Puerto Rico’s Labor & Employment Legislation Landscape Faces Major Overhaul with Approval and Enactment of Workplace Flexibility Transformation ACT (“WFTA”)



January 26, 2017

Earlier today, Governor Ricardo Rosselló Nevares signed into law Bill 453, known as the Workplace Flexibility Transformation Act (“WFTA”). WFTA, which was approved by the Puerto Legislature on January 23rd, is the first key labor legislation of the incoming Administration and represents a major overhaul to Puerto Rico’s labor and employment landscape. WFTA reflects Puerto Rico’s new and current socioeconomic reality and the incoming Administration’s interest in making Puerto Rico more attractive and competitive by creating an environment conductive to competitive business and job creation. WFTA is effective immediately.

Key aspects and provisions of WFTA are outlined below. Please bear in mind that some of the provisions impact non-exempt employees while others impact all employees working in Puerto Rico. Also note that while WFTA is effective immediately and some provisions only apply to employees hired after its effective date, some provisions also apply to existing employees.

Employment contracts / agreements – WFTA seeks to provide some certainty to the employment relationship in an attempt to promote job creation through the establishment of local and foreign businesses on the Island. With this in mind, WFTA contains several provisions dealing with employment contracts or agreements.

  • Figure of independent contractor is presumed as long as certain conditions outlined in WFTA are met.
  • Incorporates various elements used by the courts in determining whether a person is an employee or an independent contractor and limits the application of the economic reality test.
  • Flexibility afforded for younger employees (over 18) to enter into the workforce and execute contracts, whether as employees or employers
  • Amendment makes it more difficult to invalidate employment agreements based on the argument that they are contrary to law, moral or public order, and to file claims for breach of oral contracts or agreements (those exceeding 3-month compensation will not be recognized).
  • Establishes rights and obligations of employees.
  • In an attempt to provide uniformity and certainty, WFTA also provides that actions derived from an employment agreement or seeking benefits emanating therefrom will have a 1-year statute of limitations (does not apply to actionable claims prior to WFTA’s enactment or to claims that have a different statute of limitations as per special law).

Religious Accommodation – Employers have an obligation to reasonably accommodate religious practices once employee makes request in writing, as long as it does not entail an excessive difficulty to the employer

Overtime – Act 379 suffered major amendments, including:

  • Daily overtime will be determined on a calendar day basis (rather than a rolling 24-hour period), unless the employer designates a different 24-hour cycle in writing at least 5 days in advance and the employee gets at least 8 hours of rest between consecutive workdays.
  • Work performed by new non-exempt employees on 7th consecutive day (day of rest) will be paid at time and a half (1 ½), while current non-exempt employees will continue to be paid at double rate.
  • Special pay for Sunday work is eliminated.
  • Double rate overtime is eliminated for new employees; these will be paid at time and a half (1 ½) the regular rate of pay.
  • Current employees who enjoy superior benefits (overtime at double rate) will retain such benefits.

The employer may authorize employees to compensate for time not worked during a workweek for personal reasons, and those hours will not constitute overtime as long as: (i) the work is performed during the same workweek; (ii) the employee does not exceed 12 hours in a day; nor (iii) more than 40 hours  per week.

Meal Period Amendments provide flexibility to meal periods and reduce penalty for new employees

  • Penalty reduced from double to time and a half (1 ½) the regular rate of pay for new employees; current employees must be paid at double rate.
  • Meal period may be waived if the employee works no more than a total of 6 hours in the day.
  • Meal period may commence as early as after the second consecutive hour of work.
  • Aside from croupiers, nurses and security guards, the Secretary of the Department of Labor may authorize other classifications to be entitled to a reduction of meal period to 20 minutes, provided written agreement is executed.

Flexible Schedule Amendment paves way for reduced and flexible / alternate work schedules

  • Flexible workweek is established, providing that conventional 5-day workweek may be reduced to a 4-day workweek without paying overtime as long as: (i) written agreement is executed; (ii) employee does not work more than 10 hours per day; nor (iii) more than 40 hours per week.
  • Employees that regularly work 30 or more hours and have worked at least 1 year for the employer, may make a written request for a change in work schedule, specifying the desired change, either in work days, amount of work time and/or workplace, providing the reasons for the request, the effective date and duration of the change; the employer will be obligated to respond within 20 calendar days and denials must be justified. A written response will be required for employers with 15 or more employees; petitions from parents (“heads of families”) with sole parental rights or custody of their minor children, must be processed with priority.
  • A civil cause of action is provided against employers that retaliate or take any adverse employment action against an employee that refuses to accept an alternate (reduced) workweek schedule or for requesting a change or modification in the work-schedule; aside from redress for damages, the employee may be reinstated and additional punitive damages may be imposed.

Closing Law – Repealed. However, commercial retail establishments previously covered by the Closing Law must remain closed to the public on Good Friday and Easter Sunday.

Vacation / Sick Leave Accrual rates and thresholds suffered substantial amendments.

