On September 10, 2024, the Puerto Rico Secretary of Labor issued an Opinion (No. 2024-02) to clarify and provide additional information about the application of Act No. 27-2024, known as the "Act to Facilitate the Implementation of Remote Work in the Private Sector and to Incentivize the Establishment of Airline Bases in Puerto Rico.” Act No. 27-2024 exempts from certain employment law coverage domiciled and non-domiciled employees working remotely from Puerto Rico for out-of-state employers with no business nexus to Puerto Rico, and certain unionized airline employees.  

Remote Employees Domiciled in Puerto Rico

The new guidance clarifies that employment relationships between covered employers from out-of-state jurisdictions and remote employees domiciled in Puerto Rico (employees physically present and with the intention to remain in Puerto Rico indefinitely) are governed by their employment agreements when all of the following conditions are met: (i) the employee is an "exempt employee" under the Fair Labor Standards Act and Puerto Rican regulations; (ii) resides in Puerto Rico; (iii) the employer is covered by Act No. 27-2024; and (iv) the employee works remotely. These relationships are generally excluded from Puerto Rican employment laws, except as specifically stated.

Covered employers are not required to provide workers' compensation and non-occupational temporary disability if they offer equivalent or better coverage than required by Puerto Rican laws. However, for unemployment insurance, covered employers must follow Puerto Rico’s unemployment insurance statute, Act No. 74-1956, known as the “Puerto Rico Employment Security Act,” unless the employee can claim unemployment benefits elsewhere. If not, employers might delegate to the domiciled remote employee the responsibility of obtaining unemployment insurance with the Puerto Rico Department of Labor, including filing tax quarterly forms.

Remote Employees Not Domiciled in Puerto Rico

If an employee relocates to Puerto Rico on a non-domiciled basis to work remotely for a covered employer, the covered employer is exempt from Puerto Rico state employment laws, including those related to benefits and insurance. The employment relationship will be governed by the employment agreement or, if none exists, by the laws of the employee’s original domicile. This exemption applies to both exempt and non-exempt employees. However, if a non-domiciled remote employee becomes domiciled in Puerto Rico and is an exempt employee, the relationship will be governed by Act No. 27-2024. Notwithstanding, non-exempt employees who decide to become domiciled in Puerto Rico will not benefit from Act No. 27-2024, thus Puerto Rico employment laws will apply to the employment relationship.   

Unionized Employees of Airlines Opening Bases in Puerto Rico

Under Act No. 27-2024, unionized employees of airlines that establish air bases or crew bases in Puerto Rico who are covered by collective bargaining agreements are excluded from Puerto Rico employment law protections and will be governed solely by their agreements. It is still unclear whether these airlines are required to provide workers’ compensation insurance to their unionized employees. Non-unionized airline employees at these bases will remain protected by Puerto Rico employment laws.

Through Act No. 27-2024, Puerto Rico aims to be better positioned to promote itself as a viable jurisdiction for working remotely both for current residents and out-of-state individuals. Employers are encouraged to seek legal advice should any questions arise.

*Mariel Torres is a second-year law student from the University of Puerto Rico Law School and a law clerk in Littler’s San Juan office.