Doing Business in Puerto Rico Blog: Business Coaching, News & Developments

MINIMUM WAGE INCREASE INCHES CLOSER TO APPROVAL

A bill set to increase the minimum wage in Puerto Rico was approved yesterday by a 46  to 1 vote   in the  House of  Representative. Most of the Senators seem to favor it  but the Governor as of lately is inclined to wait and see what happens with the federal minimum wage bill in Congress.   The House version seeks an immediate raise of $6.25/hour.

Our local minimum wage law automatically increases with the federal minimum  wage. The issue for many is that the federal minimun has been stagnant for too long. So, our legislators always antibusiness and mostly ignorant of free market and competitiveness issues   are attempting  to do away with the  pairing concept.

Will they ever understand that we need employers  to offer jobs that pay wages?

WORKERS' SICK LEAVE UNDER PUERTO RICO LAW

Under Act No. 180 of July 27, 1998, employees in Puerto Rico accrue sick leave at a rate of one  day each month, provided that they work no less than one hundred and fifteen (115) hours a month.

The law specifically states that the enjoyment of sick leave does not excuse compliance of those standards of conduct validly established by the employer, such as atten­dance, punctuality, medical certificates if the absence exceeds two (2) working days, and periodic reports on the continued illness.

For accrual purposes, the use of sick leave shall be deemed as time worked, and shall be paid on the basis of an amount which is not less than the regular hourly wage earned by the employee in the month the leave was accrued. For individuals with variable wages such commissions  other compensation structures that are not at the full discretion of the employer, the regular hourly wage is computed by dividing  by fifty-two (52) weeks the total commissions or incentives earned during the year.

Sick leave not used by the individual during the year will accrue for subsequent years up to a maximum of fifteen (15) days.

Before Act No. 180 became law, vacation, sick leave and other benefits were regulated by a system of wage orders known as “mandatory decrees”. Employees accrued leave depending on the industry the employer belonged to. There were numerous decrees with different rates of vacation accruals.

The new law took into account this situation and provided  that employees covered by a decree as of August 1, 1995 with accrual rates  higher or lower  than what was provided by the new law would continue under the same terms of the decree. The enjoyment of the higher benefit continued for as long as an employee continued to work for the same employer.

WORKERS VACATION LEAVE UNDER PUERTO RICO LAW

Under Act No. 180 of July 27, 1998, employees in Puerto Rico accrue vacation leave at a rate of one and one quarter (1 ¼) days each month, provided that they work no less than one hundred and fifteen (115) hours a month.

For the accrual of said benefits, the use of vacation leave shall be deemed as time worked, Vacation leave shall be paid on the basis of an amount which is not less than the regular hourly wage earned by the employee in the month the leave was accrued. For employees who receive commissions or other incentives that are not at the full discretion of the employer, the total commissions or incentives earned for the year can be divided between fifty-two (52) weeks, to compute the regular hourly wage. Vacation leave shall be granted annually but an employee cannot claim the leave until it has accrued for one year.

The employer can schedule the leave in such a way as not to disrupt the normal operation of the enterprise; but leave shall be enjoyed consecutively, unless through an agreement between the employer and the employee, it is apportioned, provided that the employee enjoys at least five (5) consecutive working days of vacation leave during the year.

The employer and the employee may agree to allow up to two (2) years of vacation leave to be accrued. An employer, who fails to grant leave after accruing the maximum, must grant the total leave accrued to date, and pay the employee twice the corresponding salary for the period in excess.  The employer may allow the partial liquidation of accrued leave in excess of ten (10) days upon written request of the employee. In the event the employee terminates his/her employment, the employer must pay the employee the total leave accrued to such date, even though it is less than a year.

Before Act No. 180 became law, vacation, sick leave and other benefits were regulated by a system of wage orders known as “mandatory decrees”. Employees accrued leave depending on the industry the employer belonged to. There were numerous decrees with different rates of vacation accruals. The new law took into account this situation and provided  that employees covered by a decree as of

August 1, 1995 with accrual rates of vacation higher or lower than what provided by the new law would continue under the same terms of the decree. The enjoyment of the higher benefit continued for as long as an employee continued to work for the same employer.

