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

AFTER 100 YEARS PUERTO RICO'S ECONOMIC AND POLITICAL FUTURE REMAINS UNCERTAIN

On the verge of gaining important political clout with Spain after 400 years of colonial rule- Puerto Rico's emerging sovereignty was shut down by the U.S. when it snatched the Island from Spain as part of the spoils of the Spanish-American War.   Over a century later,  the quest to obtain more  autonomy from the colonial status  is equally shared by a  drive toward permanent union with the U.S. This polarization  has the Island running on empty. Until we get over the status issue, the Puerto Ricans will continue to take sides even if it means running the economy to the ground. That is what almost happened less than a year ago when  the government closed for weeks.

With no new economic strategy, the Island is stagnant and slipping further into poverty. We have 8% annual inflation and can only get  42 % of our able- bodied citizens to participate in the work force. A million of our citizens receive food assistance from the government.  We remain afloat partly because  the U.S. is continually pumping  our  ever deflating economy.  Obviously this creates enormous distortions; like having the biggest U.S. retailers making their biggest sales in the poorest 'state' of the union.   

A panel of economists were quoted today in El Nuevo Día newspaper as stating that there is a crisis of leadership; that besides being economically disadvantaged, we are becoming intellectually poor and unable to create a new model or build a consensus on interests and objectives.

The lack of intellectual activity is most likely the symptom of an ailment we all like to talk about but avoid acting upon.  Typically in life when we hesitate to address a pressing concern, we create other issues or turn our attention to  less important matters.  Perhaps that is why the Island has become obsessively focused (or the media has us  thinking  that) with entertainment, fashion and music.

Every day, our media takes up a disproportionate amount of bandwidth to deal with rappers, beauty queens, actors, boxers, skin models; many of which even make our daily front page. Entertainment is fine but we have many unresolved issues that we need to deal with and they should not take a backseat to show-business. 

The status- like it or not- is a back-breaking concern.  We need to address this point of order before we can achieve economic and social consensus.  Our intellectual and creative capacity  is in reaction; tired of the impasse but relentlessly defending its political turf.  Imagine if the U.S. main political debate was still  whether to remain  a colony of England or whether to accept the Confederate States as a new country. Where would the U.S. be now?

The issue of  sovereignty versus union goes at the heart of what it means to be Puerto Rican and it is something that will be eventually  addressed- whether we like it or not. Let hope that this time- unlike a century ago- it is Puerto Rico that decides.

WHEN BUYING A BUSINESS IN PUERTO RICO PAY ATTENTION TO SENIORITY ISSUES

From a labor/employment standpoint, anyone considering acquiring a business in Puerto Rico needs to take into account the "Transfer of Going business" clause under Wrongful Discharge Act No. 80 of May 30, 1976.

When a business changes ownership, the employees that remain with the new owners will be credited with the seniority they accrued under the previous owner (plus the seniority they accrue under you). This is important because under Act 80, a business must indemnify an employee who is discharged without cause and; the actual indemnity will vary depending on the years of employment. 

Under the Act every employee contracted without a fixed term, who is discharged without good cause shall be entitled to receive:

(a) The salary corresponding to two (2) months, as indemnity, if he/she is discharged within the first five (5) years of service; the salary corresponding to three (3) months if he/she is discharged after five (5) years and up to fifteen (15) years of service; the salary corresponding to six (6) months if he/she is discharged after fifteen (15) years of service.

(b) An additional progressive compensation equal to one (1) week for each year of service if he/she is discharged within the first five (5) years of employment; two(2) weeks  for each year of service between five (5) and fifteen (15) years of service and; three (3) weeks for each year of service after completing fifteen (15) years of service.

The purchaser is not obligated to keep the employees. Under the law, if the acquirer decides not to commence operations with the services of all or any of the employees and hence does not become their employer, the former employer shall be liable for the compensation provided under the Act;  “and the purchaser shall retain the corresponding amount from the selling price stipulated with respect to the business.” In case the purchaser opts to continue with the workers and later discharges them without good cause it  shall be liable for severance payment under the  Act.

While the final decision on the fate of the employees is often a point of negotiation between the parties, knowing the actual liability will help the purchaser decides the best course of action.

AGE DISCRIMINATION: DIFFERENCES BETWEEN LOCAL AND FEDERAL STATUTES

Both federal and local statutes prohibit employers in Puerto Rico to discharge any individual or otherwise discriminate against any individual because of such individual's age. However the laws differ with regard to coverage and burdens of proof imposed upon the employer and the employee.

Age Discrimination in Employment Act (ADEA) covers private employers of 20 or more persons and the prohibition of discrimination is against workers who are 40 years of age or older. Puerto Rico’s discrimination  Law 100 covers all private employers and employees of all ages.

Under ADEA-  a plaintiff has the burden of proof to show that, because of his age, he was treated less favorably than other persons who were similarly situated in all relevant respects. When a plaintiff does not have  “direct evidence that the employer's actions were motivated by age, he must show that: (1) he was at least 40 years old; (2) met the employer's legitimate job expectations; (3) was fired or constructively discharged; and (4) that age was not treated neutrally. If the plaintiff can show these four elements, the burden of proof shifts to the employer who must provide some legitimate, nondiscriminatory reason for the adverse employment action suffered by the employee.

The employer only needs to provide a justifiable reason. It does not have to persuade the court that it was actually motivated by the reasons offered. Once the employer provides the justifiable reason, the plaintiff must then prove both that the defendant's explanations are false and a pretext to hide discriminatory intent.

Law 100 states that an act of discrimination is presumed to have been committed if it is done without good cause. See P.R. Laws Ann. Tit. 29, § 148. Since Law 100 does not define the term “good (or just) cause,”

Puerto Rico’s courts have used local wrongful discharge Law 80 of May 30, 1976, to define the term.  Generally, a “discharge made by mere whim or fancy of the employer or without cause related to the proper and normal operation of the establishment” will be deemed without just cause. P.R. Laws Ann. Tit. 29, §§ 185a-185k.

The purpose of a presumption is to facilitate the employee to prove its claim; it does not relieve the employee of the need to present evidence in its favor.  In trial, the employee must begin presenting evidence to show the basis for the age claim.

To activate the presumption of discrimination, the employee must present evidence to show that that he was discharged, that it was done without just cause and must provide some basic element of proof regarding his age claim. The employee need not prove the discriminatory act itself. Once the employee complies with this initial phase the burden of proof shifts to the employer. 

If the employer does not present any evidence, the court will consider that the employee has proven his discrimination case and the remaining issues will be limited to the assessment of damages. If the employer chooses to defend itself, it has several alternatives, it can present evidence to rebut the presumption or may present evidence that there was no such dismissal (employee resigned) or that the dismissal was for cause or that despite the dismissal being unjust, it was not discriminatory.

If the employer is able to rebut the presumption of discrimination, the employee still has another opportunity to prove discrimination by presenting evidence of discriminatory intent (specific incidents, facts); now without the benefit of the presumption.