Puerto Rico Supreme Court Rules on Damages Calculations Involving Double Penalties and Alternate Income Streams

In Torres Rivera v. Econo, 2021 TSPR 150, 208 D.P.R. __ (Nov. 18, 2021), the Puerto Rico Supreme Court (“PRSC”) determined that when a plaintiff prevails in a discrimination lawsuit, any award of back pay (lost wages) to be granted must be reduced by any income earned from other means before applying the double penalty provided by local anti-discrimination laws.

Plaintiff filed suit for constructive dismissal, alleging age discrimination under Act No. 100 of June 30, 1959 (“Act 100”) and disability discrimination and retaliation under Act No. 44 of June 2, 1985 (“Act 44”). Act 100 prohibits employers from discriminating against their employees based on religion, race, sexual orientation, and gender, among other protected categories, and authorizes civil and criminal action against any employer that engages in discriminatory conduct. Act 44 seeks to protect the rights of employees with physical or mental disabilities, extending to recruitment, compensation, fringe benefits, reasonable accommodation and accessibility facilities, and seniority, among others. Any employee or candidate for employment who has been discriminated against and who prevails on a claim under Act 100, Act 44, or both, is entitled - among additional relief - to compensation equal to twice the amount all damages suffered because of the discriminatory action by the employer (“double penalty”), as well as the reinstatement of employment.

Compensation under Act 100 includes both economic and emotional damages, back pay, and front pay whenever employees cannot be reinstated in their previous job. The purpose is to return the injured party to the state in which they were prior to the discriminatory act.  After considering the restorative and non-punitive nature of the applicable labor statutes as well as the court’s precedent, the PRSC determined that any interim earnings obtained by a plaintiff by other means had to be deducted from the total amount of assets plaintiff did not receive (that is, back pay or front pay) prior to imposing the double penalty provided by law.1 The PRSC noted that deducting the injured party’s alternate income after imposing the double penalty would improperly inflate the award by failing to account for actual income received from other sources. Consequently, the PRSC ruled that the previous calculation made by the appellate court was incorrect, insofar as it deducted the income obtained by the plaintiff after applying the double penalty.

Among the interim earnings plaintiff had received were unemployment benefits. Hon. Judge Oronoz Rodríguez disagreed in part with the majority opinion, stating that the amount plaintiff obtained as unemployment benefits should not be deducted from her compensation since it is not earned income for work performed. Similarly, Hon. Judge Estrella Martínez issued a dissenting opinion in which he stated that the clear legislative motive and purpose behind the aforementioned labor statutes is to be punitive and finding otherwise will have the net effect of reducing of the compensation to victims of illegal terminations. He further explained that he believes that workers who, in the face of an illegal dismissal, obtain other income to mitigate the effects of the sudden loss of employment, including any unemployment benefits received, should not be penalized for doing so.

See Footnotes

1 The PRSC has defined “net income” as the salary earned by the dismissed employee for work obtained and performed during their termination, corresponding to the number of hours that the employer would have worked if they had not been laid off, discounting the expenses incurred to earn it. Zambrana García v. ELA et al., 204 DPR 328 (2020).

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.