FOLLOW A THREE STEP AUDIT BEFORE FIRING AN EMPLOYEE

Firing an employee in Puerto Rico for misconduct has legal consequences.  It may be deemed wrongful, discriminatory, retaliatory or in violation of some other law. You need to contend with both local and federal labor & employment issues. Fines can be steep and in some cases may require job reinstatement. Before you discharge an individual, consider and resolve the following issues.  This self-audit may avoid  future wrongful discharge claims.

Why are you are terminating the worker? If its for disciplinary reasons or violation of some policy you must follow a three step process: (1) You need to prove that the act was committed by the worker; (2) the discipline imposed must be proportionate; (3) regardless of (1) and (2), make sure  the worker is not protected by a specific law such as age, sex, disability, workers compensation, pregnancy, color, political views, religion, retaliation and if he/she is,  make sure (that you can prove) that the condition protected plays no role in the decision to terminate.

Here are some key questions you need to ask yourself:

• Is the applicable policy or rule written?
• Have  you provided  the worker with a copy of the rules or  policy?
• Do you have evidence of having provided a copy (such as  a signed acknowledgment form)?
• Is the violation contained within the rule or policy? What is the penality if any?
• Do you have a specific disciplinary process? Will you follow it?
• How serious is the  breach of conduct? Is it a first offense? A discharge for a first offense is unjustified unless it's of a grave nature and puts the business at risk.
• Have you calculated the amount of the indemnity under Puerto Rico's Wrongful Discharge Act No. 80 ? It is a wise idea to know what is your legal exposure under the law in case you are not able to prevail in a wrongful discharge claim.

Is the Worker protected by a specific law? In Puerto Rico, employers can discharge workers at will but must pay an indemnity if the discharge is without cause. However the employer must be careful not to breach other  employment laws that prohibit employment discharges for a specified reason. Example of these laws include firing a person for his/her age, color, gender, national origin, religious beliefs,  disability, retaliation and enjoying protected leaves.  While a  discharge for cause may be an adequate defense in many cases, a initial analysis of the applicability  of these laws is a wise precautionary measure. Typical questions you might ask include:

• Is the worker of a foreign nationality, black, impaired, professes a particular religion?
• Is the worker currently under a particular leave?
• Is the worker older than most? Older than 40?
• Is the worker the only woman? Has she been harassed?
• Is the worker disabled or perceived to be disabled?
• Is the worker a victim or perceived to be a victim of domestic violence?
• Is the worker currently under a protected leave such as pregnancy, Family-Medical, jury, military or workers compensation?
• Is there any protected condition that the worker may invoke to sidetrack the case from a simple discharge to a major discrimination claim?

VOLUNTARY CHAINS MAY SAVE MONEY TO BUSINESSES IN PUERTO RICO

Local businesses are taking advantage of the Voluntary Chain program administered by the Puerto Rico Trade Company (Compañía de Comercio y Exportación). The Company recently announced that the first certified voluntary chain of businesses (in this case supermarkets) would be saving over $135,000 per year in non-real estate property, municipal and inventory-related taxes.

A voluntary chain is a group of independent businesses which operate on the same distribution level- generally at the retail end- and unite with the purpose of doing joint purchases to  leverage better prices and terms of payment. They can also engage in common marketing efforts but at all times retain control of their respective businesses.

CLOSE CORPORATIONS IN PR CAN HAVE 75 SHAREHOLDERS

Act 276 of December 2, 2006 amended Puerto Rico's Internal Revenue Code to increase the number of allowed shareholders in a  close corporations electing special tax through provisions -  from 35 to 75.

PUERTO RICO'S PLANNING BOARD TO LEVY STEEPER FINES

Act 294 of December 2006 doubled the amount of fines the Planning Board of Puerto Rico can levy on a business or individual that fails to comply with its regulations or orders. The limit was raised from $5,000 to $10,000. Along with the Regulations and Permits Administration (ARPE) the Planning Board regulates land developement in the Island

PR BANKS TO FILE ANNUAL REPORT BY APRIL 15

Act 304 of December 26, 2006 finally cleared the conflict of dates for banks to file their annual reports.  The law amends Puerto Rico's Bank Law so that now the date for a bank to file its annual report is the same as the date stipulated under the Island's  Corporations law- April 15 of each year.