Jul 21
Regulations about dismissing employees and paying severance
July 21, 2017
Learn about the conducts that can be cause for dismissal and what regulations apply after the approval of the Labor Reform.
As a business owner, you know that good performance by your employees is one of the main keys to your business' success. That's why you need a team you can rely on, that you know and that is committed to the objectives of your business.
Among the changes and issues addressed by the new Labor Transformation and Flexibility Law (the “Law”), commonly known as the Labor Reform, is the issue of dismissing an employee. Attorney Mariela Rexach, a partner in the law firm of Schuster Aguiló, LLC, provided the following information about these issues:
General Concept of Just Cause for dismissal:
The Labor Reform incorporated certain opinions issued by the Puerto Rico Supreme Court and expanded the general concept of just cause for dismissal, defining it as "that which is not motivated by legally prohibited reasons and is not due to mere whim of the employer." Additionally, the Labor Reform defined improper and disorderly conduct.
Improper or disorderly conduct
The Labor Transformation and Flexibility Law defines improper and disorderly conduct as:
- Improper conduct – The employee does not follow rules and instructions, thus affecting the employer.
- Disorderly conduct – The employee disturbs the peace, order and respect in the work setting.
- Incurring in a pattern of inefficient, unsatisfactory, poor, tardy or negligent performance;
- Violates standards of quality or security;
- Reduces productivity;
- Incurs in a lack of competitiveness or ability to perform the job.
- If the employee was hired after the Labor Reform took effect, the employee is entitled to receive a severance of:
- Three months and two weeks' salary for each year of service completed, up to a maximum of nine months' salary.
- If the employee was hired before the Labor Reform took effect on January 26, the computation of the severance will be based on Law 80:
- Two months and one week per year of service if the dismissal occurred during the first five years.
- Three months and two weeks per year of service if the dismissal occurred between five and 15 years.
- Six months and three weeks per year of service if the dismissal took place after 15 years.