by cstlawLANDMARK CASE ENFORCING MANDATORY ARBITRATION OF DISCRIMINATION CLAIM FILED IN LOCAL COURT BY EMPLOYEE AGAINST HER EMPLOYER UNDER ACT NO. 100-1959
In the landmark case Quiñones v. Asociación, 161 D.P.R. 668 (2004), the Supreme Court of Puerto Rico had the opportunity to assess the scope of an arbitration clause included in a collective bargaining agreement in the context of a discrimination claim filed in court under PR Act No. 100-1959. In that occasion, the Supreme Court found an exception to the mandatory arbitration rule and held that, despite the arbitration clause contained in the collective bargaining agreement, the unionized employee was free to pursue his discrimination claim in court without having to exhaust the remedial and grievance procedures set forth in the collective bargaining agreement.
Recently, in Kendall Hope Tucker v. Money Group, LLC, 2026 TSPR 9, the Supreme Court had the opportunity to assess whether the ruling in Quiñones v. Asociación, supra, extended to an arbitration clause included in a private employment contract executed by an individual employee directly with her employer. In this context, the Supreme Court held that arbitration clauses contained in valid contracts executed by an individual employee and their employer – as opposed to collective bargaining agreements – are mandatory, even in the context of discrimination claims filed by the employee under Act No. 100-1959. In Tucker v. Money Group, supra, Tucker filed a lawsuit against Money Group in court alleging unjust dismissal, gender discrimination and retaliation, despite having executed an employment contract that contained the following arbitration clause: “All Disputes relating to this Agreement and the relationship of the parties hereto shall be settled and finally determined by arbitration in San Juan, Puerto Rico…”
The Supreme Court reasoned that, to determine whether the arbitration clause was enforceable, it was first necessary to determine if it was agreed upon pursuant to the provisions of the Federal Arbitration Act (“FAA”) by analyzing: (i) whether the arbitration clause in the employment contract was valid, and (ii) if interstate commerce falling under the jurisdiction of the FAA was at play. As to the first element, the Supreme Court held that there was no controversy over the validity of the arbitration clause. As to the second element, the Supreme Court held that the FAA applied to the arbitration clause insofar as Money Group provided services to various states of the US and Tucker was responsible for contributing to the development of Money Group by engaging with consumers in various jurisdictions of the US. Having concluded that the FAA applied to the arbitration clause executed by Tucker and Money Gram, the Supreme Court relied on a case of the US Supreme Court where an employee subject to a private employment contract with an arbitration clause tried to bypass arbitration by filing an age discrimination in court pursuant to the Age Discrimination in Employment Act (“ADEA”). It is noteworthy to mention that in relying on federal legislation and case law to support its holding that arbitration clauses in valid private employment contracts are mandatory and in observing that Act No. 100-1959 shall be interpreted in a manner consistent with ADEA, the Supreme Court referenced Article 2.13 of Act No. 4-2017 which provides that “[a]ny law or regulation of Puerto Rico that regulates employer-employee relationships and that refers to an issue that is similar to an issue regulated by an act of the United States Congress, or regulations issued thereunder, shall be interpreted consistently with said federal regulations, unless the Puerto Rico law expressly requires a different interpretation.” 29 L.P.R.A. §1221.
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:
| Juan J. Casillas Ayala | 787-523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach Zúñiga | 787-523-3496 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
by cstlawPUERTO RICO MINIMUM WAGE INCREASE EFFECTIVE JULY 1ST, 2024
On June 12 th, 2024, the Minimum Wage Evaluation Commission of the Department of Labor and Human Resources (“DLHR”) (hereinafter, “the Commission”) announced that, effective July 1st , 2024, the minimum wage will increase to $10.50 per hour, as previously established by the “Puerto Rico Minimum Wage Act” (hereinafter, “Act No. 47”).
The Commission’s determination was based on the analysis of the Minimum Wage Analysis Puerto Rico: Final Report issued by the consulting firm Abexus Analytics. The basis of the analysis included data collected from quarterly returns from the DLHR, the Quarterly Census of Employment and Wages (ES-202), aggregated data from corporate income tax returns from the Puerto Rico Treasury Department, the inflation rate, and other factors established under Act No. 47. The collection of this data allowed the creation of multiple microsimulations that measure the increase in the labor force, business closures and the inflationary effect using different hypothetical increases.
