United States: Guidelines On The Interpretation Of Puerto Rico's Employment Legislation, Chapters 9 And 10

As we have previously discussed, the Puerto Rico Department of Labor (PR DOL) recently published the first edition of its Guidelines on the Interpretation of Puerto Rico's Employment Legislation (Guidelines), which includes the PR DOL's official statutory interpretation of nearly all of Puerto Rico's employment laws. The over 200-page Guidelines are divided into 15 chapters and cover a wide range of statutes. This Insight is the fourth in a series that provides a chapter-by-chapter analysis of the most important topics addressed in the Guidelines, including an interpretation of key provisions of the Puerto Rico Labor Transformation and Flexibility Act, Act No. 4 of January 26, 2017 ("Act 4-2017" or "LTFA"), which made substantial changes to virtually all existing employment laws in Puerto Rico. This installment includes a discussion of Chapters 9 and 10, which provide guidance on termination from employment and discrimination.

Chapter 9 – Termination from Employment

The PR DOL discusses different aspects pertaining to Puerto Rico's unjust dismissal statute, Act No. 80 of May 30, 1976 (Act 80), including some of the LTFA's amendments to Act 80.

As previously discussed,1 the PR DOL acknowledges that the LTFA amendments allow employers to reserve the right to interpret their own rules and policies, as long as employers expressly do so in writing in workplace policies. The Guidelines explain that if an employer reserves such right, courts shall not substitute their own interpretation for the employer's as long as the employer's is a possible and reasonable interpretation. Therefore, it is recommended that employers revise their manuals and policies to incorporate language to reserve such right.

The Guidelines also recognize that, except in limited circumstances, employers have the discretion to manage their business and define the reasonable rules of conduct that will govern in the workplace. The PR DOL explains that this discretion includes the right to implement rules of conduct that do not require progressive discipline, and can justify immediate termination after a single violation. The PR DOL points out, however, that such discretion does not exempt employers from showing the reasonableness of their rules of conduct and emphasizes that the disciplinary measures taken must be proportional to the violations.

Regarding progressive discipline, the Guidelines state that it is "highly recommended because it promotes the professionalization of the employees at the workplace," but that "there is no legal requirement to that effect." However, the Guidelines recognize that absent progressive discipline, the factor in the legal analysis that is important to consider is the proportionality between the violation and the disciplinary measure taken. The PR DOL's recommendation goes in hand with its positions that employers still bear the burden of showing that the termination was for just cause and that an employer's mere self-serving allegations will not suffice to satisfy this burden.

Concerning first-time offenses, the Guidelines enumerate behaviors and conduct that the Puerto Rico Supreme Court (PRSC) has held constitute just cause for termination under Act 80. These are: (1) felony indictments;2 (2) assaults and threats in the workplace;3 (3) sexual harassment;4 and (4) adultery, if it affects the good and normal business operations. While the PR DOL's recognition of the PRSC's holdings is helpful, it is recommended employers consider on a case-by-case basis whether a specific violation constitutes just cause for immediate termination.

Regarding terminations based on reductions-in-force to increase the employer's competitiveness, the PR DOL is of the opinion that "to prevent employers from using pretexts to justify terminations that are really capricious, a Company that terminates employees in order to make the business more competitive has to prepare an internal plan or study of the business that shows the benefit of operating without the terminated employees." The PR DOL's opinion is not based on any legal source.

As for Act 80's definition of "termination," amended by the LTFA to incorporate the PRSC's holdings regarding constructive discharge, the Guidelines restate that employees bear the burden of showing that their resignation was forced and that said burden can be satisfied only by showing that the last reasonable alternative was resignation. The Guidelines also recognize that for a resignation to be considered an unjustified termination, the employer's actions must be arbitrary, capricious and unreasonable, and generate a hostile environment for the employee. Mere allegations of discomfort, changes of duties and of work area, and superficial reductions in salary, without more, will not suffice.

Regarding the definition of "employee," the Guidelines clarify that Act 80 exempts from its application: (1) employees on probationary period; (2) independent contractors; (2) public employees; (3) employees covered by a collective bargaining agreement; and (4) temporary employees.

Concerning temporary service contracts, the PR DOL recognizes that, although continued renewals may create an expectation of continued employment, contracts for a maximum duration of three years, from its start date or through renewal, are presumed valid and bona fide.

Finally, the PR DOL points to several amendments LTFA made to Act 80, including: (1) the new formula for calculating the statutory severance; (2) the reduction of the statute of limitations for claims under Act 80 from three years to one year from the date of termination for terminations occurring after January 26, 2017; (3) the recognized right to settle the severance once the employer either announces its intent to terminate or executes the termination; and (4) the automatic probationary period of 12 months for employees classified as executives, administrators and professionals under the FLSA, and of 9 months for all other employees. The PR DOL points out that the most important change in this regard is that probationary written agreements are no longer required.

Chapter 10 – Discrimination in Employment

Chapter 10 discusses Puerto Rico's discrimination statutes, focusing mostly on the general antidiscrimination statute, Act No. 100 of June 30, 1959 ("Act 100"), which prohibits discrimination on the basis of age, race, color, sex, sexual orientation, gender identity, social origin, national origin, social condition, political affiliation, political ideas, religious ideas, status as a victim or being perceived as a victim of domestic violence, sexual aggression or stalking, and military or veteran status.5 Below is a summary of the Guidelines' interpretation, with particular emphasis on those changes introduced by the LTFA.

