What You Should Know About the Current Labor Reform

June 26, 2023
What You Should Know About the Current Labor Reform

By: Anabel Rodríguez Alonso and Irene Viera Matta

On March 2023, the United States District Court for the District of Puerto Rico declared Act 41-2022 null and void. It reverted Puerto Rican employment laws to that in force before the summer of 2022. This means that all employers are once again governed by Act No. 4-2017, the Labor Transformation and Flexibility Act.

Here are the most important aspects:

Act 4-2017

Statute of Limitations

Further to Act 4-2017, the statute of limitations for claims arising from an employment contract was reduced to one (1) year.
Act 379-1948

Act to Establish Work Hours in Puerto Rico

Non-exempt employees can now have their meal period after completing the second hour of work and before the beginning of the sixth hour.

Employees who work more than ten (10) hours a day are entitled to a second meal period, with certain exceptions.

If an employee is required or allowed to work during their meal period, or if the employee does not use it or only uses a fraction of it, they are entitled to receive payment. Said period or fraction thereof shall be paid at time and a half of their hourly rate.

In cases where the total number of hours worked in a day does not exceed six (6) hours, the meal period may be omitted.

Act 289-1946

Act to Establish a Day of Rest in the Work Schedule

Employers with non-exempt student employees are no longer required to pay time worked at double the rate for the hours they worked during their seventh day of rest.
Act 180-1998

Puerto Rico Minimum Wage, Vacation, and Sick Leave Act

The statute of limitations for wage and hour claims is one (1) year. However, for claims under the Puerto Rico Minimum Wage Act (Act 47-2021), the statute of limitations is five (5) years from the date of termination or the filing of a judicial or extrajudicial complaint.  The claims period is five (5) years.

Non-exempt employees may only request payment of accrued vacations that exceed ten (10) days.

The number of hours worked requirement to accrue vacation and sick days is now 130 hours per month. People who work part-time no longer accumulate any such leave.

The minimum monthly vacation accrual for employees hired on or after January 26, 2017 is as follows:

–       half (½) day during the first year of service

–       ¾ of a day after the first year of service up to the fifth year of service

–       one (1) day after the fifth year of service until completing the 15th year of service

–       1¼ days after the 15th year of service

The minimum monthly accrual of sick days is one (1) day per month insofar as the employee works the minimum number of hours required.

For employees who work for employers located in Puerto Rico who have 12 employees or less, the minimum monthly accrual of vacation days is ½ day each month.

Vacation accrual for non-exempt employees hired before January 26, 2017 is 1¼ vacation days per month. There is no prorated accrual of vacation days for months in which an employee has not worked the required 130 hours.

Act 148-1969

Christmas Bonus for Private Sector Workers and Employees Act

Payment of the Christmas bonus is governed by the provisions of Act 4 of 2017. Benefits depend on the date of hire.

Employees hired before January 26, 2017 who worked for 700 hours or more from October 1 of any year until September 30 of the following year are entitled to a bonus pay equal to 6%, of a total maximum of $10,000 earned during that period.

Employers who have 15 employees or less must pay a bonus equivalent to 3% of the total maximum salary of $10,000.

Employers with more than 20 employees must pay a bonus equivalent to 2% of the total salary earned, up to $600 to employees hired on or after January 26, 2017, and who worked at least 1,350 hours during the period.

Employers with fewer than 20 employees during the same 12-month period must pay them a bonus equivalent to 2% of the total salary earned, up to $300.00. During the first year of service, 50% of the payment is required.

The amount paid for the above totals cannot exceed 15% of the employee’s gross income.

Act 80-1976

Unjustified Dismissal Act


Once again, the statute of limitations for unjustified dismissal claims is one (1) year.

Automatic probation periods apply again. Said periods are nine (9) months for non-exempt employees and twelve (12) months for exempt employees.

The formula to calculate the severance pay for employees hired on or after January 26, 2017 has changed to three (3) months of salary plus two (2) weeks for each year of service, without distinction for years of service. Also, the severance for these employees will never exceed nine (9) months of salary.

The severance for employees hired prior to January 26, 2017 will be calculated in accordance with the rule of law prior to Law 4-2017, as follows:

·      0-5 years of service – Two (2) months of salary, plus one week for each year of service completed.

·      >5-15 years of service – Three (3) months of salary plus two (2) weeks for each year of service completed.

·      >15 years of service – Six (6) months of salary plus three (3) weeks for each year of service completed.

If there was an interruption in employment lasting more than two (2) years, tenure of the previous job is not considered to calculate the severance pay.

Severance payments are exempt from Puerto Rico Salary Tax, up to the established statutory amount. Anything more than the above shall be considered for tax purposes.

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