As we mentioned in a previous Newsletter, Act No. 47 established an annual minimum wage increase system for non-exempt employees of the private sector in Puerto Rico. Pursuant to Section 2.02 of Act No. 47, as part of the established staggered increase, the minimum wage increased to $8.50 per hour on January 1, 2022, to $9.50 per hour on July 1, 2023, and to $10.50 per hour on July 1, 2024. Act No. 47 also created and granted authority to the Commission to periodically review the Commonwealth’s minimum wage to adjust it to the increase in the cost of living of Puerto Rican workers.
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:
| Juan J. Casillas Ayala | 787-523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach Zúñiga | 787-523-3496 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
by cstlawBE ON THE LOOKOUT FOR ANOTHER POTENTIAL INCREASE ($10.50) TO THE MINIMUM WAGE EFFECTIVE JULY 1ST, 2024
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:
| Juan J. Casillas Ayala | 787-523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach Zúñiga | 787-523-3496 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
by cstlawFINAL RULES ISSUED BY U.S. DEPARTMENT OF LABOR AND FEDERAL TRADE COMMISSION
On April 23rd, 2024, the U.S Department of Labor (“DOL”) and the Federal Trade Commission (“FTC”) announced issuance of Final Rules that impact the employment landscape.
DOL’s Final Rule
The DOL’s Final Rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, revises and updates the regulations issued under Section 13(a)(1) of the Fair Labor Standards Act (“FLSA”) implementing the exemptions from minimum wage and overtime pay requirements for executive, administrative and professional (“EAP”) employees. Significant revisions include increases to the standard salary level for overtime eligibility, increases to the highly compensated employee total annual compensation threshold, and the inclusion of a mechanism that provides for updates of the salary and compensation thresholds every three years. In addition, the Final Rule provides guidance for employers on how to pay employees for overtime hours. Effective July 1, 2024, the new standard salary threshold for EAP employees to qualify for “exempt” status will increase from $684 ($35,568 per year) to $844 ($43,888 per year) per week, and effective on January 1, 2025, the standard salary threshold will increase to $1,128 per week ($58,656 per year).
The threshold for the “highly compensated employee” exemption will increase from $107,432 to $132,964 on July 1, 2024, and to $151,164 on January 1, 2025. This threshold will also be updated every three years.
However, please note that the Final Rule does not change the standard salary threshold for Puerto Rico and other U.S. Territories (Guam, the U.S. Virgin Islands, and the Northern Mariana Islands). As stated in last week’s Final Rule, the DOL “[w]ill address these aspects of its proposal in a future final rule.” Therefore, the standard salary threshold to qualify as exempt EAP employee remains at $455 per week for Puerto Rico.
FTC’s Final Rule
Also last week the FTC issued the Non-Compete Clause Final Rule which establishes that non- compete clauses constitute an unfair method of competition and a violation to Section 5 of the Federal Trade Commission Act (“FTC Act”), as amended, and thus employers will be unable to require any such agreement in the future.
However, with respect to the existing non-compete agreements, entered before the effective date, the Final Rule adopts a different approach between those involving senior executives, defined as a “worker earning more than $151,164 who are in a policy-making position,” and those involving workers other than senior executives. The Final Rule becomes effective 120 days after being published in the Federal Register.
For senior executives, the rule permits existing non-compete agreements to remain in force but after the effective date, companies and individuals are prohibited from entering into new non- compete agreements with senior executives. On the other hand, for non-competes involving other workers or employees who are not considered senior executives, existing non-competes are no longer enforceable after the effective date. Employers must provide such workers with existing non-compete agreements a notice of non-enforcement by the effective date.
The implementation of this Non-Compete Clause Final Rule and the regulatory landscape surrounding non-compete agreements is undergoing significant changes. While there is 4-month period for the Final Rule to become effective, we anticipate that in the meantime this Final Rule will be subject to immediate legal challenge and injunction efforts, including on the grounds of whether the FTC has legal authority to promulgate such a rule nationwide.
