On June 20, 2022, the governor of Puerto Rico signed into law the long-awaited amendments to Law No. 4-2017, the Labor Transformation and Flexibility Law of 2017 (also known as the Labor Reform of 2017). Now, with the benefit of an opinion of the Secretary of Labor and Human Resources of Puerto Rico issued on June 28, 2022, and a presentation by such agency on June 30, 2022, we have a better view of the scope of Law No. 41-2022, which is effective on July 20, 2022. For micro businesses and PYMES (small and medium enterprises) as defined in Law No. 62-2014, the provisions of Law No. 41-2022 will be effective ninety (90) days after its approval.
It is still unknown if the Puerto Rico Financial Oversight Board will challenge Law No. 41-2022 under the provisions of PROMESA. However, the clock is ticking and employers must be ready to implement changes in employee manuals and other internal operation documents, if needed, by July 22, 2022.
The main goal of Law No. 41-2022 is to revert some of the amendments introduced by the Labor Reform of 2017. It also creates new benefits for certain employees. Eight (8) labor laws have been amended by Law No. 41-2022, which consist of the following:
1. Ambiguous provisions in employment contracts shall be liberally construed in favor of the employee. Employers, however, may reserve the right to interpret its own rules and policies as long as such interpretation is reasonable.
2. The statute of limitation for employment contract related claims is increased from one (1) to three (3) years.
3. The Secretary of Labor and Human Resources of Puerto Rico shall submit reports to the legislature every three (3) months with respect to Law No. 41-2022.
1. The employer has the burden of proof in wrongful discharge claims.
2. The indemnity cap of nine (9) months is repealed.
3. Employees with more than fifteen (15) years of service are entitled to claim an indemnity equal to six (6) months plus three (3) weeks of salary for every complete year of employment.
4. Employees with less than fifteen (15) years of service are entitled to claim an indemnity equal to three (3) months plus two (2) weeks of salary for every complete year of employment.
5. Courts can order a judicial deposit of the amount equal to the indemnity under the law plus fifteen percent (15%) in attorney’s fees.
6. The probationary period will be automatic for the first three (3) months for both exempt and non-exempt employees. Such period can be extended to a maximum of six (6) if the employer notifies in writing to the Puerto Rico Department of Labor the reasons for the extension.
7. The probationary period provision of Law No. 41-2022 is prospective. It does not affect employees hired under the probationary period provisions of Law No. 4-2017.
8. All voluntary payments for terminations are credited towards the Law No. 80-1976 indemnity. Such payments are tax exempt up to the indemnity amount.
9. Amounts paid to terminated employees under profit sharing programs or resulting from liquidation or closure, for reasons attributed to the employer (closing, partial closing, reductions-in-force, reorganizations), will not prevent employees from claiming the indemnity provided under Law No. 80-1976.
10. The statute of limitations is increased to three (3) years.
1. The rebuttable presumption of discrimination is reinstated, if the alleged acts are committed without just cause.
2. The caps for damages in cases of discrimination and retaliation established under Law No. 4-2017 remain in place.
1. All full time non-exempt employees will be entitled to accrue one and one quarter (1.25) vacation days and one (1) sick leave day for every month in which the employee works one hundred and fifteen (115) hours.
2. For Puerto Rico employers with twelve (12) employees or less, such employees will accrue one half (0.5) vacation days and one (1) sick leave day if they work at least one hundred and fifteen (115) hours per month.
3. For Puerto Rico employers with twelve (12) employees or less, such employees will accrue a quarter (0.25) vacation days and one half (0.5) sick leave days if they work no less than twenty (20) hours per week but less than one hundred and fifteen (115) hours per month.
4. Part-time employees will accrue one half (0.5) vacation days and one half (0.5) sick leave days if they work no less than twenty (20) hours per week but less than one hundred and fifteen (115) hours per month.
5. Upon written request of the employee, the employer may pay the full amount or part of the accrued and unused vacation balance.
