Background Checks

• Background checks are legal in Puerto Rico, but employers must comply with federal laws (such as the Fair Credit Reporting Act) and local constitutional protections for privacy and dignity.

Employers can conduct checks on:

• Criminal records
• Employment history
• Education verification
• Credit history (with restrictions)

These checks can be done internally or through third-party agencies, provided compliance with applicable laws.

Key Restrictions

Salary History Ban: Under the Puerto Rico Equal Pay Act, employers cannot ask about an applicant’s current or past compensation, except if:

• The applicant voluntarily discloses it, or
• After an offer has been made and salary negotiations occur. This requirement is based on Act 16-2017 and remains in effect as of 2025.

Credit Checks: Act 150-2019 prohibits employers from requesting or obtaining credit reports, except for positions where such checks are required by federal law (e.g., financial roles).

Criminal Records:

• Historically, discrimination based on prior convictions was considered illegal under Puerto Rico Law 100 (social condition protection).
• However, a 2020 Supreme Court decision (Garib Bazain v. Hosp. Español Auxilio Mutuo) clarified that conviction status is not a protected class, though employers should still apply fair hiring practices.

Privacy and Constitutional Protections:

The Puerto Rico Constitution guarantees:

• Human dignity is inviolable (Article II, Section 1).
• Right to privacy (Article II, Section 8).

Employers must balance legitimate business interests with these rights.

Healthcare

Legal Framework:

• Puerto Rico has its own tax and insurance laws, but many U.S. federal laws also apply, including parts of the Affordable Care Act (ACA) and ERISA.
• The Puerto Rico Health Insurance Code incorporates ACA provisions, meaning local law enforces many ACA requirements even though some federal mandates (like the employer “pay-or-play” penalty) do not apply in Puerto Rico.

Employer Obligations:

• No Local Employer Mandate: Puerto Rico does not impose its own employer mandate for health coverage beyond ACA requirements for Applicable Large Employers (ALEs) (50+ full-time equivalent employees).

ACA Requirements That Apply:

• No lifetime or annual dollar limits on essential health benefits.
• Coverage for dependents up to age 26.
• Preventive care with no cost-sharing.
• No pre-existing condition exclusions for individuals under 19 (and later for all ages).
• Waiting periods for coverage cannot exceed 90 days.
• ERISA Compliance: Group health plans in Puerto Rico must comply with ERISA fiduciary standards, reporting, and disclosure requirements.

Health Insurance Practices:

• While not all employers are legally required to provide health insurance, it is standard practice and highly expected by employees.
• Employer Contributions: Typically range from 50% to 80% of the premium for employee coverage.
• Plan Types: Common options include HMOs and PPOs, offered by local and national insurers.
• Coverage: Usually includes doctor visits, hospitalization, prescription drugs, and preventive care.

Retirement

Legal Framework:

• Puerto Rico is a U.S. territory, so federal laws like ERISA apply, but Puerto Rico also has its own Internal Revenue Code and retirement plan rules.

Employers can sponsor:

• Puerto Rico-only qualified plans (under PR Code Section 1081.01).
• Dual-qualified plans (comply with both U.S. and Puerto Rico rules under ERISA Section 1022(i)(2)).

All retirement plans covering Puerto Rico employees must be approved by the Puerto Rico Treasury (Hacienda).

Types of Retirement Plans:

• Defined Contribution Plans: Similar to U.S. 401(k) plans but with different contribution limits and testing rules.
• Defined Benefit Plans: Provide fixed benefits based on salary and years of service.
• Individual Retirement Accounts (IRAs): Governed by PR Code Section 1081.02; distributions after 2018 are taxed at 10% if subject to withholding.

Tax Treatment:

• Employer Contributions: Tax-deductible under PR Code.
• Employee Contributions: Pre-tax contributions reduce taxable income for Puerto Rico income tax purposes.

