As we have previously discussed, the Puerto Rico Department of Labor (PR DOL) recently published the first edition of its Guidelines on the Interpretation of Puerto Rico’s Employment Legislation (Guidelines), which includes the PR DOL’s official statutory interpretation of nearly all of Puerto Rico’s employment laws.  The over 200-page Guidelines are divided into 15 chapters and cover a wide range of statutes. This Insight is the second in a series that will provide a chapter-by-chapter analysis of the most important topics addressed in the Guidelines, including an interpretation of key provisions of the Puerto Rico Labor Transformation and Flexibility Act, Act No. 4 of January 26, 2017 (“Act 4-2017” or “LTFA”), which made substantial changes to virtually all existing employment laws in Puerto Rico.

Chapter 4 - New Right: Religious Accommodation

Article 2.19 of the LTFA is likely to generate many questions for employers. It recognizes an employee’s right to participate in religious services, and specifically establishes an employer’s obligation to reasonably accommodate an applicant’s or employee’s religious practices upon written request. Denial of this type of religious accommodation is justified only when the employer can show that, of each alternative method of available accommodation, the option chosen by the employee presents “excessive difficulty.” Furthermore, the provision explicitly states that the mere presumption that many others with the same religious practices will also need the religious accommodation will not be evidence of excessive difficulty. After the approval of the LFTA, the PR DOL Secretary filed Regulation Number 8947 (“Regulation 8947”) before the Puerto Rico Department of State to implement this new right. The Regulation took effect in 2017.¹

The Guidelines emphasize the rights and responsibilities of both parties in religious accommodation requests.² The Guidelines also provide useful examples for employers. According to the PR DOL Secretary, it is not an “excessive difficulty” for an employer to incur some administrative costs, make changes to a work schedule, or even pay overtime to an employee who is willing to work in excess of the daily maximum in exchange for having off on a certain day to attend a religious service (if not recurring in nature). Under the Guidelines, it may be deemed “excessive difficulty” if, in order to grant a religious accommodation request, the employer needs to hire a new employee to cover shifts and positions to stay in operation. The Guidelines also provide that cost is not the only factor that the judge must analyze when determining whether granting a religious accommodation constitutes an excessive difficulty. It is also necessary to evaluate the burden that is imposed on the business in general, as well as the legitimacy of the reasons provided by the employer to deny the requested accommodation taking into consideration the nature of the business.

Employers should adopt, or review, handbooks and workplace policies to ensure compliance with these laws and regulations.

Chapter 5 – Work Shifts and Flexible Schedules

In this chapter, the PR DOL discusses LTFA’s amendments to the PR Working Hours and Days Statute, Act No. 379 of May 15, 1948 (“Act 379”), the PR Day of Rest Statute, Act No. 289 of April 9, 1946, and the repealing of Act No. 1 of December 1, 1989 (“Act 289”), commonly known as the Closing Law. The Guidelines break down the types of overtime that exist in Puerto Rico under Act 379. They discuss how overtime is, among other things, “hours that an employee works for his employer in excess of eight (8) hours during any calendar day.” Pursuant to Art. 4 of Act 379, the Guidelines state that the employer may notify the employee of an alternate 24-hour cycle in lieu of using the “calendar day,” provided that the notification is made in writing and within a term not less than five days prior to the start of the alternate cycle and that there are 8 hours between consecutive shifts. The Guidelines emphasize that to establish the alternative 24-hour period, the employer must comply with the notification requirement and grant a minimum rest of eight hours between consecutive work shifts so that overtime is not incurred.

The Guidelines also address that pursuant to Art. 4(d) of Act 379, the hours that an employee works during the weekly day of rest, as established by law, are also considered overtime. According to Act 289, every non-exempt employee of any establishment that operates with or without profit has the right to one day of rest for every six days of work. The Guidelines emphasize the amendment introduced to Act 289 by the LFTA regarding the type of salary that an employee who works during the day of rest should receive. In this regard, the Guidelines state that employees hired as of the effective date of the LFTA must receive compensation equivalent to time and a half their regular rate of pay for the hours worked during the day of rest. Employees hired before the effective date of the LFTA preserve the right to double pay for hours worked during the day of rest. The Guidelines explain that since each week of work is an independent unit, the right of the employee to receive extraordinary compensation for the hours worked during the day of rest does not extend beyond said seventh day, because the next day is the first of a new work week.