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:
| Juan J. Casillas Ayala | 787-523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach Zúñiga | 787-523-3496 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
by cstlawU.S. DEPARTMENT OF LABOR ANNOUNCES FINAL RULE ON CLASSIFYING WORKERS AS EMPLOYEES OR INDEPENDENT CONTRACTORS UNDER THE FAIR LABOR STANDARS ACT
On January 9, 2024, the U.S. Department of Labor’s (“DOL”) Wage and Hour Division announced issuance of a new final rule titled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act” to help employers and workers have a better understanding of when a worker qualifies as an employee and when they may be considered independent contractors under the Fair Labor Standards Act (“FLSA”). This final rule rescinds the “Independent Contractor Status Under the Fair Labor Standards Act” (2021 IC Rule) that was published on January 7, 2021, by the DOL.
Essentially, the DOL recognized that the 2021 IC Rule marked a departure from the longstanding “economic reality test” adopted by courts and the DOL to determine whether a worker is an employee or an independent contractor under the FLSA. It identified 5 economic reality factors to guide said inquiry, but designated 2 of those factors —i.e. the nature and degree of control over the work and the worker’s opportunity for profit or loss— as “core factors” that were the most probative and carried greater weight in the analysis. If these 2 core factors point towards the same classification, there is a substantial likelihood that it is the worker’s accurate classification. The other 3 factors —the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production— were considered as less probative non-core factors. Hence, said prior rule stated that it was “highly unlikely” that these 3 non-core factors could outweigh the combined probative value of the 2 core factors. Furthermore, said rule limited consideration of investment and initiative to the opportunity for profit or loss factor in a way that narrowed, in at least some circumstances, the extent to which investment and initiative are considered. The facts to be considered under other factors (such as control) were also narrowed, and the factor that considers whether the work is integral to the employer’s business was limited to whether the work was part of an integrated unit of production. Finally, under the 2021 IC Rule the actual practice of the parties involved was more relevant than what could be contractually or theoretically possible.
In sum, after careful consideration, the DOL concluded it was appropriate to rescind the 2021 IC Rule and set forth guidance for determining employee vs independent contractor status that is more consistent with longstanding judicial and administrative precedent. As used in the new final rule the term “independent contractor” refers to workers who, as a matter of economic reality, are not economically dependent on an employer for work and are in business for themselves. To those effects, the new final rule restores the totality-of-the-circumstances multifactor analysis that has been generally applied since the 1940’s by the DOL and courts, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor, with no factor or factors having predetermined weight. The six factors addressed by the new final rule are:
- Any opportunity for profit or loss a worker might have.
- The financial stake and nature of any resources a worker has invested in the work.
- The degree of permanence of the work relationship.
- The degree of control an employer has over the person’s work.
- Whether the work the person does is essential to the employer’s business.
- Factors regarding the worker’s skill and initiative.
The final rule also provides guidance on how those 6 economic reality factors should be considered and, among other things, provides broader discussion of how scheduling, remote supervision, price setting, and the ability to work for others should be considered under the control factor. Furthermore, it allows for consideration of reserved rights while removing the provision in the 2021 IC Rule that minimized the relevance of retained rights. The final rule also discusses exclusivity in the context of the permanency factor, and initiative in the context of the skill factor. Lastly, in addition to these 6 factors, other factors may also be relevant to the extent that they may, in some way, indicate whether the worker is in business for themself, as opposed to being economically dependent on the potential employer for work.
Scope and Applicability of the DOL Final Rule
The regulatory guidance promulgated in this final rule is generally applicable across all industries and will go into effect on March 11, 2024. Therefore, it is important for employers to be aware and up to date with the current guidance and rules implemented by the DOL to assure compliance with legal obligations under the FLSA and applicable regulations concerning the proper classification of workers as employees or independent contractors.
If you have any questions or comments regarding these recent developments that impact the employment landscape, please contact any of the following attorneys from our Labor & Employment Practice Group at your convenience:
| Juan J. Casillas Ayala | 787 523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach-Zúñiga | 787 523-3498 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
| Nathalia S. Marrero Méndez | 787-523-6069 | nmarrero@cstlawpr.com |
by cstlawNOTICE OF PROPOSED RULEMAKING PERTAINING TO THE FAIR LABOR STANDARDS ACT
On August 30, 2023, the U.S. Department of Labor (“DOL”) announced issuance of a Notice of Proposed Rulemaking (“NPRM”) to update and revise the regulation issued under section 13(a)(1) of the Fair Labor Standards Act (“FLSA”) implementing the exemption for minimum wage and overtime pay requirements for executive, administrative, professional, outside sales, and computer employees. The NPRM includes:
- a substantial increase to:
- the minimum salary level to qualify as an exempt employee, which is expected to be at
least $1,059 per week and $55,068 annually; - the highly compensated employee annual compensation threshold to $143,988;
- the minimum salary level to qualify as an exempt employee, which is expected to be at
- the implementation of an automatic update mechanism to assure efficiency maintaining
updated all earnings thresholds every three years based on data available at that time.
