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

RETAIL OPERATIONS NEED TO UNDERSTAND THE CLOSING LAW TO AVOID STIFF FINES

Puerto Rico’s ‘Closing law’ requires retail commercial establishments to remain closed during certain hours and days. In the case of Sundays,  an establishment may only open for business from 11:00 a.m. to 5:00 p.m. There are exceptions depending on the type of store involved, the nature of the goods sold and the number of employees.

Besides civil and criminal penalties for requiring employees to work on Sundays, a commercial establishment risks severe penalties for selling merchandise outside the allowed hours of operation.   The Department of Justice of Puerto Rico investigates and files administrative complaints against commercial establishments that fail to abide by the opening/closing schedule. 

The charges are filed before the Department of Consumer Affairs (DACO) which ultimately decides the applicable fines. The fines can later be appealed in a court of law.

Penalties are stiff- up to for $50,000 for each violation. Here are some real-life examples (some of which were later revoked):

• ELA v. Frigorifico, 2001 JTS 125: A supermarket  operation received a      $50,000.00 fine.
• Supermercado Selectos de Venus Gardens: A supermarket fined $15,000 by DACO.
• Supermercado Jardines de Caparra, 2002 JTS 103:  DACO issued a $10,000 fine to the merchant.
• Servicentro v Justicia,  PR Court of Appeals, KPE01-0823 (907): A gas station franchisee was facing  over $50,000 in fines.
• DACO v. CM Cash and Carry,2002 TCA 1574: Supermarket  sold a pack of lightbulbs to an undercover agent from the Justice Department and later was fined $5,000. When IT refused to pay, DACO obtained a court order  against the owner for criminal contempt.
• E.L.A. v. Diaz Arocho, 2000 TCA 839: In 1999 a business was fined $20,000 for violations that had occurred in 1994.
• ELA v. Farmacia La Nueva Modelo De Bayamón, 2000 TCA 1662: A pharmacy was fined $10,500 for selling to  an undercover agent three items (on Sundays before 11:00 a.m.)  totaling $6.47.
• ELA v. Fairview Service Station, Inc., 2001 TCA 486: A circle K franchisee was fined 9,500 for selling merchandize to an undercover investigator totaling .94 cents.
• ELA v. Royal Motors Corp,  98 TCA 343: Car dealer fined  $5,000 for opening on a holiday.
• ELA v. Caguas Expressway Motors, 2000 TCA 1582: Car dealership fined $10,000 for opening before 11:00 a.m. on Sundays.

The biggest danger I see for commercial establishments is that the Justice Department takes a long time to complete the complaint process.  It may gather evidence in the course of several years and then simultaneously file a dozen charges which could ultimately cripple a small business. The case also moves at a slow pace in  DACO; often taking more than a year to adjudicate a complaint.

Using E-Mail Systems For Union Business

The National Labor Relations Board will hear oral arguments on March 27, 2007 as part of it process to determine whether employees have a right to use their employer's e-mail system to communicate with other employees about union or  concerted  activities.  There are other issues as stake:

• If employees do have a right, what restrictions if any may the employer place on those communications?
• If not,  does an employer violates the National Labor Relations Act if it permits non-job related e-mails but not those repeated to union or other concerted  activities?
• If employees have a right to use the e-mail system may an employer nevertheless prohibit e-mail access to their employees by non-employees?

Non-union businesses  assume that because there is not a union in their workplace, they can freely manage their workforce. However, the National Labor Relations Act (NLRA) which regulates union-management relations, also protects certain  employees' activities  despite the absence of a union. 

For example, under the  NLRA  employees have the right to engage in concerted activities for collective bargaining or other mutual aid or protection. Employers may not interfere with those concerted activities.

Determining what  is a concerted activity under the NLRA is  the subject of continuous controversy.  Basically, it must be undertaken by two or more employees working with the same employer or by one employee speaking  for other employees'; and  the purpose of the  activity must center around the employees' wages, hours, or other terms and conditions of employment.  Examples include employees acting as a group to complain about certain conditions at work; as opposed to one employee complaining about his particular problem.

The oral arguments for the 27th of March are in the case of The Guard Publishing Company, Cases 36-CA-8743-1, et al, the Board will decide to what extent (if any) employees may  communicate with other employeees about concerted and other protected activities.

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.

UNION OFFICIAL SENTENCED TO SEVENTEEN YEARS IN PRISION

Sentenced to pay 2 million in restitution and serve 17 years of prison is Hector Rene Lugo- the former President of the largest union in the Aqueduct and Sewer Authority of Puerto Rico (AAA). As a lawyer for the AAA, I repeatedly dealt with him and his closest aids- Andres Carrasquillo and Elba García (both will also serve jail time); this was many years ago when as a young lawyer I represented the AAA in arbitration.   I still recall the way he used to sneer at us during  the hearings. He seemed to silently say to everyone present,"you fools, don't you know I own this place?" Hector Rene faced a very different hearing this time around and things  did not go as he expected.

For many years Hector Rene was a dominant force in the AAA.  With an absolute grip over the most influential union in the AAA - the Union Independiente Autentica (UIA)- Hector Rene's shoved his influence everywhere-  from the mechanic shops all the way to the Executive Director's Office. It was someone few attempted to mess with; except - of course- the U.S. Justice Department  which charged him (and 11 other union officials) with embezzling over 15 million dollars from the Union's medical plan.

I don't wish for anyone to spend his/her retirement behind bars but unfortunately that seems to be what Hector Rene will be facing.  Hector Rene received his sentence chained and handcuffed; a reminder  to all that the high flying agenda of the most powerful man in the AAA is now clipped to the bare bones activity  of grinding jail time.

PR Courts Lack Jurisdiction on Discharge Claim Based on Union Affiliation

An employee filed a charge before the National Labor Relations Board alleging that her employer Sulsoni Hospital had fired her for engaging in union activities. During the process, the parties settled the claim and entered into an agreement that was subsequently approved by the Board. In the agreement, the Hospital did not admit to any wrongdoing or responsibility under the National Relations Act.  Afterwards, the employee’s husband and children sued the Hospital for damages arising from the alleged wrongful discharge.

The Hospital requested the dismissal of the action arguing that the court lacked jurisdiction because the claim was preempted by the National Relations Act (NLRA). The Hospital argued that if the court ruled in favor of the employee, it necessarily had to conclude that the employee had been discharge for her union activities an issue of the exclusive jurisdiction of the National Relations Board.

While the Court acknowledged that under PR law, relatives of a wrongfully discharged employee can sue the employer under the general torts statute, Article 1802 of the Civil Code (for abusive conduct against the employee for example), when the claim is based on conduct prohibited by section 8 of the NLRA, local courts had no jurisdiction because as the U.S. Supreme Court has reasoned, “to allow the States to control conduct which is subject of national regulation would create potential frustration of national purposes.” San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1958). 

By allowing the controversy to be re-litigated in the local forum, the courts were potentially interfering with the labor policy of the National Labor Relations Board. This case is consistent with previous case law in Puerto Rico.  See also, Rivera v. Security National Life Insurance, 106 DPR 517 (1977).