Damages Cap

The Guidelines emphasize that under the LTFA amendments, emotional damages under Act 100 are capped based on the number of employees,6 but the cap applies only to discrimination and retaliation claims, and not to other employee claims based on actions separate and independent from the employment statute violation.7

Federal Law/Case Law as Guidelines

The Guidelines reiterate that, according to the LTFA, when analyzing a discrimination or retaliation claim, federal law, regulation and case law will be recognized in order to ensure consistent interpretations of similar laws, unless the local law requires a different interpretation.8

Probationary Scheme

Another important change the LTFA made to Act 100-1959 is that it eliminated the rebuttable presumption of discrimination and adopted the burden-shifting framework of McDonnell Douglas9 to analyze discrimination claims. The rebuttable presumption had the effect of transferring to the defendant not only the burden of production but also the burden of persuading the fact finder. With this change, the burden of proof now remains at all times with the plaintiff. The Guidelines make clear that this burden-shifting framework applies to the summary judgment and trial stages only and not to the pleading stage. That is, plaintiffs do not have to allege every element of the prima facie case in order to state a claim upon which relief can be granted.

Domestic Violence Discrimination

Under Act 100, the employer is responsible for making reasonable adjustments or accommodations to protect its employees from a potential aggressor once it receives notice of the potential occurrence of a dangerous situation. Failure to do so is presumed to be discriminatory conduct. The LTFA amended Law 100 to establish that it is not presumed that the employer had knowledge of the personal situation of any employee in cases of discrimination against victims or presumed victims of domestic violence, sexual assault or stalking, unless the employer was actually in a position to have such knowledge.

The Guidelines state that an employer is in a position to have knowledge if one of its employees goes to the company's office or uses internal services to notify the employer of the situation. The mere fact that an employee seeks orientation regarding an internal protocol that provides for the management of sexual harassment or domestic violence cases, however, is insufficient to establish an inference against the employer. The Guidelines explain, "there should always be an affirmative disclosure by the employee."

Stay tuned for our final discussion of the Guidelines, which will cover Chapters 11 through 15, regarding topics such as retaliation, summary procedure for employment cases, dispositive motions, alternate dispute resolution methods and mandatory decrees.

Footnotes

1. Érika Berríos Berríos, Ana Beatriz Rivera-Beltrán and Andrés C. Gorbea-Del Valle, Guidelines on the Interpretation of Puerto Rico's Employment Legislation, Chapters 1-3, Littler Insight (June 4, 2019).

2. Anabel Rodríguez, Erika Berríos-Berríos and Alberto Tabales, Puerto Rico Supreme Court Holds that an Employee's Felony Indictment Constitutes Just Cause for Termination, Littler ASAP (May 7, 2019).

3. Ana B. Rosado-Frontanés and Gabriel Maldonado-González, Supreme Court of Puerto Rico Reaffirms that Violence in the Workplace Justifies First Offense Termination, Littler ASAP (Oct. 20, 2015).

4. Ana B. Rosado-Frontanés, The Supreme Court of Puerto Rico Clarifies Employer Obligations to Eradicate Sexual Harassment in the Workplace, Littler ASAP (Mar. 20, 2015).

5. There are other anti-discrimination laws, including Act No. 69 of July 6, 1985, which prohibits discrimination on the basis of sex and supersedes Act 100 regarding sex discrimination claims. There is also Act No. 17 of April 22, 1988, which prohibits sexual harassment in the workplace and requires employers to adopt policies to eradicate such harassment. Act No. 16-2017 is the Equal Pay Act, which prohibits salary discrimination on the basis of sex. Act No. 3 of March 3, 1942 protects pregnant women from termination and provides maternity leave for women who give birth or adopt a child up to five years old. Act No. 44 of July 2, 1985 ("Act 44-1985") protects individuals with disabilities from discrimination. The Guidelines include short discussions of these laws and the rights they provide.

6. The damages cap follows the limits on compensatory and punitive damages under Title VII and goes from $50,000 (for employers with 1–100 employees) up to $300,000 (for employers with 501 or more employees).

7. As a general rule, the only remedy available for an unjustified dismissal in Puerto Rico is the statutory severance provided by Act 80-1976. The PRSC has held, however, that when an employee is terminated without just cause and has been subjected to acts that violate his or her integrity, the employee can claim damages in addition to the statutory severance. See Soc. de Gananciales v. Royal Bank de P.R., 145 D.P.R. 178 (1998).

8. The Guidelines note that Act 44-1985, which prohibits discrimination on the basis of disability, expressly provides that federal court and administrative decisions that restrictively interpret the Americans with Disabilities Act (ADA) should not be used as precedents to interpret Act 44. The Guidelines, however, do not address the fact that this provision was introduced to Act 44 through an amendment in 2004 prior to the U.S. Congress' passing the ADA Amendments Act of 2008 (ADAAA). After the ADAAA, Act 44's caveat about reliance on ADA precedent should no longer significantly affect the Puerto Rico courts' ability to look to federal case law for guidance on interpreting Act 44.

9. See McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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