Littler Global Guide - Puerto Rico - Q3 2022

Browse through brief employment and labor law updates from around the globe. Contact a Littler attorney for more information or view our global locations.

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New Legislation on Remote Workers of “Out-of-State” Employers

New Legislation Enacted

Author: Shiara Diloné-Fernández, Capital Member – Schuster LLC | Littler

On June 30, 2022, the governor of Puerto Rico signed into law Act No. 52 (Act 52-2022), which amended the concept of “engaged in trade or business” under the Puerto Rico Internal Revenue Code of 2011, to address the pandemic-related issue of employees working remotely from the Island for “out-of-state” employers with no business nexus to Puerto Rico.

Pursuant to Act 52-2022, for taxable years commencing after December 31, 2021, businesses with employees working remotely from Puerto Rico will not be deemed “engaged in trade or business,” provided that (i) at no time during the taxable year, the business (i.e., the taxpayer) has an office or a fixed place of business in Puerto Rico; (ii) at no time during the taxable year, the taxpayer has an “economic nexus” with Puerto Rico; (iii) the taxpayer is not considered a merchant under the provisions of the Puerto Rico Internal Revenue Code; (iv) the remote worker is not an officer, director or majority shareholder of the taxpayer; (v) the services provided by the remote worker are provided for the benefit of clients or businesses of the taxpayer that do not have a nexus with Puerto Rico; and (vi) the taxpayer reports the income paid to the remote worker on a Federal Form W-2 or on a Form 499R-2/W-2PR.

Monkeypox State of Emergency: Why Should Employers Take Note?

New Order or Decree

Author: Anabel Rodriguez-Alonso, Capital Member – Schuster LLC | Littler

In response to the COVID-19 pandemic, Puerto Rico enacted Act No. 37-2020, which created a special five-day paid leave for nonexempt employees in the private sector. Act No. 37 amended the Puerto Rico Minimum Salary, Vacation and Sick Leave Act, by establishing a special paid leave for nonexempt employees infected (or are suspected of being infected) by an illness or epidemic that triggers a state of emergency declared by either the Governor of Puerto Rico or the Secretary of the Puerto Rico Health Department.

On September 1, 2022, Governor Pedro Pierluisi issued Executive Order 2022-044, declaring a State of Emergency in Puerto Rico as a result of the monkeypox virus and empowering the Department of Health to implement the efforts and measures necessary to safeguard the health, well-being, and public safety of citizens, in the face of the increase in cases reported in recent days. As a result of this declaration, non-exempt employees may be entitled to the special paid leave if they are infected or suspected of having been infected with monkeypox.

Secretary of Labor Defines PYMES for Purposes of Act 41-2022

New Regulation or Official Guidance

Author: Mariela Rexach-Rexach, Capital Member – Schuster LLC | Littler

Last month, Puerto Rico’s governor approved Act 41-2022, which includes a series of amendments to Puerto Rico’s Act 4-2017, better known as the Labor Transformation and Flexibility Act (LTFA), and other employment legislation. Act 41-2022 includes various provisions, including those providing special treatment for employers that are deemed microenterprises, small or medium businesses (jointly “PYMES” by its Spanish acronym) based on their gross income and number of employees during a determined period (as defined by Act 62-2014). The Puerto Rico Secretary of Labor and Human Resources’ Opinion No. 2022-02 provides the criteria for PYMES classification.

The special treatment for employers classified as PYMES includes: (i) a 90-day deferred effective date of Act 41-2022 (i.e., until September 18, 2022); (ii) a special hours-worked requirement for employees hired after the effective date of the LFTA in order to be entitled to the Christmas bonus; and (iii) an exemption to the double pay provision applicable when a student works on the day of rest or seventh consecutive day of work.

Puerto Rico Secretary of Labor Interprets Vacation and Sick Leave Accrual for Part-Time Employees under Act 41-2022

New Regulation or Official Guidance

Author: Mariela Rexach-Rexach, Capital Member – Schuster LLC | Littler

Puerto Rico’s Vacation and Sick Leave Act (Act 180-1998), which establishes the vacation and sick leave accrual entitlement for nonexempt employees in the private sector, has been amended through the enactment of Act 41-2022. Among other things, the amendment establishes the accrual entitlement of employees, commonly known as “part-time employees,” who work less 115 hours, but at least 20 hours per week. Should the employee satisfy both requirements regarding hours worked, they are entitled to accrue a half day of vacation and a half day of sick leave per month, except in the case of Puerto Rico employers with 12 or fewer employees, in which case the vacation accrual rate shall be reduced to one quarter day per month.

Because of the Act’s reliance on two different time-worked concepts – to wit, total weekly and monthly hours worked – the Secretary of Labor and Human Resources recognized it has led to varied interpretative proposals and contrary opinions, particularly as to whether compliance with the weekly hours’ requirement is based on an average of weekly hours worked during a given month, or, alternatively, whether the employee must work at least 20 hours every week of the month. After reviewing the Act’s legislative history, the Secretary, in Opinion 2022-03, adopts the latter approach.

Government’s Fiscal Measures in Response to Hurricane Fiona

Important Action by Regulatory Agency

Authors: Lourdes C. Hernández-Venegas, Capital Member, and Alberto Tabales Maldonado, Associate – Schuster LLC | Littler

On September 17, 2022, Puerto Rico Governor Hon. Pedro Pierluisi issued Executive Order No. OE-2022-045, declaring a state of emergency due to the impact of Hurricane Fiona. Likewise, on September 21, 2022, President Joseph Biden authorized a disaster declaration for Puerto Rico, opening up additional relief and assistance for Puerto Rico's recovery process after the devastation left by the hurricane. In light of these actions, on September 27, 2022, the Puerto Rico Treasury Department (PR Treasury) issued Administrative Determination No. 22-08 (AD No. 22-08), summarizing the fiscal administration measures for the benefit of taxpayers and authorized representatives affected by the emergency that has been generated as a result of Hurricane Fiona.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.