The disappearing exempt workforce of Puerto Rico Law 379

Both federal law (Fair Labor Standards Act or FLSA) and Puerto Rico Law 379 (379 -1948, 29 LPRA §271 et seq, as amended) generally require the payment of overtime wages for work performed after 40 hours per week. The FLSA applies to employers with an annual business volume exceeding $500,000 or when their employees engage directly in interstate commerce or in the production of goods for interstate commerce regardless of the annual sales volume. In addition, Puerto Rico law No. 379 also requires payment of overtime for daily hours in excess of eight.

Both the FLSA and Puerto Rico Law 379 exempt from the overtime pay requirements employees who work in a bona fide executive, administrative or professional capacity. In addition, outside sales workers, certain computer and highly compensated employees are generally exempted. Puerto Rico’s Regulation No. 13 identifies the specific exclusions under local law and generally mirror FSLA regulations.

To qualify for exemption, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

The U.S. Secretary of Labor has proposed regulations to raise the threshold under which most salaried workers are guaranteed overtime-from $455 a week ($23,660 a year) to a projected level of $970 a week ($50,440 a year) in 2016.  The regulations propose to automatically update the threshold based on inflation or wage growth over time.

The expected impact in Puerto Rico of these new regulations currently under review would be enormous and far greater than in the U.S. given that the average wages in the Island are much lower than the U.S.  As a result most of the employees, even those clearly exercising executive or administrative duties would cease to be exempt.

These changes would further disrupt the local labor scenario since Law  379 also regulates meal periods. The law requires employers to provide their non-exempt employees a daily meal break of no less than one hour (unless reduced by mutual consent) between the third and the fifth hour of work.

As of this date, the Department of Labor is in the process of reviewing the comments to the proposed regulations and participating in congressional hearings.  Many expect a final decision during the latter part of 2016.