Distributions:

• Lump-sum distributions generally subject to 20% withholding (10% for certain qualified plans).
• Annual exemption for annuity payments: $11,000 ($15,000 if age 60+).
• Declared Disaster Distributions: First $10,000 tax-free; next $90,000 taxed at 10%.

Social Security and Medicare:

• Employees in Puerto Rico pay Social Security and Medicare taxes and are eligible for U.S. Social Security benefits and Medicare at age 65.
• There is no mandatory retirement age in Puerto Rico; individuals can retire when financially able.

Contribution Limits and Compliance:

• Puerto Rico plans have different contribution limits than U.S. plans (lower catch-up contributions for employees 50+).

Plans must file:

• Form 5500 (for ERISA compliance).
• Form 480.70 with Hacienda for Puerto Rico reporting.

Audit requirements apply for large plans, similar to U.S. ERISA plans.

Social Security

Employees in Puerto Rico pay Social Security and Medicare taxes and are eligible for U.S. Social Security benefits and Medicare at age 65.

Employment Contract Details

Employment contracts in Puerto Rico are governed by local labor laws and U.S. federal standards, but Puerto Rico has its own labor code and judicial interpretations that employers must follow. A written employment agreement is not always mandatory, but it is considered best practice to avoid disputes and ensure compliance.

Types of Employment Agreements

• Indefinite Term: The most common type; employment continues without a set end date. Termination requires just cause under Law 80, and severance applies if terminated without cause.
• Fixed Term: For a specific period or project; must be in writing. If terminated early without just cause, the employer may owe damages. If the term expires naturally, Law 80 severance does not apply. Repeated use of fixed-term contracts for permanent roles can lead to reclassification as indefinite.

Essential Clauses

A comprehensive employment contract should include:

• Identification of Parties: Full legal names and addresses.
• Job Title and Description: Duties and responsibilities.
• Start Date: Effective date of employment.
• Compensation: Salary or wage, payment frequency, and method.
• Work Schedule: Hours, days, and location.
• Benefits: Health insurance, vacation, sick leave, holidays.
• Probationary Period: If applicable, duration and conditions.
• Governing Law: Puerto Rico law applies.
• Signatures: Employer and employee signatures with date. Optional but recommended: confidentiality, IP rights, and termination procedures.

Probation Period

Probationary periods in Puerto Rico are regulated under local labor laws Title 29, Chapter 7, § 171 and apply to both exempt and non-exempt employees. These periods allow employers to evaluate new hires before granting full employment protections under Law 80 (Unjust Dismissal Act).

Duration of Probationary Periods

• Exempt Employees (Professionals, Administrators, Executives): Automatic 12-month probationary period.
• Non-Exempt Employees: Automatic 9-month probationary period.

Requirements for Valid Probationary Contracts

• Must be in writing and signed before the employee starts work.

Must clearly state:

• Start and end dates of the probationary period.
• If needed, the probationary period can be extended by up to 90 additional days with prior authorization from the Puerto Rico Secretary of Labor and Human Resources or through a collective bargaining agreement.

Rights and Limitations During Probation

• Employers can terminate employment without just cause during the probationary period, without triggering Law 80 severance obligations.

However, employees remain protected under:

• Anti-discrimination laws.
• Workplace safety regulations.
• Other statutory benefits (e.g., minimum wage, overtime).

Visas

Puerto Rico follows U.S. immigration laws:

• Visa Waiver Program (ESTA): Citizens of 40+ countries can enter Puerto Rico for business or tourism for up to 90 days without a visa under ESTA.
• B-1 Business Visa: Required for nationals not eligible for ESTA. Allows short-term business activities (meetings, negotiations, conferences) but does not permit employment or earning income locally. Valid for up to 6 months per visit.
• B1/B2 Visa: Combines business and tourism; valid for multiple entries over 10 years.

Other Business Visas:

• L-1A/B: For intracompany transfers.
• H-1B: For specialty occupations.
• EB-2/EB-5: For skilled professionals and investors.

