Labor Reform redefines the concept of overtime while allowing agreements for flexible work hours. Learn more about these changes.
The reality is that in many countries and companies, working hours are no longer the typical 40 hours per week, divided into five (5) work days. An increasing number of employers are adjusting to the real and changing needs of their employees. In addition to working, they want time to take care of their children or other family members or work on their personal projects or passions on the side.
Some business owners in Puerto Rico have already established, on their own, flexible work arrangements with their employees. But, since January 26, 2017, the Labor Transformation and Flexibility Law (commonly known as the Labor Reform) has established exceptions to overtime and the possibility of flexible work hours for non-exempt employees.
Here are the most important changes in work hours:
- Flexible work hours: The Labor Reform establishes that non-exempt employees can perform their work week duties in fewer work days. They can work up to ten (10) hours per day for four (4) days a week without incurring daily overtime.
“This agreement must be voluntary and written. But it can be revoked by mutual agreement at any time or unilaterally revoked after one (1) year,” explained expert labor attorney Mariela Rexach Rexach, from the firm Schuster Aguiló, LLC.
It is important to note that if the employee exceeds ten (10) hours per day, the additional amount must be compensated as overtime.
- Overtime is redefined: The Labor Reform defines overtime as:
- Hours worked in excess of eight (8) in one calendar day. (This remains the same as previously.)
- The work schedule surpasses 40 hours in a week. (This remains the same as previously.)
- Hours worked on the seventh consecutive day of work. (This remains the same as previously except that employees hired after January 26, 2017, will be paid one and a half times their base salary. Employees hired before January 26, 2017 will be paid two times their base salary.)
- In the retail industry, hours worked during the time the establishment is closed to the public will be considered overtime. With the elimination of the Closing Law, these days are limited to Good Friday and Easter Sunday.
- Eliminated was the “technical” overtime, which occurred when an employee worked more than eight (8) hours in a period of twenty-four (24) consecutive hours.
- Daily and weekly overtime will be paid based on one and a half times the base salary. There is an exception, however, in the case of employees who were hired before the date the Law took effect and work in industries that are still covered by a mandatory decree. For that reason, Rexach recommends a case-by-case analysis, depending on the industry.
- Replacement hours: Under the Labor Reform, the employer and the employee can agree to replace hours without incurring overtime.
Example: Imagine that you have an employee with a sick family member who he or she has to accompany to a medical appointment. As we know, the majority of these commitments occur during working hours.
Now, the employee has the option of replacing the time dedicated to a family member at another time during the work week. This way, the employee continues to get paid and production is not affected.
Meanwhile, as the business owner, you do not have to pay overtime.
Note: These hours are not considered overtime as long as they are worked during the same week as the absence, do not exceed 12 hours in one day and are not more than 40 hours for the week.
The changes presented here are just part of the contents of the Labor Transformation and Flexibility Law. We encourage you to read the Law here so you have all the details and can review any case involving your employees.
This is the final article in an educational series prepared by the Banco Popular Business Banking Division about the Labor Reform with the goal of helping you develop your business.
Banco Popular de Puerto Rico, its subsidiaries or affiliates do not provide legal, tax or accounting advice. The information provided in this material should be used only as a guide and not as a source of legal advice. The information provided here is current as of April 26, 2017, and does not consider, or will consider, any change that could have occurred or may occur in the future. The law firm Schuster Aguiló, LLC, and Popular, Inc., and/or its subsidiaries, affiliates, or related entities are not responsible for losses or damages (direct or indirect) that may be incurred by any institution, company, entity, business or person from the information contained here. All information provided in this material or any other related topic should be confirmed and corroborated with your legal advisor.