6. The statute of limitation for actions arising under Law No. 180-1998 is increased to three (3) years.
7. This statute of limitations also applies to claims under mandatory decrees, Law No. 289-1946 (Rest Day), Law No. 17-1931 (Payment of Salaries), Law No. 148-1969 (Christmas Bonus), and Law No. 379-1948 (Days and Hours of Work).
1. Daily overtime will be the hours worked in excess of eight (8) in any calendar day.
2. Employees can request a change of schedules, number of hours worked, or place of work. Employers must respond in writing. Granting such request is subject to the conditions agreed between employer and employee.
3. Denials in changes of schedules, number of hours worked, or place of work must be specific. If there are no alternatives available for the changes requested, the response shall state so.
4. Meal periods shall begin after the completion of the third consecutive hour of work and before the sixth consecutive hour of work. By written agreement between the employer and the employee, the meal period could be taken between the second and the third hour of work.
5. Waivers of meal periods in cases in which the employee does not work more than six (6) hours a day are repealed.
6. Second meal periods can be waived by written agreement between the employer and the employee, if the workday does not exceed twelve (12) hours, and the first meal period was taken.
7. Written agreements to reduce the meal period to thirty (30) minutes are valid as long as the parties agree. Otherwise, they can be revoked at any time.
8. For union employees, the meal period reduction is only valid if included in the collective bargaining agreement, or by written agreement with the union.
1. Students working on a seventh consecutive day of work must be compensated at double the rate for hour.
2. A student is defined as a person enrolled in a higher education system, university, or graduate program.
3. A student employed by a microbusiness or PYMES (small or medium enterprise) as defined in Law No. 62-2014, will be compensated at time and a half.
4. All other employees are paid at time and a half.
1. The minimum hours to qualify for a bonus is seven hundred (700) hours during a period of twelve (12) months comprised between October 1 and September 30 of the following year (“the bonus year”).
2. The bonus is equivalent to six percent (6%) of the maximum salary of $10,000 earned by the employee, or $600.
3. Employers with twelve (12) employees or less during at least twenty-six (26) weeks during the bonus year will pay a bonus equivalent to three percent (3%) of the maximum salary of $10,000, or $300.
4. For employees hired on or after January 26, 2017, the effective date of the Labor Reform of 2017, who work no less than seven hundred (700) hours during the bonus year, the bonus will be equal to three percent (3%) of the salaries up to a maximum of $600.
5. For employees hired on or after January 26, 2017, who work no less than seven hundred (700) hours for an employer with twenty (20) employees or less during more than twenty-six (26) weeks in the bonus year, the bonus will be equal to three percent (3%) of the salaries up to a maximum of $300.
6. Employers considered to be a microbusiness or PYMES (small or medium enterprise) as defined in Law No. 62-2014, will pay a bonus to its employees who work nine hundred (900) hours or more during the bonus year, equal to three percent (3%) of the salaries up to a maximum of $600.
7. Employers considered to be a microbusiness or PYMES (small or medium enterprise) as defined in Law No. 62-2014, with twenty (20) employees or less during more than twenty-six (26) weeks in the bonus year, will pay a bonus to its employees who work nine hundred (900) equal to three percent (3%) of the salaries up to a maximum of $300.
8. The payment of fifty percent (50%) of the bonus during the first year of employment is repealed.
1. Bleeding conditions similar to hemophilia are added.
2. The employee must have worked during the previous twelve (12) months and at least one hundred and thirty (130) hours per month to claim the benefits of the special leave.
The labor and employment law team of AMG will keep all our clients and friends updated and well informed of all the latest developments related to Law No. 41-2022.
This Court’s decision is not final yet. According to some government spokespersons, including the Secretary of Labor and Human Resources of Puerto Rico, they are analyzing the legal grounds that support the decision and will determine if the best course of action is to appeal. However, given this swift action and decisive language used by the Court, in addition to the good track record of the Board in PROMESA cases, it is likely that the decision will be upheld. Moreover, the least that is needed at this moment is further confusion and instability from a government appeal.
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