Independent Contractors

• Independent contractors do not receive overtime pay and are not covered by wage and hour laws.
• Misclassification is illegal.

The Labor Transformation and Flexibility Act (LTFA) presumes a worker is an independent contractor if:

• They have an employer ID or business tax filings.
• A written contract exists.
• They control how and when work is performed and can work for others.

Employers cannot simply label a worker as a contractor to avoid obligations.

Paid Time Off

Employees in Portugal are entitled to a minimum of 22 working days of paid annual leave per calendar year, exclusive of public holidays.

• First Year of Employment: Employees accrue 2 working days of leave per month, up to a maximum of 20 days. This leave typically becomes available after completing six months of service.
• Carryover Rules: Unused vacation days may be carried over into the following year but must be used by April 30.
• Anual Limit: Employees may not take more than 30 working days of vacation within a single calendar year, unless otherwise agreed.

Paid Time Off

In addition to the 13 national public holidays, each of Portugal’s 308 municipalities observes its own local or municipal holiday. Employees are entitled to take the local holiday that corresponds to the location of their workplace. The exact date of the municipal holiday should be confirmed with the relevant local authority. Note: If a public holiday falls on a weekend, it is not typically compensated with an alternative day off.

• New Year’s Day
• Good Friday
• Easter Sunday
• Liberation Day
• Labor Day
• Corpus Christi
• National Day
• Assumption Day
• Republic Day
• All Saints’ Day
• Independence Restoration Day
• Immaculate Conception
• Christmas Day

Bereavement

In the event of the death of a close family member, employees are entitled to up to 5 consecutive days of paid leave. This applies to the loss of a spouse, parent, child, sibling, or other close relatives as defined by law.

Maternity Leave

Expectant mothers are entitled to 120 consecutive days of maternity leave, paid at 100% of their regular salary by Social Security. This benefit is exempt from tax and Social Security contributions.

• Eligibility: At least 80 days of employment in the 12 months prior to the expected due date.
• Pre- and Post-Birth: Leave includes 30 days before and a mandatory 6 weeks after childbirth.

Paternity Leave

Fathers are entitled to 28 working days of paid paternity leave:

• 5 consecutive days must be taken within 42 days of the child’s birth.
• Leave can be taken consecutively or in parts.
• An additional 7 days may be taken, some of which must overlap with the mother’s maternity leave.

All paternity leave is paid at 100% of the employee’s average salary over the last six months and is tax- and contribution-exempt.

Parental Leave

After maternity and paternity leave, parents may share additional parental leave:

• 120 days: Paid at 100% of salary
• 150 days: Paid at 80% of salary

Parents can decide how to divide this time, offering flexibility in caregiving responsibilities.

Sick Leave

Employees are entitled to sick leave when medically unable to work. The system is structured as follows:

• First 3 Days: Unpaid. Employees may submit a self-declaration to notify the employer.
• From Day 4 Onward: Paid by Social Security, provided the employee:
• Has at least 6 months of employment (consecutive or not).
• Submits a medical certificate confirming temporary incapacity.

Sick Pay Rates (based on duration of illness):

• Up to 30 days: 55% of reference salary
• 31 to 90 days: 60%
• 91 to 365 days: 70%
• Over 365 days: 75%

Maximum Duration:

• Employees, seafarers, coastguards: Up to 1,095 days
• Self-employed and researchers: Up to 365 days

Termination Requirements

For information related to termination requirements, see Notice Period section below.

Notice Period

No mandatory notice period for individual terminations under Puerto Rico law. Employers can terminate employment immediately, provided they comply with severance obligations if applicable. Employees also have no legal obligation to give notice when resigning, though two weeks’ notice is customary as a professional courtesy.

Exceptions:

• Mass layoffs or plant closings may trigger the federal WARN Act, requiring 60 days’ advance notice for employers with 100+ employees.

