By Goldman Antonetti & Córdova, LLC [Client Alert]
On September 18, 2017, the Puerto Rico Department of Labor and Human Resources (the «PR DOL») enacted a Regulation regarding the Puerto Rico’s Christmas Bonus Act, Act No. 148 of 1969. Such Regulation supersedes all prior regulations on the subject and establishes guidelines on implementation of the Christmas Bonus Law as amended by the Labor Transformation and Flexibility Act, Act No. 4 of 2017 (the «LTFA»).
Applicability
- The Regulation applies to all employers in the private sector that employ one or more employees between October 1 and September 30 of the subsequent calendar year (the «coverage period»).
- Excluded from the definition of «employees» are: (i) independent contractors; (ii) those employed in agricultural activities, domestic service, in family homes, or by charitable institutions; employees covered by a Collective Bargaining Agreement whose negotiated bonus is equal or greater than that provided by Law No. 148; (iii) officials and employees of the Puerto Rico’s government and any of its three branches, instrumentalities, public corporations and municipalities; or (iv) federal employees.
Eligibility
- Employees hired before January 26, 2017, the effective date of the LTFA, have a right to receive the Christmas Bonus if they worked at least 700 hours for the same employer. However, dock workers must work a minimum of 100 hours, in order to qualify.
- Employees hired on or after January 26, 2017, must work at least 1,350 hours to qualify for the payment of the Christmas Bonus.
Bonus Amount
A. Employees hired before January 26, 2017
- Employers with at least 16 employees within the coverage period must provide employees a bonus equivalent to 6% of their total salary earned (up to $10,000) within the coverage period.
- Employers with 15 employees or fewer within the coverage period must provide a bonus equal to 3% of the total salary earned (up to $10,000) by the employee during the coverage period.
B. Employees hired on or after January 26, 2017
- Employers with at least 21 employees for more than 26 weeks within the coverage period must pay each employee a bonus equivalent to 2% of the total salary earned, up to a maximum bonus of $600.
- Employers with 20 employees or fewer for more than 26 weeks within the coverage period must pay each employee a bonus equal to 2% of the total salary earned, up to a maximum of $300.
- For employees in their first year of employment, the required bonus is 50% of their calculated bonus amount.
Employers Obligations
- Employers must pay the Christmas Bonus between November 15 and December 15 of each year.
- The total amount of the bonus paid to employees must not exceed 15% of the employer’s annual net profits within the period covering from September 30 of the previous year to September 30 of the year in which the bonus is paid. However, although not legally required to, employers may at their discretion pay the bonus in full even if the bonus payments exceeds such 15% limit.
- Employers must notify the PR DOL no later than November 30 of each year if they will not pay the bonus in full or in part because they did not earn the necessary profits or if net annual profits are insufficient to cover the entire bonus without exceeding the 15% limit. Employers will be obligated to pay the bonus in full if the requested balance sheet and profit and loss statements are not submitted.*
- Employers must maintain records, including financial statements, accounting books; payroll lists and hours worked profit and loss statements, and balance sheets of their operations in Puerto Rico. Also, if requested, the employer must submit these records to the PR DOL.
- Employers must notify their employees if they will credit toward the Christmas Bonus any voluntary and additional compensation previously paid to the employee during the coverage period.
Penalties
- There is a two-tiered penalty for failure to pay the Christmas Bonus between November 15 and December 15 of each year.
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* The regulation provides the details required by the employer in order to request and obtain exemption provided by Law No. 148.