Wage Laws: Puerto Rico's Compliance And Adherence

As a US commonwealth, Puerto Rico's employment law is covered by US labor law and its own constitution. The territory's Department of Labor and Human Resources enforces labor laws, which include the right to a reasonable minimum salary, an eight-hour workday, and overtime compensation. The territory's minimum wage is higher than the US federal rate and is set to increase gradually until 2024. Overtime laws also apply to workers in Puerto Rico, with some industries, such as domestic work and government, being exempt.

Overtime pay

Puerto Rico's labor laws establish a special overtime rate of double an employee's normal hourly rate for any hours worked over 8 in a single day, or over 40 in a week. This is higher than the standard overtime rate of time-and-a-half.

Employees who work over 40 hours in a week are entitled to overtime pay, but there are some exemptions. Domestic workers, government employees, and white-collar executive, professional, or administrative workers are all completely exempt from overtime pay under Puerto Rico law. To be exempt from overtime, a job must fall into one of four main categories: executive, administrative, professional, or outside sales. These exemptions are designed to prevent workers from being exploited by their employers, with hourly wage earners being the primarily protected group.

The Fair Labor Standards Act (FLSA) automatically qualifies certain types of workers who meet overtime pay requirements to receive overtime for all hours worked over 40 in a single week. This includes manual labor jobs such as construction worker, factory attendant, or cashier. The FLSA also specifically covers certain jobs, including first responders (police, paramedics, and firefighters), practical nurses, and paralegals.

If an employee believes they are owed overtime pay, they can file an FLSA violation claim with a Department of Labor office in Puerto Rico, which will work with them to ensure they receive their fair wages for all hours worked.

Minimum wage

As a US commonwealth, employment law in Puerto Rico is covered by both US labour law and the Puerto Rico Constitution. The latter affirms the right of employees to a reasonable minimum salary.

The Minimum Wage, Vacation, and Sick Leave Act of Puerto Rico (Minimum Wage Act) was enacted in 1998. This established that the federal minimum wage fixed by the Fair Labor Standards Act (FLSA) applies automatically to non-exempt employees in Puerto Rico who are covered by the FLSA.

However, in 2021, Puerto Rico passed a new minimum wage law. This law calls for rates to increase gradually:

• $8.50 – Jan. 1, 2022
• $9.50 – July 1, 2023
• $10.50 – July 1, 2024, unless a review board determines it should not go into effect

The US federal minimum wage is currently $7.25 per hour.

The Wage and Hour Division (WHD) enforces labour laws in Puerto Rico. When violations are found, the WHD often recovers unpaid wages on behalf of employees. If employees are owed back wages collected by the WHD, they can search a database and submit a claim.

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is legislation intended to help address the fiscal crisis in Puerto Rico. Parts of PROMESA provide for special consideration in the application of minimum wage and overtime requirements to establishments and employees located in Puerto Rico. These changes came into effect on June 30, 2016.

Christmas bonus

Employment law in Puerto Rico is covered by both US labour law and the Puerto Rico Constitution. The Puerto Rico Department of Labor and Human Resources is responsible for overseeing the territory's employment legislation.

The Christmas Bonus

The Christmas bonus, or el Bono de Navidad, is a mandatory annual payment to employees based on their earned wages for the year. The bonus is calculated as a percentage of an employee's salary, up to a certain cap. The specific calculation depends on the number of employees in the company and the employee's hiring date.

Calculation

The Christmas Bonus Law applies to private sector employers in Puerto Rico and outlines the conditions for providing a Christmas bonus to eligible employees. The bonus is calculated as a percentage of an employee's total salary for the year, up to a maximum bonus of $600 or $300, depending on the number of employees in the company.

For companies with:

• 15 or fewer employees: the bonus is 3% of the total salary, up to a maximum of $10,000.
• More than 15 employees: the bonus is 6% of the total salary, up to a maximum of $10,000.

Employee Hiring Dates

The calculation also depends on the employee's hiring date. For employees hired:

• Before 26 January 2017: they must work 700 hours or more to be eligible for the bonus.
• On or after 26 January 2017: they must work 1,350 hours or more to be eligible for the bonus.

Payment Dates and Penalties

The bonus must be paid between 1 and 15 December each year. Penalties for late payment are specified, including additional compensation if the payment is delayed. If the bonus is not paid within the period prescribed by law or the alternate payment period, employers will have to pay 1.5 times the bonus if the payment is made within 6 months, and 2 times the bonus if the payment is made more than 6 months after the due date.

Waivers and Exemptions

The Puerto Rico Department of Labor can approve a waiver of the Christmas bonus. Employers with insufficient profits or economic losses may request a waiver or exemption from the Department of Labor by submitting a written petition and the necessary financial statements.