Severance Pay

Severance pay is required in cases of fair dismissal due to objective reasons (e.g., redundancy or unsuitability), and the amount depends on the contract type and length of service.

Indefinite-Term Contracts

• Severance is calculated at 12 to 18 days of base salary per year of service
• Capped at 240 times the national minimum monthly wage

Fixed-Term Contracts

• Severance is calculated at 24 days of base salary and seniority allowances per year of service

Additional Notes

• Higher severance amounts may be negotiated to avoid litigation.
• Severance may also apply for dismissals during the 91st to 180th day of the probation period.
• No severance is owed in cases of dismissal for just cause.

Unemployment Insurance

Puerto Rico participates in the U.S. federal-state unemployment insurance system.

Employers must pay state unemployment tax (SUTA) and FUTA.

Employees who lose their job through no fault of their own (e.g., layoffs, reduction in force) may qualify for unemployment benefits.

Eligibility generally requires:

• Sufficient wages earned during the base period.
• Ability and availability to work.
• Actively seeking employment.

Benefits are administered by the Puerto Rico Department of Labor and Human Resources.

Anti-Discrimination Practices

Non-discrimination in Puerto Rico is governed by Act No. 100 of 1959 (Puerto Rico Anti-Discrimination Law) and federal laws such as Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA). These laws prohibit discrimination in all aspects of employment, including hiring, promotions, compensation, training, and termination.

Protected Characteristics

Employers cannot discriminate based on:

• Race, color, or ancestry.
• Sex, gender identity, or gender expression
• Sexual orientation
• Pregnancy, childbirth, or related conditions
• Religion or religious beliefs
• National origin or ethnicity
• Marital status
• Age (40 or older)
• Disability
• Social or economic status
• Political affiliation or beliefs
• Status as a victim of domestic violence, stalking, or sexual aggression

Employer Obligations

• Written Anti-Discrimination Policy: Employers with 15 or more employees must adopt and communicate a written policy prohibiting discrimination and harassment.
• Complaint Procedures: Policies must include clear reporting channels and investigation procedures.
• Reasonable Accommodations: Employers must provide accommodations for employees with disabilities and for religious practices unless it causes undue hardship.
• Anti-Harassment Measures: Employers must prevent and address harassment based on any protected characteristic.
• Retaliation Prohibition: Employers cannot retaliate against employees who file complaints or participate in investigations.

Enforcement and Penalties

Agencies: The Puerto Rico Department of Labor and Human Resources and the Puerto Rico Equal Employment Opportunity Commission (PR-EEOC) enforce these laws.

Penalties: Employers found guilty may face fines, back pay, reinstatement orders, and damages. Employees can also file private lawsuits for discrimination.

Workplace Safety Standards

Legal Framework

Workplace safety in Puerto Rico is governed by:

• Puerto Rico Occupational Safety and Health Act (Act No. 16 of 1975) – Establishes minimum health and safety standards for all workplaces.
• Puerto Rico Occupational Safety and Health Administration (PR OSHA) – Enforces workplace safety laws under the Puerto Rico Department of Labor and Human Resources.
• Federal OSHA – Retains authority over certain sectors (e.g., maritime, federal facilities) and anti-retaliation provisions.

Key Regulations

General Regulations for Industrial Safety and Health (GRISH) – Covers ventilation, lighting, emergency procedures, and PPE.

Occupational Accident Prevention Program (PAPR) – Requires employers to implement accident prevention programs.

Fire Prevention and Electrical Codes – Mandate fire safety measures and safe electrical installations.

Hazardous Materials Handling Rules – Govern storage, labeling, and disposal of hazardous substances.

Construction Safety Standards – Include fall protection, scaffolding, crane safety, and trenching requirements.

Employer Responsibilities

Provide a safe and healthy workplace free from recognized hazards.

Develop and maintain:

• Emergency Action Plans.
• Accident Prevention Programs.

Provide safety training tailored to job duties.

Supply personal protective equipment (PPE) at no cost to employees.

