A US employer considering expanding its operations to Puerto Rico may think that it will be relatively easy to manage a workforce in that location since Puerto Rico is subject to US employment laws, including Title VII, the Fair Labor Standards Act and the Family and Medical Leave Act. However, as is true with many states, Puerto Rico’s laws provide greater rights to employees than US federal law.
The failure to comply could land an employer in hot water since Puerto Rico is known for being highly litigious due to the fact that employees are able to file labor-related complaints free of charge. Here are six highlights of Puerto Rico employment law that an employer operating there needs to know.
1. Employee Leave Rights
Puerto Rico provides employees with greater leave rights than under US law in terms of maternity, vacation, sick leave and even leave for renewing driver’s licenses! Eligible Puerto Rican employees are entitled to receive:
- Eight weeks of paid maternity leave, which must be paid in a lump sum at the start of maternity leave.
- Vacation leave accruing at one-and-a-quarter days of annual leave for each month in which nonexempt employees work at least 115 hours for their employer, up to a maximum of 15 days a year.
- One day of sick leave for each month nonexempt employees work at least 115 hours for their employer, up to a maximum annual entitlement of 12 days.
- Two hours of paid time off when an employee with a Puerto Rico driver’s license needs to renew his or her license.
2. Christmas Bonus
A mandatory bonus, known as a Christmas bonus, must be paid annually to employees unless the employer has insufficient profits, in which case it must follow a statutory procedure.
3. Employment Is Not At-Will
In almost all US states, employment is considered to be at-will, meaning that an employer can terminate an employee at any time for any reason (with certain exceptions) or for no reason without incurring legal liability. However, in Puerto Rico, an employer may only terminate an employee recruited on an open-ended basis (as opposed to a fix-term) for “just cause.”
The circumstances that constitute “just cause” are defined by statute. If a US employer is unaware of this distinction and dismisses an open-ended employee without “just cause,” it will be forced to pay the employee severance based on his or her length of service.
4. Protected Categories
Puerto Rico’s employment discrimination laws go beyond federal laws. For instance, Puerto Rico prohibits discrimination against employees or job applicants regarding any terms and conditions of employment on account of:
- Being married to another employee;
- Their political beliefs;
- Social condition; or
- Being a victim or perceived victim of domestic violence, sexual aggression or stalking.
5. Health Insurance
Unlike the US where large employers are required under the Affordable Care Act to offer health care coverage to a percentage of their full-time employees or be subject to a penalty, there is no similar requirement in Puerto Rico. In fact, there is no obligation for any private employer in Puerto Rico to provide group health plan benefits to employees, or on individuals to have healthcare insurance.
6. Disability Compensation
Employers are required to pay into Puerto Rico’s Non-Occupational Disability Insurance scheme, otherwise known as SINOT, which compensates employees (other than employee drivers) for loss of wages resulting from a temporary disability caused by sickness or accident not related to their employment. However, an employer may opt out of SINOT if it establishes a private non-occupational disability plan that is at least as beneficial for employees as SINOT.
There are many other nuances to Puerto Rico’s employment laws in addition to those described above. As a result, employers managing a workforce on the island must ensure they are in compliance and keep current with new legal developments.