OUTLINE
Notice periods in Puerto Rico
Termination of employment in Puerto Rico
Post-termination restraints in Puerto Rico
Employment waivers in Puerto Rico
Transfer of undertaking in Puerto Rico
Minimise risk with our end-to-end employment solutions
Ending employment in Puerto Rico
Ending an employment relationship in Puerto Rico involves specific legal requirements that employers and employees must follow. Whether an employee resigns, is laid off, or is terminated for cause, Puerto Rico labour laws provide protections to ensure fair treatment. Employers must comply with regulations regarding notice periods, severance pay, and final wages to avoid legal disputes.
Employees leaving a job, either voluntarily or involuntarily, may also need an end of employment letter, which serves as official documentation of their departure. This letter can be useful for future job applications, unemployment benefits, or legal reference. The letter may include details such as the reason for separation, final pay details, and benefits information. Employees may need this letter for future job applications, unemployment benefits, or legal records.
Moreover, employers must follow proper procedures when terminating an employee, including providing final wages and complying with severance pay requirements under Act 80 of 1976, also known as the Unjust Dismissal Act. This law mandates that employees dismissed without just cause are entitled to severance based on their length of service. Failing to follow these rules can lead to legal disputes and financial penalties.
For employees who resign, there is generally no required notice period, though giving notice is considered professional. However, in cases of mass layoffs or workforce reductions, employers may be required to provide advance notice under the federal Worker Adjustment and Retraining Notification (WARN) Act.
Notice periods in Puerto Rico
Employment contracts notice period in Puerto Rico
In Puerto Rico, there is no mandatory employment contract notice period when ending an employment relationship. This means that employers are not legally required to give advance notice before terminating an employee, and employees are also not obligated to provide notice before resigning. However, providing notice is considered a professional courtesy and can help ensure a smooth transition for both parties.
Severance pay in Puerto Rico
Although Puerto Rico does not require a notice period, severance pay is mandated in cases of termination without just cause. Under Act 80 of 1976, employees who are dismissed without valid reasons are entitled to severance compensation. This includes:
- 12 weeks of salary as a base severance payment.
- An additional two weeks of salary for every full year of service.
- A maximum cap of 36 weeks of severance pay, regardless of the employee’s tenure.
Severance is not required if the employer can justify termination with valid reasons such as misconduct, performance issues, or company restructuring that meets legal criteria.
Probation period in Puerto Rico
Probation periods are only permitted for employees with indefinite contracts and vary depending on the role:
- Executives, administrators, and professionals: Up to 12 months of probation period.
- General employees: Up to 9 months of probation period.
During this time, employers can assess performance and fit before offering full job security. If termination occurs within the probation period, severance pay is not required.
Termination of employment in Puerto Rico
Employment termination in Puerto Rico is regulated by Act 80 of 1976 (Wrongful Discharge Act), which protects employees from unjust dismissal. The law establishes guidelines for just cause termination, outlines severance pay requirements for unjust termination, and sets rules for probationary periods. Employers need to follow these regulations carefully to avoid legal disputes and financial penalties.
Just cause termination of employment in Puerto Rico
Under Puerto Rico’s termination laws, employers must have a have a valid reason for firing an employee. Just cause reasons include:
- Poor performance: Consistently failing to meet reasonable job expectations.
- Misconduct: Violating company policies, insubordination, or inappropriate behaviour.
- Business restructuring: Downsizing, closing operations, or eliminating positions due to financial reasons.
- Repeated violations: Continued infractions despite previous warnings or disciplinary action.
If an employer proves just cause, they are not required to provide severance pay.
Employment termination without just cause in Puerto Rico
Meanwhile, if an employer terminates an employee without just cause, Act 80 mandates severance compensation based on the employee’s length of service:
- 12 weeks of base severance pay.
- An additional two weeks of pay per full year of service.
- A maximum cap of 36 weeks of pay.
Severance does not apply to probationary employees or independent contractors.
Resignation and employee-initiated termination in Puerto Rico
Employees can resign at any time, and there is no legal obligation for a notice period. However, it is common practice to provide at least two weeks’ notice to allow for a smooth transition.
Post-termination restraints in Puerto Rico
Non-compete clauses in Puerto Rico are legally enforceable, but only if they meet strict requirements. Employers cannot impose overly broad restrictions on employees, and any agreement must balance business interests with an employee’s right to work.
For a non-compete clause to hold up in court, the agreement must be in writing and signed by both the employer and employee. It cannot be forced or implied. Non-compete restrictions cannot last longer than 12 months after the employee leaves the company. Any longer duration is likely to be invalid. Simply allowing the employee to keep their job is not enough to justify a non-compete agreement. Employers must offer something extra, such as a bonus, salary increase, or other benefits, in exchange for the restriction.
In addition, the restriction must be directly related to protecting trade secrets, confidential information, or a unique customer base. It cannot be used simply to prevent an employee from working for a competitor.