NPRM applicability to U.S. territories including Puerto Rico
The DOL is also proposing that said increase should apply in the U.S Territories, including Puerto Rico, which has not increased for almost two decades. As you may recall, in the 2019 revision, the DOL elected to preserve the salary level set in 2004 (i.e. $455 per week) for Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. Nonetheless, in the interest of applying the FLSA uniformly to areas subject to the federal minimum wage, the DOL is now proposing to apply the standard salary level to employees in all territories that are subject to the federal minimum wage and to maintain a special salary level only for employees in American Samoa, because that territory remains subject to special minimum wage rates. The DOL is also proposing to update the special base rate for employees in the motion picture industry to $1,617 per week (or a proportionate amount based on the number of days worked).
However, at this juncture the NPRM is still in the early stage of public comment submissions which means that the proposed rule is subject to change. Furthermore, considering our current state of affairs, we will continue to monitor the development of the NPRM because there is a possibility that the Financial Oversight and Management Board will recommend the exclusion of Puerto Rico from the final rule, consistent with the considerations that motivated the adoption of PROMESA, as it has occurred in the past. Accordingly, it is important for employers to be aware of new developments regarding the approval and the implementation of the NPRM to ensure compliance with legal obligations under the FLSA and the applicable regulations.
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:
| Juan J. Casillas Ayala | 787 523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach-Zúñiga | 787 523-3498 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Natalia M. Palmer Cancel | 787-523-6074 | npalmer@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
| Nathalia S. Marrero Méndez | 787-523-6069 | nmarrero@cstlawpr.com |
| Paola S. Ayala Acevedo | 787-523-3494 | payala@cstlawpr.com |
by cstlawTHE PREGNANT WORKERS FAIRNESS ACT COMES INTO EFFECT AND THE EEOC POSTS NOTICE OF PROPOSED RULE MAKING
The Pregnant Workers Fairness Act (“PWFA”), signed into law by President Joe Biden on December 27th, 2022, became effective this past July 27th. The PWFA expands and builds upon the existing protections against pregnancy discrimination under Title VII of the Civil Rights Act (“Title VII”) and the reasonable accommodation requirements under the Americans with Disabilities Act (“ADA”).
Succinctly, the PWFA requires covered employers to engage in the “interactive process” and provide a “reasonable accommodation” to a “qualified” employee or applicant with a “known limitation” related to, affected by, or arising out of her pregnancy, childbirth, or related medical conditions, unless the accommodation will cause the employer an “undue hardship.” Private sector employers with at least 15 employees are considered “covered employers” under the PWFA. Some of the terms and protections under the PWFA are similar to the provisions under the ADA and the existing protections against pregnancy discrimination under Title VII. However, some major distinctions must be kept in mind.
For instance, while pregnancy is not a disability under the ADA, some pregnancy-related “known limitations” may be covered under the PWFA, even if such “limitations” do not meet the definition of a “disability” under the ADA. Furthermore, contrary to ADA, under the PWFA an employee or applicant may be “qualified” even if she cannot perform one or more “essential functions” of the job if the inability to perform the essential function(s) is “temporary,” she could perform the essential function(s) “in the near future,” and the inability to perform the essential function(s) “can be reasonably accommodated.” Accordingly, because the PWFA allows for the temporary suspension of one or more essential functions in certain circumstances, during the interactive process the employer must also consider whether one or more essential functions can be temporarily suspended before a determination is made on whether the employee is “qualified” or not, and before determining whether a reasonable accommodation is viable.
In connection with the PWFA, earlier this week (August 7th) the U.S. Equal Employment Opportunity Commission (“EEOC”) issued a Notice of Proposed Rulemaking (“NPRM”) to implement the PWFA, which you can see here. The proposed rule explains how the EEOC intends to interpret the PWFA and certain terms such as, for example, “known limitation,” “communicated to the employer,” “temporary,” “in the near future” (i.e. 40 weeks), “can be reasonably accommodated,” and “essential functions”. It also provides numerous examples of possible reasonable accommodations and seeks input on whether there should be more examples and for what additional different situations. For instance, among some of the proposed reasonable accommodations, the EEOC proposes the following:
- Frequent breaks;
- Sitting/Standing;
- Schedule changes, part-time work, and paid and unpaid leave;
- Telework;
- Parking;
- Light duty;
- Making existing facilities accessible or modifying the work environment;
- Job restructuring;
- Temporarily suspending one or more essential functions;
- Acquiring or modifying equipment, uniforms, or devices; and
- Adjusting or modifying examinations or policies.
Pursuant to the PWFA, employers cannot: (i) deny a “reasonable accommodation” to a qualified employee or applicant with a “known limitation,” absent “undue hardship;” (ii) require an employee to accept an accommodation without a discussion between the worker and the employer; (iii) deny a job or other employment opportunities to a qualified employee or applicant based on the person’s need for a reasonable accommodation; (iv) require an employee to take leave if another reasonable accommodation can be provided that would let the employee keep working; (v) retaliate against an individual for reporting or opposing unlawful discrimination under the PWFA or participating in a PWFA proceeding; or (vi) interfere with any individual’s rights under the PWFA. Please be advised that, under the proposed rules, the EEOC proposes that an unnecessary delay in responding to a request for a reasonable accommodation may result in a violation of the PWFA, even if the reasonable accommodation is eventually provided.
Furthermore, it is important for employers to know that the EEOC will be accepting charges under the PWFA from the effective date of the statute. In other words: employers must ensure compliance with the provisions of the PWFA to avoid EEOC charges and any other liability under the statute. The procedures for filing a claim under the PWFA, as well as the available remedies (i.e. injunctive relief, back and front pay, damages, compensatory or punitive damages) are the same as under Title VII, the Congressional Accountability Act, the Government Employee Rights Act, and section 717 of Title VII, for the employees covered by their respective statutes. Limitations regarding available remedies under these statutes likewise apply under the PWFA. As with the ADA, damages are limited if the claim involves the provision of a reasonable accommodation, and the employer makes a good faith effort to meet the need for a reasonable accommodation.
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:
| Juan J. Casillas Ayala | 787 523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach-Zúñiga | 787 523-3498 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Natalia M. Palmer Cancel | 787-523-6074 | npalmer@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
| Nathalia S. Marrero Méndez | 787-523-6069 | nmarrero@cstlawpr.com |
| Paola S. Ayala Acevedo | 787-523-3494 | payala@cstlawpr.com |
by cstlawEMPLOYERS BEWARE OF PROPOSED RULE THAT MAY IMPACT NON-COMPETE COVENANTS AND LOCAL LEGISLATION THAT SEEKS TO CURTAIL UNPAID INTERNSHIPS
A. The Federal Trade Commission (FTC) proposes rule to ban non-compete covenants and/or agreements
Earlier this month the FTC published for public opinion a new proposed rule to ban employers from requiring non-compete clauses from their workers. The proposed rule is based on findings that a non-compete clause constitutes an unfair method of competition and therefore violates Section 5 of the Federal Trade Commission Act. Also, the FTC estimates that banning this practice could increase wages by nearly $300 billion per year and expand career opportunities for nearly 30 million Americans.
A non-compete clause is a contractual agreement aimed to impede an employee from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the termination of the worker’s employment. To be valid in Puerto Rico, non-compete clauses must comply with certain requirements established by the Puerto Rico Supreme Court, to wit: the clause must protect an employer’s legitimate interest, the scope of the restriction must correlate to the employer’s legitimate interest, the restriction cannot exceed 12 months after termination of the employment relationship, the clause must identify its geographical confinements or the clients that will be affected by the restrictive covenant, the employer must offer adequate consideration in exchange for the non-compete clause, and the agreement must also be in writing.
The proposed rule would be added to subchapter J-Rules Concerning Unfair Methods of Competition, part 910-Non-Compete Clauses, of chapter I of title 16 of the Code of Federal Regulations. As proposed, the rule would prevent employers from entering into non-compete clauses with workers and/or require employers to rescind existing non-compete clauses. The term “worker” would include any natural person who works, whether paid or unpaid, for an employer, including employees, individuals classified as independent contractors, externs, interns, volunteers, apprentices, or sole proprietors who provide a service to a client or customer. The only exception recognized by the proposed rule is limited to non-compete clauses between the seller and buyer of a business and would apply only if the restricted party is an owner, member or partner holding at least 25% ownership in a business entity. Non-compete clauses covered by this exception would remain subject to federal antitrust and other applicable laws.
