Puerto Rico enacted the Labor Transformation and Flexibility Act (“LTFA”), which makes sweeping changes to Puerto Rico’s wage and hour employment law and affecting employers doing business in Puerto Rico. This article cannot address all of the many changes in the LTFA, but includes highlights of some of the new requirements.  

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Puerto Rico Enacts Sweeping Changes to Employment Law – Wage and Hour

Mar 5, 2017

Background and Details of the Change:

Puerto Rico enacted the Labor Transformation and Flexibility Act (“LTFA”). The LTFA makes sweeping changes to Puerto Rico’s wage and hour employment law which will affect employers doing business in Puerto Rico. The LTFA includes a variety of overtime and scheduling changes such as:

  • Multiple changes to overtime provisions
  • Scheduling requirements
  • Meal break penalty payments

While this article cannot address all of the many changes in the LTFA, here are a few highlights of some of the new requirements:

Overtime paid at 1.5x the regular rate of pay

  • Eliminates the 24-hour overtime requirement for all employees.
  • Maintains the requirement that hours worked in excess of 8 hours a natural day be paid the overtime rate. Employers may determine the period of 24 hours that constitutes a 24-hour workday – other than the concept of the natural day. To do so, an employer must notify the employee in writing

To modify an employee’s 24-hour cycle the notification must be written and provided at least 5-days prior to the change and there must be at least 8-hours in between consecutive shifts.

The LTFA is unclear as to the definition of “at least 8-hours in between consecutive shifts,” and further guidance from Puerto Rico will likely be required. Employees who work an alternate work week must be paid overtime for all hours worked over 10-hours in a workday.

  • Hours worked during the 7th consecutive workday must be paid at the overtime rate.
  • Hours worked in a retail establishment on Good Friday and Easter must be paid at the overtime rate.

Alternate work week

  • LTFA allows a 40 workweek with daily shifts up to 10 hours per day, if the employee and employer agree. The agreement must be in writing.
  • Employees who work an alternate work week must be paid overtime for all hours worked over 10-hours in a workday.

Make up hours

  • An employee is allowed to make up hours not worked for personal reasons.
  • The make up hours will not be considered overtime if worked during the same week of the absence and do not exceed 12 hours in one day or 40 hours in that particular week.

Employee requests for work-shift changes

Employees may request a change to work shifts, number of hours worked and workplace where work is performed.

  • Employee eligibility requirements:
    • Regularly works 30 hours or more in a workweek
    • Has worked for the same employer at least 1 year
  • Requires employee’s written request that includes:
    • Reason for the request
    • Effective Date
    • Duration of the change
  • Requires employers with fifteen or more employees to respond in writing within 20 calendar days.

Scheduling

  • LTFA limits the hours when a retail establishment is required to be closed to the public to Good Friday and Easter. In addition, the minimum Sunday pay of $11.50 an hour requirement was eliminated for retailers.
  • Employers must provide employees with a written notification that includes the:
  • Daily work hours required in the workweek
  • Start and end time of each work shift
  • Start / end time of the meal period break within the work shift.

Meal period breaks / Scheduling

  • If the total hours worked by the employee in a given day do not exceed six (6) hours, the meal period break may be obviated, without the need for a documented agreement between the employee and the employer.
  • The meal period break may now be taken after the second consecutive hour of work, whereas before it could only be taken after the third consecutive hour of work.
  • LTFA also relaxes the requirements regarding second meal period breaks. Now, if the total number of hours worked by an employee in a day do not exceed twelve (12) hours, the second meal break may be obviated as long as the first meal period was taken by the employee without the need for a documented agreement between the employee and the employer.
  • Meal period breaks that occur within or outside the regular work shift, may still be reduced to thirty (30) minutes through a written agreement between the employer and the employee, and to twenty (20) minutes in the case of croupiers, nurses and security guards. Additionally, the Act empowers the Secretary of Labor and Human Resources ("Secretary") to authorize a twenty (20) minute reduction for other type of employees.

 Meal period breaks / Penalty pay

  • For employees who are hired after 1/26/2017, the penalty compensation employers must pay employees who work during the period fixed for the meal period, has been reduced to, in addition to his/her regular rate of pay, an additional amount equal to one half the regular rate of pay for the meal period or fraction worked.
  • For employees who are hired before 1/26/2017, the penalty compensation employers must pay employees who work during the period fixed for the meal period, must be paid for all hours worked plus a meal period premium equivalent to his or her regular rate of pay.

General Impact to Employers:

In some sections of the LTFA the preexisting law permitted grandfathering of certain rights to employees in certain industries, which is no longer in effect. However, the new law does provide superior benefits for certain employees, but whether these benefits apply and to which employees, is something the customer will need to determine with their counsel. Employers will need to review all affected policies and procedures and make necessary changes to comply. In addition, they will need to be aware of court interpretations of changes and modify policies as appropriate.

For more information, please reference:

Labor Transformation and Flexibility Act (LTFA) / An official English language version was not available at the time of writing