New Employment Law

January 18, 2024

After several amendments, today, January 17, 2024, Honorable Pedro Pierluisi signed the House Bill 1745, commonly known as the Law to Facilitate the Implementation of Remote Work in Private Business.

Through the statute, it is recognized that the alternative of remote work represents a unique opportunity to attract more people to Puerto Rico. Likewise, it is understood that remote work expands the opportunities for Puerto Ricans to obtain remote jobs in industries outside the country. Therefore, the Act establishes remote work as a public policy in Puerto Rico, whether temporarily or permanently, in order to encourage employers without local presence or businesses to recruit people who are domiciled in Puerto Rico.

However, this statute does not apply to all employees and/or forms of remote employment. The Act expressly provides that it will apply to employees domiciled in Puerto Rico when the following requirements are met:

  1. the employee must be classified as exempt under the categories of Executive, Administrative or Professional as defined by the “Fair Labor Standards Act” and the Regulation No. 13 of the Department of Labor;

  1. the employee must be domiciled in Puerto Rico, which implies his physical presence, together with the intention to remain on the Island;

  1. it must be an employer covered by this law, that is one who is not dedicated to industries or businesses, nor to the sale of taxable items in Puerto Rico in accordance with the “Puerto Rico Internal Revenue Code of 2011” and the other tax legislation or regulations in force in Puerto Rico, including the official interpretation of the Department of the Treasury; and

  1. the employee must perform his work remotely, which means that he does not provide his/her services face-to-face, rather his/her services are performed outside the physical work facilities, by virtue of which he can carry out his workday from his residence or any other place.

When these four (4) requirements are met, the employment relationship will be governed solely by the employment contract and the employee will be excluded from all other labor legislation of Puerto Rico, unless expressly provided otherwise. Likewise, the following rules will govern:

  • Puerto Rico Act No. 45 of April 18, 1935, known as the Puerto Rico Workers' Accident Compensation Act, as amended; Act No. 139 of June 26, 1968, as amended, known as the “The Temporary Non-Occupational Disability Insurance” (SINOT); and Act No. 428 of May 15, 1950, as amended, “Social Security Act for Chauffeurs and Other Employees” will not apply if the employer provides the remote employee with equal or greater insurance for occupational, non-occupational or driver injuries (if applicable) than the aforementioned local laws.

  • The employer must comply with Act No. 74 of June 21, 1956, as amended, known as the “Puerto Rico Employment Security Act,” related to unemployment benefits, except when the employee can request these benefits in another jurisdiction.

  • The tax treatment of any remote employee providing services to these employers under the Act will be determined by the Internal Revenue Code of 2011.

Finally, in cases in which a non-domiciled employee voluntarily decides to relocate to Puerto Rico to work remotely for an employer covered by this Act, the employer will be exempt from complying with all local labor legislation, including benefits, obligations, insurance, and any other provision applicable to such employment relationship in Puerto Rico. This employment relationship will be governed solely by the employment contract or, in the absence of a contractual agreement, according to the law applicable in the jurisdiction where the employee is domiciled.

We have witnessed that remote work has increased during the COVID-19 pandemic. The increase in this type of employment and the emergence of controversies around the applicable law required guidance from the Government to address these legal gaps. The Department of Labor and Human Resources will develop an orientation campaign to educate and provide guidance to employers and employees covered by this legislation on their duties and responsibilities before the agency. Likewise, the Department will create informational materials to communicate the provisions of this Law.

All people are equal before the law.

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