As you may recall from our previous Newsletter, on September 21, 2021, the Governor of Puerto Rico, Pedro Pierluisi, signed into law House Bill 338 which establishes the “Puerto Rico Minimum Wage Act” (hereinafter, “Act No. 47”). Essentially, its purpose is to adapt the minimum wage to the cost of living of Puerto Rican workers, based on the principle that no worker should live below poverty level. To achieve said public policy, Act No. 47 created the Minimum Wage Evaluating Commission (hereinafter, “the Commission”), which is instructed to periodically review the Commonwealth’s minimum wage to adjust it to the increase in the cost of living of Puerto Rican workers. To that end, Act No. 47 promulgated a staggered increase in the state minimum wage whereby it was increased to $8.50 per hour in January 2022, and it was increased again to $9.50 per hour on July 1, 2023.

Now, pursuant to Section 2.02 of Act No. 47, the final increase to $10.50 per hour is scheduled to become effective July 1st, 2024, unless the Commission issues a different mandatory decree in the following weeks.

Minimum Wage Evaluating Commission

Pursuant to Section 2.09 of Act No.47, the Commission shall prepare an annual report analyzing work conditions, benefits, cost of living and other factors that should be considered in establishing the minimum wage. In addition, the Commission shall provide a study about the potential economic impact of the implementation and application of the provisions of Act No. 47.

The staggered salary increase applies to all workers covered by the Fair Labor Standards Act of June 25, 1938, as amended (hereinafter, “FLSA”). However, it does not apply to: (i) agricultural workers; (ii) “Administrators,” “Executives,” and “Professionals,” as such terms are defined in Regulation Number 13 of the Minimum Wage Board; (iii) government employees, including the government’s executive agencies, legislative and judiciary branches, municipalities, and instrumentalities, but excluding employees of public corporations and other public entities that operate as private corporations; and (iv) employees covered by a collective bargaining agreement between a labor organization and an employer, provided that their salary is equal to or greater than that established under the provisions of Act No. 47.

Regarding tipped employees, Act No. 47 provides that they will be entitled to the federal minimum wage in effect for such workers, which in combination with the credit for tips received must reach, at least, the local minimum wage established by this Act or an applicable mandatory decree that may be approved by the Commission.

Status

Abexus Analytics is the consulting firm hired to conduct the economic study, research and data analysis that are deemed pertinent to assist the Commission with the preparation of the annual report that includes a comprehensive analysis of the effects of increasing the minimum wage in Puerto Rico to $10.50 effective July 1st, 2024, in accordance with Act. No 47. Currently, the Commission is still working on the preparation of the annual report and waiting for the economic study to be completed by the consulting firm, which will serve as the basis for the Commission’s mandatory decree.

In a recent communication, the Commission invited the public to share their comments on the potential minimum wage increase set to become effective on July 1st, 2024. Once the Commission issues the proposed mandatory decree, the public will have 30 days to comment on the proposal before it becomes effective. We will of course keep you abreast of any related developments.

If you have any questions or comments regarding these recent developments that impact the employment landscape or if you’d like assistance to revise or modify your practices and policies to ensure compliance with local legislation, please contact any of the following attorneys from our Labor & Employment Practice Group at your convenience: