Puerto Rico DOL Publishes Guidelines Interpreting 2017 Labor Reform

Following sweeping labor reform legislation in 2017, Puerto Rico’s Department of Labor and Human Resources has released guidance clarifying its interpretations of the act and how it plans to implement and administer the new legal framework, which included changes to more than a dozen employment statutes in Puerto Rico.

The Puerto Rico Department of Labor and Human Resources (Department) issued the first edition of its Guide for the Interpretation of Puerto Rico’s Employment Legislation[1] (Guide) on May 8 containing discussion, interpretation, and analysis of the changes brought forth by the Labor Transformation and Flexibility Act (Act) signed into law on January 26, 2017. The Act made significant changes to more than a dozen existing statutes in Puerto Rico, including those governing wrongful termination, wages and hours, vacation and sick leave entitlement, lactation breaks, and employment discrimination.

Because the Act introduced numerous sweeping changes to the employment legal landscape in Puerto Rico, the Guide seeks to clarify the Department’s interpretations of and positions regarding the Act so employers and employees alike can understand and predict how the Department plans to implement and administer the new legal framework. The Department clarified that the Guide is not intended to create substantive or procedural rights apart from the 2017 legislation; it is simply an additional resource for employers and employees aimed at furthering the equitable and uniform application of labor legislation and regulation in Puerto Rico.

Chapter 1 of the Guide highlights and elaborates on principles of interpretation that the Department believes should guide relevant stakeholders, including courts, when interpreting the statutes and adjudicating employment disputes. At the outset, the Department describes a canon of interpretation often invoked by the Supreme Court of Puerto Rico that, in the case of ambiguity, courts should interpret the law in favor of the worker. The Department noted that although certain statutes have a remedial character, this interpretive principle departs from the general principle that courts should look primarily to the plain text of the law and contextual factors to ascertain legislative intention.

Rather, as its first principle of interpretation, the Department advocates that to the extent there is ambiguity with respect to an employment relationship, an employment agreement, or the applicable employment rules or laws, the proper interpretive approach looks to the text and purpose of the law, the text and purpose of the employment agreement and employment policies at issue, the purpose of the employment relationship, and productivity. Moreover, to the extent the employer reserves the discretion to interpret or apply its policies, such discretion should be respected absent arbitrary, capricious, or otherwise unlawful conduct or interpretations on the part of the employer.

The Guide’s second interpretive principle is to the extent that a Puerto Rican law that purports to regulate aspects of an employment relationship is similar to a US federal law or regulation, it should be interpreted in a manner that is consistent with US federal norms and rules unless Puerto Rican law expressly requires a different interpretation. In other words, unless a statute specifically provides otherwise, the intent is to incorporate normative developments, legislative interpretations and jurisprudence, and federal worker protections of the United States into Puerto Rican law in order to maintain uniformity and fill interpretive gaps.

Chapter 2 of the Guide provides an additional explanation of the “grandfather” clause contained in the Act. It clarifies that the clause does not mean that so long as employees were employed by the same employer prior to January 26, 2017, the changes contemplated by the Act do not apply to them. Rather, the clause was meant to express the Legislative Assembly’s general intention to leave unharmed the preexisting rights enjoyed by the working class. The Guide recognizes, however, that there are sections of the Act that apply only to employees hired after January 26, 2017, and that other sections apply to all employees, irrespective of hire date. Therefore, careful attention should be paid to the text of the Act to determine which employee populations the changes affect.

The rest of the Guide provides interpretative guidelines for the remaining chapters of the Act, including the following:

• Clarification concerning the potential liability of temporary staffing agencies and the client to which a staffing agent supplies workers, which can be joint liability, individual liability, or primary vs. subsidiary liability depending on the type of claim at issue
• Recognition that the irrefutable presumption of independent contractor status when certain factors set forth in the Act are met is designed to reduce worker misclassification claims
• Clarification concerning the requirements to address and respond to employee requests for schedule and other adjustments for purposes of religious accommodations
• Confirmation that, unless otherwise exempt from applicability, Law 289 (which requires premium payment for work on the seventh day of work) applies to all nonexempt employees, including those covered by the local Closing Law derogated by the Act
• Clarification concerning the interplay between the automatic probationary period under local Law 80 and the accrual and use of vacation time under local Law 180 during such probationary period, and confirmation that vacation days taken during the probationary period suspends the probationary period, which resumes upon the employee’s return from vacation
• Confirmation that the maximum of 15 sick days that may be carried over from one year to the next under local Law 180 is not a cap on an employee’s sick day accumulation
• Clarification that employers who lay off employees for the purpose of increasing the establishment’s productivity or competitiveness as “just cause” for termination under local Law 80 should present a plan or study that demonstrates how the contemplated personnel reductions will result in increased productivity and competitiveness (and clarifying that this does not require the employer to demonstrate it has been operating with losses)
• Discussion concerning the different elements of proof, potential liability, and interrelation of the transfer of going business and successor employer concepts
• Clarification concerning the applicable burdens of proof and potential individual liability under local antidiscrimination laws

At more than 200 pages, these are just some of the examples the Guide covers. Puerto Rico employers should carefully review the Guide and examine their employment and payroll policies and procedures in light of the interpretative guidance. Paying careful attention to which employees are covered by the Act’s provisions, employers should revise their employment handbooks to reflect these provisions consistent with the Guide’s analysis and interpretation.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

New York
Melissa C. Rodriguez

Miami
Anne Marie Estevez

[1] Departamento del Trabajo y Recursos Humanos, Guías para la Interpretación de la Legislación de Puerto Rico (1era ed. 2019).