PUERTO RICO Law and Practice Contributed by: Dianette Rivera-Melendez, Oreste Ramos, Maria Trelles-Hernandez and Rosangela Sanfilippo, Pietrantoni Mendez & Alvarez LLC
10.3 Employment Protection Act 80 provides that any person employed for an indefinite period of time and dismissed without “just cause” will be entitled to receive a wrongful dis - charge indemnity from their employer. The amount of such indemnification is determined by a formula provided by Act 80, which takes into consideration the employee’s seniority with the employer and their highest earnings.. Employees do not have a mandatory right to their employment when their employer is acquired. How - ever, employees who experience an employment loss as the result of an asset or stock purchase, merger or any other transaction will be entitled to receive the abovementioned discharge indemnity if they are ter - minated without “just cause”. Act 80’s definition of “just cause” includes termina - tions that result from: • a full, temporary or partial closing of the operations of the employer or any of its establishments; • technological changes or reorganisation, such as in the style, design or character of the product manufactured or handled, or changes in services rendered to the public; • downsizing made necessary by a reduction in the foreseen or prevailing volume of production, sales or profits at the time of the discharge or for the purpose of increasing the establishment’s competi - tiveness or productivity; • the employee’s engagement in a pattern of improp - er or disorderly conduct or poor performance; and • the employee’s repeated violations of the employ - er’s reasonable rules, provided that a written copy thereof has been timely furnished to the employee. Furthermore, offering a transferred employee a com - pensation and benefits package that is significantly lower than the one offered by the buyer may constitute a constructive dismissal under Act 80 and may trigger payment of the discharge indemnity provided therein.
• employee benefits. Generally, labour relations in Puerto Rico are governed by the National Labor Relations Act. As in the USA, union membership in the Puerto Rican private sector has been declining significantly over the last 50 years. The percentage of private sector bargained employ - ees currently stands at approximately 7%. Foreign investors seeking to establish a presence in Puerto Rico may need to navigate US immigration laws. Visa categories could be relevant, such as the E-2 Treaty Investor Visa or the EB-5 Immigrant Inves - tor Programme, depending on the nature and scale of the investment. 10.2 Employee Compensation Under Puerto Rican law, non-exempt employees must be paid their wages in intervals that do not exceed 15 days. Non-exempt employees are guaranteed statu - tory benefits, such as: • daily and weekly overtime; • vacation and sick leave; • employer paid maternity leave; • premium pay for work performed during the statu - tory meal period; and • premium pay for work performed during the sev - enth consecutive day of work. Furthermore, employers are required to retain statu - tory employment insurances such as government- provided workers’ compensation and unemployment insurance and short-term non-occupational disability insurance. Benefits such as health insurance and pen - sion plans (401 (k)s, for example) are not required by local law but are commonly provided. In an asset purchase scenario, buyers of an ongoing business regularly offer the seller’s employees com - parable compensation and benefits to those previ - ously offered by the seller. In this scenario, a signifi - cant reduction in compensation and benefits may be deemed a constructive dismissal under Act 80, which may trigger the employer’s obligation to pay the dis - charge indemnity provided in the Act if the termination was executed without “just cause”.
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