If approved, the proposed rule would supersede any State statute, regulation, order, or interpretation to the extent in which it is inconsistent therewith. Employers would be required to comply with the proposed rule 180 days after publication of the Final Rule. You can read the FTC’s proposed new rule here. If interested, employers may submit comments to the proposed rule on or before March 6, 2023.
B. Recently enacted legislation provides protections for interns
On December 27th, 2022, Act No. 114 of 2022, known as the “Puerto Rico Fair Internship Act”, (Act. 114-2022) was signed into law. Essentially, Act 114-2022 serves the purpose of ensuring that university students and recent graduates receive a fair compensation for their work as a part of an internship program.
Article 4 of the Act defines “internship” as any public or private program that offers a learning and work experience to high school or college students or graduates within one year after graduation. For an internship to be subject to the provisions of the Act, it must meet the following criteria:
- it must require ten or more hours per week,
- the duration of the program must be defined before it begins,
- the participants must have a direct supervisor,
- supervisors must provide midterm and final evaluations to the participants and discuss the results with them to offer assistance for their development, and
- the program must include an educational component and mentoring initiatives related to skill development, networking, and professional development.
Pursuant to Act 114-2022, regardless of the terminology used to identify it, if a program meets the above criteria, it will be considered an internship and the organizer must provide compensation to its participants. The minimum compensation required must be based on the federal minimum wage or the state minimum wage, whichever is higher.
However, please note that the following activities are exempted from the provisions of the Act, in which case, compensation would not be required:
- Programs that are required for graduation or offered in exchange for university credits.
- Volunteering experiences, defined as the free and voluntary participation of citizens in activities of social or community interest for public or private organizations without compensation of any kind and solely for civic purposes.
- Shadowing programs where the participant is limited to observing the work of others or where the assigned work does not require any specific skills or knowledge.
- Internship or volunteering programs offered by federal or state department agencies.
- Programs offered by non-profit organizations (subject to certain qualifications identified in the Act and the approval of the Puerto Rico Department of Labor and Human Resources).
Article 8 of the Act establishes the rights held by participants in internships, which include, among others, rights to receive monetary compensation, to acquire knowledge and develop skills in a professional and respectful environment, to be informed of the assigned tasks and the evaluation criteria, to be protected against discrimination and hostility, and to work in a safe and healthy environment.
Finally, the Puerto Rico Department of Labor and Human Resources is authorized to issue rules and regulations to assure compliance with the Act.
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:
| Juan J. Casillas Ayala | 787 523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach-Zúñiga | 787 523-3498 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Natalia M. Palmer Cancel | 787-523-6074 | npalmer@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
by cstlawBEWARE OF CHANGES TO STATUTORY CHRISTMAS BONUS AND RELATED OCTOBER 24TH OPINION FROM PR DEPARTMENT OF LABOR
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 1st of any calendar year through September 30th of the following calendar year. Eligible employees should receive the annual bonus between November 15th to December 15th (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.
- 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 1st, 2021, through September 30th, 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.