On the other hand, the Guidelines explain the employees’ right to request, in writing, a change in schedule or in the number of hours to be worked or the place where work is to be performed. The employee’s written request must specify the requested change, the reason for requesting it, its effective date and its duration. The Guidelines emphasize that the employer is compelled to provide a response to the employee’s request within 20 calendar days from the receipt of the request, and if the employer has more than 15 employees at the time of the request, the answer must be in writing. The Guidelines indicate that the employer and the employee can discuss informally to voluntarily reach acceptable terms. They also state that the employer may grant, totally or partially, the employee’s request or may deny it. The Guidelines clarify, however, that if the employer rejects the employee’s request, it must include any alternative that may be offered to the employee under the circumstances. According to the Guidelines, the employer’s response constitutes a business decision. Therefore, the employer’s criterion must be given deference in accordance with the interpretative rule adopted by the Guidelines, discussed in Chapter 1.³ Citing Regulation No. 9017 of the Puerto Rico DOL, but without any support in the law, the Guidelines assert that if the employer does not provide the employee with a substantiated response or if the employee works in accordance with the request for change, it will be understood that the employee’s request was granted as requested.

Lastly, the Guidelines state that Art. 3.17 of the LFTA repealed the Closing Law in its entirety, eliminating previous restrictions on hours and days of operation for covered commercial establishments. Nonetheless, the Guidelines explain that Art. 3.17a of the LFTA retained one provision of the Closing Law, which survives as the only limitation to this freedom to operate. Specifically, according to the Guidelines, Art. 3 of the repealed Closing Law remains effective in part, requiring that commercial establishments close operations to the public on Good Friday and Easter Sunday. The Guidelines clarify that, as an exception, at the discretion of the owner, manager or person in charge of the business, those tasks related to the continuity of their operations and maintenance can be carried out during those days. The Guidelines also explain that commercial establishments that maintain operations in contravention to the commercial closure imposed must pay their employees additional compensation based on their hire date, for each hour worked during Good Friday and Easter Sunday, i.e., time and a half the regular rate of pay for employees hired on or after January 26, 2017, and twice the regular rate of pay for employees hired before that date.

Chapter 7 – Christmas Bonus to Private-Sector Employees

Act No. 148 of June 30, 1969, the Christmas Bonus Act, requires employers in the private sector to pay certain eligible exempt and non-exempt employees a statutory bonus provided certain conditions are met. The law applies to all employers in the private sector that employ one or more employees between October 1 and September 30 of the subsequent calendar year (the “coverage period”). In general terms, the Guidelines summarize and explain the requirements already established by the Christmas Bonus Act and its applicable regulation, namely Regulation No. 9003 of September 18, 2017, also known as Regulation to Administer Act 148 of June 30, 1969, as amended, the Christmas Bonus Act (“the Regulation”).⁴ Specifically, the Guidelines reiterate and explain the eligibility and bonus amount requirements, which will depend on the number of employees hired by the employer and the number of hours worked by the employee for the same employer. It is important for employers to consider that both the eligibility and bonus amount requirements will also vary depending on the employee’s hire date.

Timing of Payment

As a general matter, employers must pay the Christmas Bonus between November 15 and December 15 of each year. Notwithstanding, the Guidelines provide that the employer may credit towards the Christmas Bonus any voluntary and additional compensation previously paid to the employee, provided such compensation is made during the coverage period. In order to take advantage of this provision, the employer must notify the employee of its intention to credit that additional compensation to the payment of the Christmas Bonus. This notice must be provided in writing within five business days of the disbursement. If the employer does not pay the bonus on or before December 15, it will have to pay a penalty of up to an amount equal to the bonus due to the employee. The Guidelines further explain that for any voluntary compensation made to an employee between October 1 and November 14, the employer has two options: (1) the employer may pay in advance the bonus that must be paid that year; or (2) it may credit the voluntary compensation to the bonus that must be paid the following year.

Christmas Bonus Exemption

There are instances in which an employer will not have to pay the bonus or will only have to pay it partially. For example, when the total amount paid to employees in compliance with the Christmas Bonus Act exceeds 15% of the employer’s net annual profits from September 30 of the previous year to September 30 of the year in which the bonus is paid, the employer may ask the Secretary of the PR DOL for a total or partial exemption from paying the bonus in the corresponding year. The LFTA, the Guidelines and Regulation No. 9003 set out the factors that employers can consider when computing annual profit for purposes of the Christmas Bonus Act.

Stay tuned for a discussion of Chapters 6 and 8, which will cover vacation, sick leave, breastfeeding and equal pay legislation.