On June 20, 2022, Governor Pedro Pierluisi signed into law Act No. 41-2022 (hereinafter, Act No. 41) which amended various employment statutes including the Puerto Rico Christmas Bonus for Private Workers and Employees Act, Act No. 148 of June 30, 1969, as amended (hereinafter, Act. No. 148).[1] Succinctly, Act No. 148 requires private employers to pay an annual bonus to all employees that comply with the required number of working hours within the period of 12 months comprised from October 1^st of any calendar year through September 30^th of the following calendar year. Eligible employees should receive the annual bonus between November 15^th to December 15^th (thus the reason for commonly referring to it as the “Christmas bonus”), unless a waiver is approved by the Puerto Rico Department of Labor (hereinafter, PRDOL). On October 24, 2022, the Secretary of the PRDOL published an opinion on the number of working hours required by the new legislation for employees to be eligible for the Christmas bonus. Below we summarize certain key aspects of the recent legislation that are applicable to the 2022 Christmas Bonus, as interpreted by the PRDOL in its opinion.

1. Number of hours an employee must work to be eligible for the Christmas Bonus

Pursuant to the amendments introduced to Act. No. 148 by Act No. 41, the number of hours required to be eligible for the Christmas Bonus will depend on the employees’ hiring dates and whether the employer fits the definition of a micro, small, or medium-sized business established in the Puerto Rico Micro, Small, and Medium-Sized Business Promotion Act of 2014, Act. 62 of June 11, 2014, as amended (hereinafter, Act. No. 62).[2]

Employees hired prior to or after the effective date of the Labor Transformation and Flexibility Act of 2017[3] (“Labor Reform of 2017”) must work 700 hours or more, or 100 hours or more in the case of dock workers, within the period of 12 months comprised from October 1^st, 2021, through September 30^th, 2022, to be eligible for the benefit. However, employees of micro, small or medium-sized businesses hired on or after the effective date of the Labor Reform of 2017 must work 900 hours or more within the aforementioned period to be eligible for the bonus.

1. Amount of the statutory benefit

Pursuant to Act No. 41, eligible employees hired before the effective date of the Labor Reform of 2017 maintained the same statutory benefits of 6% of their salary up to $10,000, capped at $600. Likewise, eligible employees hired by employers with 12 employees or less will receive a bonus equivalent to 3% of their salary up to $10,000, capped at $300. This applies whether the employer is a micro, small, or medium-sized business or not.

Eligible employees hired on or after the effective date of the Labor Reform of 2017 by employers who had more than 20 employees for more than 26 weeks within the period of October 1^st, 2021, to September 30^th, 2022, will receive a bonus equivalent to 3% of their salary up to a maximum of $600. On the other hand, eligible employees hired on or after the effective date of the Labor Reform of 2017 by employers who had 20 employees or less for more than 26 weeks within the aforementioned period, will receive a bonus equivalent to 3% of their salary up to a maximum of $300. This applies whether the employer is a micro, small, or medium-sized business or not.

For illustrative purposes, we provide a summary of the Christmas bonus statutory obligations following Act No. 41’s amendments:

1. Waiver of the requisite to pay the Christmas bonus

Employers with insufficient profits or economic losses may request a waiver from the PRDOL by submitting a written petition to the Negociado de Normas del Trabajo office on regular workdays between 8:00 a.m. through 12:00 pm and 1:00 p.m. through 4:00 p.m. on or before Wednesday, November 30, 2022. The request must be accompanied by the following documents in original format:[4]

1. Application for Exemption from the payment of the annual bonus (2022).[5]
2. A profits and losses statement: compiled, reviewed, or audited, signed, and stamped by a Certified Public Accountant (CPA).

Note that Act No. 41 did not modify Section 6 of Act No. 148, which essentially states that its provisions do not apply in cases where the employees receive an annual bonus pursuant to a collective agreement. Consequently, employers with employees covered by collective agreements will not be able to request an exemption of the PRDOL from the payment of the Christmas bonus and shall proceed in accordance with the provisions of the respective collective bargaining agreement.

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[1] The Financial Oversight and Management Board challenged the implementation and validity of Act No. 41-2022. However, until otherwise required by a competent court, the provisions of the Act are in full force and effect.

[2] Per § 2 of Act No. 62, a micro-business is “[a] business or enterprise whose annual gross income is less than five hundred thousand dollars ($500,000) and has seven (7) employees or less”; a small-sized business is “[a] business or enterprise whose annual gross income is less than three million dollars ($3,000,000) and has twenty-five (25) employees or less”; and a medium-sized business is “[a] business or enterprise whose annual gross income is less than ten million dollars ($10,000,000) and has fifty (50) employees or less.”

[3] January 26, 2017.

[4] Please consider that submitting the request does not automatically constitute an affirmative determination thereto. A written determination must be issued by the PRDOL in order for the waiver to be valid.

[5] A copy may be obtained here.

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: