new cause of action available to the employees. Previously an employee that was not compensated according to the law, had the option of filing a claim to recover the unpaid wages, plus a penalty imposed by law. Now, they can seek damages in addition to the make whole remedy. In our opinion, it is a terrible amendment as it will increase the claims against the employers.
Statute of limitations
Another change is the new statute of limitation to bring claims for unpaid wages. The Act increased the term from 1 year to 5 years from the last day of employment of the employee on the date the claims was filed. Also, the Act increased the period of the time in which the employee can claim the back wages from 3 years to 5 years. This requires the employer now to maintain payroll records for up to 10 years after the employee leave the company.
