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Total Articles: 10

Employment Law Reform in Puerto Rico: Take Two

Last month, we reported that the Governor of Puerto Rico announced his “Initiative to Reform the Labor Force,” which would have created significant employment law changes to increase the employment participation rate on the Island. One week later, on March 28, 2018, in response to strong opposition from the Puerto Rico Legislature, the Governor withdrew his proposal. Now, it is the Fiscal Oversight and Management Board (FOMB) that is proposing additional employment law reform.

Puerto Rico Governor Announces Proposed Plan to Revamp the Labor Force

On March 21, 2018, the Governor of Puerto Rico announced his “Initiative to Reform the Labor Force,” with the express goal of increasing the employment rate. Standing alongside the presidents of the Senate and House of Representatives, the Governor anticipated this Initiative would include: elimination of the Christmas Bonus; implementation of a “Bonus for Work;” a tiered increase of the minimum wage; a reduction of sick and vacation leave; a reassurance that all recipients of the Nutritional Assistance Program (PAN, for its Spanish acronym) between the ages of 18 and 55 will join the labor force; and the repeal of Act 80 (indemnifying unjust dismissals). The Governor also intends to increase tax incentives and lower the current rates for individuals as well as corporations.

Puerto Rico Supreme Court Sets Standard to Apply the Successor Liability Doctrine

The Puerto Rico Supreme Court (“PRSC”) recently issued an Opinion in the case of Roldán Flores v. M. Cuebas, 2018 TSPR 18, 199 D.P.R. __ (Feb. 6, 2018), in which it addressed again the requirements for applying the “successor liability doctrine.”1 The PRSC held that prior to applying the successor liability doctrine, courts must first determine whether the prior owner/employer had any legal obligations or committed an illegal act with respect to the plaintiff-employee. If there was no employment obligation or illegal act attributable to the prior owner/employer, then there is no need to examine or apply the successor liability doctrine. In the context of unjust dismissal claims, the effect of the PRSC’s holding is that when there is a complete closing of operations, which is considered just cause for termination under Act No. 80 of May 30, 1976 (“Act 80”),2 there is no need to examine the applicability of the successor liability doctrine as there is no illegal act for which the acquiring entity could be held liable.

New Act in Puerto Rico Establishes a Special Paid Leave for Employees Suffering from Catastrophic Illnesses

The Governor of Puerto Rico recently signed into law Act No. 28 (“Act 28”), entitling all employees, including temporary employees, to take up to six days of paid leave per year if they suffer from a “catastrophic illness.” This bill, as presented to the Governor, defines catastrophic illnesses as those listed in the Health Insurance Administration of Puerto Rico Special Coverage (HIAPRSC), which currently includes: Acquired Immunodeficiency Syndrome (AIDS); Tuberculosis; Leprosy; Lupus; Cystic Fibrosis; Cancer; Hemophilia; Aplastic Anemia; Rheumatoid Arthritis; Autism; Post Organ Transplant; Scleroderma; Multiple Sclerosis; Amyotrophic Lateral Sclerosis (ALS); and Chronic Kidney Disease in levels 3, 4 and 5. To be entitled to this leave, employees must have worked for their employer for at least 12 months, and have worked an average of 130 hours per month during the previous 12-month period.

Puerto Rico Bars Use of Legitimate Absences in Performance Review, Adds Catastrophic Illness Leave

Just one year after substantial changes to Puerto Rico employment laws became effective, the Governor has enacted two new sick leave laws. One shields employees from adverse consequences from sick leave use. The other creates a special leave for catastrophic illnesses.

New Act Prohibits Employers in Puerto Rico from Using Absences to Measure Employee Efficiency and Performance

On Saturday, January 27, 2018, the Governor of Puerto Rico signed into law Act No. 60, establishing greater protections for non-exempt private sector employees by prohibiting employers from using sick leave to measure employees’ efficiency in their annual performance evaluations. This bill as presented to the Governor amends Article 6 of Act No. 180–1998, better known as the “Puerto Rico Minimum Wage, Vacation, and Sick Leave Act,” to include this protection.

Littler Global Guide - Puerto Rico - Q4 2017

Hurricane Aftermath: Available Government Assistance for Puerto Rico Residents

Plan Sponsors and Service Providers Must be Aware of Changes Made to Rules Pertaining to Puerto Rico Qualified Retirement Plans

Recent changes to Puerto Rico’s tax treatment of certain retirement plans have taken effect. Act No. 106 of August 23, 2017 (“Act 106”) amended Section 1081.01 of the Puerto Rico Internal Revenue Code as amended, (the “PR Code”), to reflect changes in the rules governing Puerto Rico qualified retirement plans. Employee benefit practitioners, service providers, as well as the Pension Plan Section at the Puerto Rico Department of the Treasury (the “PR Treasury”) were taken by surprise by these amendments, as they revised legislation designed to guarantee payment to government retirees and to establish a new defined contribution plan for government employees.

Puerto Rico Department of the Treasury Announces 2018 Limits on Qualified Retirement Plans

On December 15, 2017, the Puerto Rico Department of the Treasury (the “PR Treasury”) issued Tax Policy Circular Letter No. 17-02 (“CL 7-02”) announcing the 2018 applicable contribution limits for qualified retirement plans. Pursuant to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”), the Secretary of the Treasury is required, before the beginning of each taxable year, to provide notice of the applicable limits under the U.S. Code, which are incorporated by reference into the PR Code limits (e.g., annual compensation, annual benefit/contribution limits).

Puerto Rico Department of the Treasury issues Q&As Clarifying Guidance on Qualified Payments Made for Hurricane María Disaster Assistance

As previously discussed, on October 4, 2017, the Puerto Rico Department of the Treasury (the “PR Treasury”) issued Administrative Determination No. 17-21 (“AD 17-21”) granting temporary income tax exemption for payments considered “Qualified Payments made for Disaster Assistance” related to the recent hurricane. To clarify various aspects of AD 17-21, the PR Treasury issued a series of questions and answers (Q&As). The following is a summary of the clarification provided in the Q&As.