Report workplace accidents resulting in death or serious injury within 24 hours to PR OSHA.

Maintain records of injuries, illnesses, and safety inspections.

Employee Rights

• Right to a safe workplace and to refuse unsafe work.
• Right to training and hazard information.
• Protection from retaliation for reporting safety concerns.
• Access to exposure and medical records.
• Coverage under workers’ compensation for work-related injuries or illnesses.

Enforcement

PR OSHA conducts inspections based on complaints, accidents, or high-risk industries.

Violations can result in:

• Citations and fines.
• Business shutdowns for severe non-compliance.

Employers have the right to contest citations and penalties.

Workers’ Compensation

Mandatory Coverage: Title Eleven

• Workers’ compensation is compulsory for all employers in Puerto Rico. There are no waivers or exemptions, even for small businesses.
• Employers cannot use private insurance or self-insurance; coverage is provided exclusively through the State Insurance Fund Corporation (SIFC).
• Agricultural and domestic workers are also covered under this system.

Administration

The system is managed by the State Insurance Fund Corporation (CFSE/SIFC), which:

• Evaluates claims.
• Determines eligibility.
• Pays benefits directly to injured workers.

Employers must contribute to the fund based on payroll and risk classification.

Benefits for Injured Workers

Medical Benefits: Full coverage for all necessary treatments, including hospital care, surgeries, medications, and rehabilitation, with no monetary or time limits.

Disability Benefits:

• Temporary Total Disability (TTD): 66 2/3% of wages, up to $300/week, for a maximum of 312 weeks.
• Permanent Total Disability (PTD): 66 2/3% of wages, up to $430/week, for the duration of the disability.
• Permanent Partial Disability (PPD): Compensation based on severity and schedule of injuries.

Death Benefits: Paid to dependents if the injury results in death.

Vocational Rehabilitation: Job training and counseling for employees unable to return to their previous role.

Claim Process

Employee Responsibilities:

• Report the injury to the employer immediately.
• Seek treatment from an authorized medical provider.
• File a claim with the SIFC promptly.

Employer Responsibilities:

• Maintain workplace safety.
• Report incidents to the SIFC.
• Keep accurate records of injuries and claims.

Labor Law Sanctions

Legal Framework:

Puerto Rico labor law is governed by local statutes, the Puerto Rico Constitution, and U.S. federal labor laws (e.g., FLSA, NLRA, anti-discrimination laws).

Key local statutes include:

• Law 80 (Unjust Dismissal Act) – regulates termination and severance
• Law 100 – prohibits employment discrimination
• Law 4-2017 (Labor Transformation and Flexibility Act) – introduced major reforms to hiring, wages, and benefits
• Law 41-2022 – attempted to reverse some reforms but was declared void; Law 4 remains in effect

Administrative Sanctions:

Under Title 29, Section 1203, agencies and appointing authorities must comply with equal employment opportunity provisions.

Fines for Non-Compliance:

• Appointing authorities: $100–$500 per violation
• HR directors: $50–$250 per violation

Criteria for fines include:

• Number and seriousness of violations
• Previous patterns of non-compliance

Extenuating circumstances (e.g., immediate correction, first-time violation) may reduce fines, but repeat violations trigger maximum penalties.

If violations suggest a public offense, cases are referred to the Secretary of Justice for criminal action.

Labor Practice Sanctions:

Employers guilty of unfair labor practices or failing to comply with labor board orders may face:

• One-year ban on bidding for government contracts
• Loss of eligibility for licenses, permits, grants, or loans from public entities
  • Government contracts must include clauses allowing termination and withholding of payments if labor laws are violated

Other Penalties:

Unjust Dismissal (Law 80): Employers must pay statutory severance if termination lacks just cause.

Discrimination or Harassment: Employers may face civil liability, administrative fines, and reputational damage.

Wage and Hour Violations: Penalties include back pay, double damages, and fines under both local and federal law.