The non-compete must specify the geographic region it covers, and it must be reasonable in relation to the employer’s business operations. Overly broad restrictions may be invalidated.
If the clause includes client restrictions, they must be specific and limited to customers the employee directly worked with. A blanket ban on working with any former clients is unlikely to be enforceable.
What employers should keep in mind
Non-compete clauses must be carefully crafted to be enforceable. Vague or overly restrictive agreements may not hold up in court. The burden is on the employer to prove necessity. If challenged, employers must justify why the restriction is essential to protect their business.
Puerto Rico law tends to favour employee mobility. Courts are generally cautious about enforcing non-compete clauses that unfairly limit a worker’s career opportunities.
To increase the likelihood of enforceability, businesses should:
- Clearly outline the business interests being protected.
- Ensure fairness by offering reasonable compensation.
- Limit restrictions to a necessary scope and timeframe.
- Consult legal counsel to draft agreements that comply with Puerto Rico’s labour laws.
Employment waivers in Puerto Rico
Employees cannot waive certain statutory rights, and any attempt to do so may be considered invalid or unenforceable under the law. However, some rights may be waived under specific conditions, depending on the context and the fairness of the agreement. Employers must be cautious when including waivers in employment contracts or separation agreements to ensure they comply with legal requirements.
Can employees waive their rights in Puerto Rico?
The ability of an employee to waive statutory rights depends on the type of right being considered:
- Non-waivable rights: Certain fundamental employee protections, such as minimum wage, overtime pay, discrimination protections, and labour law rights, cannot be waived, even if the employee agrees to do so in writing. These rights are protected by Puerto Rico’s labour laws to prevent unfair treatment.
- Limited waivers: Some rights, such as severance pay in a termination without just cause, may be waived if the employee voluntarily signs a valid separation agreement that includes fair compensation in exchange for the waiver. However, any waiver must be clear, knowing, and voluntary, and employees cannot be pressured into signing.
- Settlement agreements: Employees may waive claims (such as wrongful termination or discrimination claims) as part of a legal settlement. However, the waiver must be mutually beneficial, meaning the employee receives compensation or other benefits in return.
Before drafting waivers, it’s best to consult compliance or legal experts to ensure compliance with local labour laws and avoid potential legal disputes.
Transfer of undertaking in Puerto Rico
The transfer of undertaking, commonly known as “Traspaso de Empresa” or “Transferencia de Establecimiento”, refers to the legal framework governing what happens to employees when a business or part of a business is transferred to a new owner.
The goal of these regulations is to protect employees’ rights and ensure that they are not unfairly dismissed or disadvantaged due to a company transition.
When a business transfers to a new owner, employees typically keep their existing terms and conditions of employment, unless renegotiated with the new employer.
If employees are covered by a union agreement, the new employer may be required to honour its terms, ensuring continuity in wages, benefits, and work conditions.
Employees generally retain their employment status, meaning accrued benefits such as vacation time, seniority, and retirement plans may carry over under the new employer.
The transfer of a business is not a valid reason for termination. If an employer dismisses an employee due to the transfer, they may be required to provide severance pay or justify the termination under Puerto
Rico’s just cause termination laws.
Employers may need to notify employees and consult with them or their representatives before implementing changes, especially if the transfer affects workplace policies, job security, or working conditions.
In some cases, employees may have the right to oppose the transfer or resign if they believe the change significantly alters their job conditions. Whether they are entitled to severance or compensation depends on Puerto Rican labour laws and contractual agreements.
To remain compliant during a business transfer, companies must keep in mind the following:
- Understand existing employment contracts to determine if any modifications or negotiations are needed.
- Respect employee rights and ensure workers are not unfairly dismissed due to the transfer.
- Comply with collective bargaining agreements to avoid disputes with labour unions.
- Communicate with employees about the transition to maintain transparency and trust.
- Seek legal guidance to ensure compliance with Puerto Rico’s Labour Laws regarding business transfers.
Minimise risk with our end-to-end employment solutions
There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Puerto Rico— or you could end up facing legal issues.
Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
DISCLAIMER: The information contained on this website is provided for general informational purposes only and should not be construed as legal, tax, or other professional advice on any subject matter. While we endeavor to ensure that the content is accurate and up to date, we make no warranties or representations of any kind regarding the completeness, accuracy, reliability, suitability, or availability of the information contained herein. The content on this site is not intended to be a substitute for professional advice. Users should not act or refrain from acting based on any information on this website without seeking the appropriate legal, tax, or other professional advice tailored to their specific circumstances from qualified professionals. We expressly disclaim all liability in respect to actions taken or not taken based on any or all of the contents of this website. Use of the information on this site does not create an attorney-client, tax advisor-client, or any other professional-client relationship between the user and the website or its authors.
Australia/New Zealand Head Office
Asia Head Office
EMEA Head Office
North America Head Office
Latin America Head Office
Level 3, 99 Walker Street
North Sydney, NSW 2060 Australia