Employment contracts

The Labor Transformation and Flexibility Act (LTFA) outlines that employees hired before 26 January 2017 are entitled to severance pay with no cap if they are terminated without just cause. Employees hired after this date are subject to a different formula, which varies with years of service and is capped at nine months.

The LTFA also establishes that employees are entitled to overtime pay for each hour worked beyond their regular workday. The rate for overtime pay is one and a half times the regular pay rate. Employees not covered by the Fair Labor Standards Act (FLSA) are entitled to double their regular compensation rate for every hour worked beyond 40 within a week.

The Minimum Wage, Vacation, and Sick Leave Act of Puerto Rico, enacted in 1998, establishes that the federal minimum wage fixed by the FLSA applies to non-exempt employees in Puerto Rico covered by the FLSA. However, in 2021, Puerto Rico passed a new minimum wage law, with rates to increase gradually:

• $8.50 – Jan. 1, 2022
• $9.50 – July 1, 2023
• $10.50 – July 1, 2024, unless a review board determines it should not go into effect

The Christmas Bonus, or el Bono de Navidad, is a mandatory annual payment to employees based on their earned wages for the year. Employees are entitled to 3% of their salary, capped at $600 for those who work more than 1,350 hours in a year. Employers with 15 or fewer workers only need to pay a maximum of $300 per employee.

Employees in Puerto Rico cannot be fired at will, meaning that employees cannot be fired anytime, for any reason. Employers must demonstrate just cause for termination or risk paying a premium to the discharged employee, which can include a severance package of at least two months' salary, plus progressive compensation depending on length of service. Examples of just cause for termination include:

• Documented patterns of improper or disorderly conduct
• Measurable work performance issues
• Violations of reasonable written rules
• Closing of business operations

Working hours

Employment law in Puerto Rico is covered by both US labor law and the Puerto Rico Constitution. The Puerto Rico Department of Labor and Human Resources is responsible for overseeing the legislation affecting workers and employment programs in Puerto Rico.

The standard working week in Puerto Rico is 40 hours, with a maximum of eight hours per day. The workweek begins on the day and time determined by the employer, who must notify the employee in writing. Employees must be notified in writing of the number of working hours required daily for each day of the week, the times work begins and ends, and the times the meal period begins and ends within the regular working hours.

Employees who work 30 hours or more per week and have been with the company for at least a year can request a change of schedule, number of hours, or workplace in writing. The request must specify the change requested, the reason for the request, the effective date, and the duration of the change. Employers must respond to these requests within 20 calendar days, in writing if they have over 15 employees. If they meet with the employee within this time, they have 14 days after the meeting to issue a response. Employers can approve or deny requests, with approvals subject to conditions. Denials must state reasons and offer alternatives. Priority is given to requests from heads of families with legal or sole custody of minor children.

An employer and employee may agree in writing to establish an alternate workweek, allowing the employee to complete a workweek of no more than 40 hours, with daily shifts not exceeding 10 hours per workday (excluding overtime) for four days (which do not have to be consecutive). Alternate week schedule agreements must be in writing and voluntary, and employers cannot make them a condition of employment. These agreements may be terminated at any time after one year.

Employees are entitled to a minimum of eight hours of rest between consecutive shifts. Non-exempt employees who work six consecutive days have the right to a day of rest, comprising 24 consecutive hours. Work performed on Sundays is not considered overtime unless it exceeds eight hours in a day, 40 hours in a workweek, or is during a seventh consecutive day of work. Employees are entitled to a premium of 1.5 times the regular rate of pay for any hours worked during the day of rest.

Employees are entitled to a one-hour unpaid meal break. The meal break should be taken between the end of the third and the beginning of the sixth hour of work. To avoid a meal-break penalty, it must be scheduled before the beginning of the sixth consecutive hour of work, so employees are not required to work for more than five consecutive hours without a meal period. The employee is no longer allowed to waive the first meal period. The meal period may be waived only when it is a second meal period, the workday does not exceed 12 hours, and there is a written agreement between the employer and employee.

If the employee works for more than 10 hours per day, they are entitled to a second meal break. This second meal break may be waived when a working day does not exceed 12 hours, provided the first meal break was taken. A reduced meal period cannot be shorter than 30 minutes, except in the cases of nurses, security guards, croupiers, and others authorised by the Secretary of Labor and Human Resources, where it may be reduced to 20 minutes.

Overtime

If an employee works more than 10 hours in a given day, they are entitled to overtime pay at a rate of 1.5 times their regular pay rate.

Frequently asked questions