  • Applicable to new employees; current employees who enjoyed substantial accrual rates will continue to enjoy these as long as they continue to work for same employer
  • Illegal for an employer to terminate, layoff or suspend indefinitely an employee in order to rehire him/her and circumvent the grandfathering clause; violation deemed misdemeanor with imposition of administrative fines ($500 to $5,000) and/or jail time (no less than 120 days to no more than 1 year), in addition to civil fines equal to double damages
  • Minimum hour threshold increased to 130 hours / month
  • Monthly accumulation for vacation leave: (i) half (1/2) day during the first year of service; (ii) three fourths (3/4) day after first year of service until five years of service; (iii) one (1) day after five years of service until fifteen years of service; (iv) one and one fourth (1 ¼) day after achieving fifteen years of service
  • Local employers with 12 or less employees can establish a monthly vacation accrual of a half (1/2) day per month
  • For employees that earn tips, payment of vacation / sick leave will be based upon the legal minimum wage ($7.25) and/or the stipulated hourly rate, whichever is higher
  • Monthly accumulation of sick leave remains at one (1) day per month
  • 1-year statute of limitations for employee to present wage claim since employee’s termination and/or resignation (except for extrajudicial wage claims notified prior to WFTA’s enactment); statute of limitations may be tolled

Christmas Bonus – Amendments apply to employees hired after enactment of WFTA

  • If employer has more than 20 employees during more than 26 weeks in a period of 12 months [from October 1st through September 30th], during which time an employee worked 1,350 hours or more, employer is obligated to grant a Christmas bonus equivalent to 2% of employee’s total salary. Christmas bonus capped at $600.00.
  • If employer has less than 20 employees during more than 26 weeks in a period of 12 months [from October 1st through September 30th], during which time an employee worked 1,350 hours or more, employer is obligated to grant a Christmas bonus equivalent to 2% of employee’s total salary. Christmas bonus capped at $300.00.
  • During their first year of employment, employees hired after the enactment of WFTA are only entitled to 50% of the Christmas bonus
  • Christmas bonus must be paid between November 15th and December 15th

Other bonuses paid to employees during covered period may be credited towards Christmas bonus, provided employer makes written notification of such intent.

Cafeteria Plans WFTA amends Internal Revenue Code and expands the type of benefits employers can provide to their employees under “cafeteria plans,” mirroring federal income tax provisions

Breastfeeding Leave – Amendment extends breastfeeding rights to part-time employees who work at least 4 hours during the work day; also,

  • Amendment establishes that employers must guarantee privacy to employees extracting breast milk, as well as a secure and hygienic space that has electricity and ventilation; if employee is working part-time and her working day surpasses 4 hours, period to extract breast milk will be equal to 30 minutes for each consecutive 4 hour period of time
  • Noncompliant employers face penalty fees as damages equal to: (1) three times the employee’s salary for each day the employer denied employee her breastfeeding rights or (2) an amount not less than $3,000.00, whichever is greater; when employee has a salary under the federal minimum wage, as defined in the Fair Labor Standards Act (FLSA), tips will be included in salary calculation for the penalty fee or, absent that, the federal minimum wage will be used to calculate the penalty fee, whichever is most beneficial to the breastfeeding mother

Unemployment – Minimum and maximum weekly benefits are increased

Act 80 – Puerto Rico’s Wrongful Termination Act is substantially amended to adopt a new severance formula, applicable to employees hired after the enactment of WFTA and terminated without just cause (“justa causa”). Other changes include:

  • Employees hired after the enactment of WFTA and terminated without just cause will be entitled to three (3) months’ salary plus two (2) weeks’ salary for each full year of employment (note that under current formula, employees terminated without cause within the first 5 years of employment, would be entitled to two (2) months’ salary, plus one (1) week for every year of service)
  • For purposes of calculating Act 80’s severance, 1 month will be comprised of 4 weeks
  • Severance benefit capped at nine (9) months
  • New formula does not apply to employees hired priorto the enactment of WFTA
  • Severance payments under Act 80 will be tax-exempt (up to the amount of the statutory severance)
  • Amendment to Article 11 of Act 80 eliminates employer’s burden of proof to establish that termination was justified (no presumption that termination was without just cause) and employer bond
  • Article 2 amended to define “just cause” as the termination of an employee that is not based on illegal reasons and is not due to the employer’s whims and to include reasons related to the normal and proper functioning of the employer’s operations
  • Constructive discharge case law and doctrine incorporated into Act 80
  • 9-month probationary period is established (unless otherwise stipulated among the parties or in cases where the employee is represented by a union) for non-exempt employees
  • 12-month probationary period is established for executives, administrators and professionals under the Fair Labor Standards Act (FLSA)
  • 1-year statute of limitations is adopted for claims stemming from terminations that occur after the enactment of WFTA
  • Several definitions incorporated into Act 80; of significance is that fixed-term employment agreements that do not exceed a 3-year term (either in the original term or by way of extensions) shall be presumed bona fide and valid

Definition of salary “overturns” case law from Court of Appeals that adopted a broad and all-encompassing definition of salary for purposes of calculating severance pay.

Reinstatement – Worker’s compensation and non-occupational disability (SINOT) reinstatement provisions are amended – prospectively – to provide that reinstatement must be requested within 12 months of the date of the work-related accident and/or non-occupational disability, or within 6 months for employers with 15 or less employees at the date of the accident and/or non-occupational disability

Discrimination / Retaliation claims – caps adopted for damages (mental anguish and other compensatory and punitive damages).

  • Less than 101 employees:        $50,000
  • 101 to 200 employees:             $100,000
  • 201 to 500 employees:             $200,000
  • 501 or more employees:           $300,000
  • Federal legislation and case law adopted for purposes of interpreting discrimination / retaliation laws
  • Amendment to Article 3 of Act 100 (Anti-Discrimination Act) eliminates presumption that employer incurred in any of the discriminatory acts included in Act 100 when such acts are conducted without just cause

We strongly encourage all clients to carefully examine WFTA and consider any potential changes to their internal policies and protocols. If you have any questions or comments regarding WFTA or if you’d like assistance to revise or modify your practices, employment agreementsand policies accordingly, please contact any of the attorneys from our Labor & Employment Practice Group at your convenience.


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