- 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 1st, 2021, to September 30th, 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:
| Employee’s hiring date: | Minimum number of hours worked required during the period of coverage: (October 1st, 2021 to September 30th, 2022) | Christmas Bonus minimum payment: |
| Before January 26, 2017 | 700 hours or more for employers with more than 12 employees (100 hours for dock employees)
|
6% of the employee’s salary up to $10,000 |
| Before January 26, 2017 | 700 hours or more for employers with 12 employees or less
|
3% of the employee’s salary up to $10,000 |
| On or after January 26, 2017 | 700 hours or more for employers with more than 20 employees | 3% of their salary up to a maximum of $600 |
| On or after January 26, 2017 | 900 hours or more for employers considered micro, small, or medium-sized businesses with more than 20 employees
|
3% of their salary up to a maximum of $600 |
| On or after January 26, 2017 | 700 hours or more for employers with 20 employees or less | 3% of their salary up to a maximum of $300 |
| On or after January 26, 2017 | 900 hours or more for employers considered micro, small, or medium-sized businesses with 20 employees or less | 3% of their salary up to a maximum of $300 |
- 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]
- Application for Exemption from the payment of the annual bonus (2022).[5]
- 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:
| Juan J. Casillas Ayala | 787 523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach-Zúñiga | 787 523-3498 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Natalia M. Palmer Cancel | 787-523-6074 | npalmer@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |
by cstlawPUERTO RICO DEPARTMENT OF LABOR (“PRDOL”) PUBLISHES MODEL PROTOCOL TO PREVENT AND ADDRESS SEXUAL HARASSMENT COMPLAINTS IN THE WORKPLACE
On October 28th, 2022, the PRDOL published a model protocol to prevent and address sexual harassment complaints in the workplace. You can access the PRDOL’s model protocol here. This model protocol was prepared and disseminated by the PRDOL in response to a recent amendment to Act No. 17 of April 22, 1988 (“Act No. 17”), known as Puerto Rico’s Sexual Harassment Act, which, among other things, extended protection against sexual harassment to paid and unpaid interns and mandated that employers have protocols in place to address situations and complaints of sexual harassment in the workplace, while setting forth minimum standards that said protocols must contain. Employers can adopt the model protocol published by the PRDOL or prepare and disseminate their own which must, at a minimum, incorporate the standards established in the PRDOL’s model protocol. Likewise, employers that already have a protocol in place must ensure that it incorporates the minimum standards established in the recent legislation and contained in the PRDOL’s model protocol. Moreover, the Secretary of the PRDOL recommends employers that do not have a protocol in place to adopt the PRDOL model protocol on a temporary basis while they design and disseminate a protocol that addresses the needs of their particular industry, workforce and workplace, while containing the statutory minimum standards.
Below we summarize certain key aspects that you should be mindful of as it pertains to either the revision, adoption and/or creation of a sexual harassment protocol that is fully compliant with recent legislation and the PRDOL’s model protocol.
I. Protocol to address situations and complaints of sexual harassment must, at a minimum, include or provide the following:
1. A statement communicating that sexual harassment is illegal and expressing the company’s zero tolerance policy;
2. Legal basis for the protocol;
3. Definitions;
4. The person responsible for handling and investigating sexual harassment allegations or complaints;
5. Explanation of the process to report and file a complaint;
6. State who can file a complaint for sexual harassment, including the alternative to file a verbal, written or anonymous complaint;
7. Examples of prohibited conduct;
8. Actions to maintain the confidentiality of the complaint;
9. Anti-retaliation provision;
10. Description of the investigative process that follows a complaint for sexual harassment;
11. Measures that can be adopted for victim’s protection, as well as those who testify or collaborate in the investigation;
12. Legal remedies available for victims and the information of agencies that could assist them;
13. Include a complaint form for employees to report sexual harassment incidents;
14. Reference regarding local and federal provision related to sexual harassment.
II. Web Portal
Employers should be mindful that the recent legislation provides for the creation of a webpage (“hostigamientosexual.pr.gov”) where employees may file complaints of sexual harassment in the workplace, that will be addressed, investigated and adjudicated by the PRDOL and the Women’s Solicitor Office. Per a recent communication from the Secretary of the PRDOL, the portal’s availability will be announced soon. Notably, however, the PRDOL and recent legislation are silent as to how these virtual sexual harassment complaints will be notified to employers, if at all, so that employers may take immediate actions to address and correct situations of sexual harassment in the workplace.
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:
| Juan J. Casillas Ayala | 787 523-3439 | jcasillas@cstlawpr.com |
| Luis F. Llach-Zúñiga | 787 523-3498 | lllach@cstlawpr.com |
| Israel Fernández Rodríguez | 787-523-3437 | ifernandez@cstlawpr.com |
| Luis R. Ramos Cartagena | 787-523-3483 | lramos@cstlawpr.com |
| Juan C. Nieves González | 787-523-3478 | jnieves@cstlawpr.com |
| Natalia E. del Nido Rodríguez | 787-523-3481 | ndelnido@cstlawpr.com |
| Natalia M. Palmer Cancel | 787-523-6074 | npalmer@cstlawpr.com |
| Cristina B. Fernández Niggemann | 787-523-6076 | cfernandez@cstlawpr.com |