The recent repeal of Law 41-2022, which had sought to restore several labor benefits and protections eliminated by Law 4-2017, including amendments to the Christmas Bonus Law (Law 148-1969) for private sector workers and employees, places us back under the provisions modified by Law 4-2017. This legislative change has significant implications for both workers and employers in Puerto Rico. Here is a short summary, and at the end, the provisions of the repealed laws are included.
The Christmas Bonus Law applies to private sector employers in Puerto Rico and outlines the conditions for providing a Christmas bonus to eligible employees.
Key provisions include:
- Applicability: The law applies to employers who have one or more workers within a 12-month period.
- Bonus Calculation: The bonus is calculated as 6% of the total salary for employees who work 700 hours or more, with a maximum bonus limit of $10,000. For dockworkers, the bonus applies to those who work 100 hours or more.
- Small Employers: Employers with 15 employees or fewer must grant a bonus of 3% of the total salary, also with a maximum of $10,000.
- Special Provisions for Employees Hired Post-Labor Transformation and Flexibility Law: For employers with more than 20 employees, the bonus is 2% of the total salary, up to $600. For employers with 20 employees or fewer, the bonus is 2% of the total salary, up to $300.
- Bonus Payment Restrictions: The total bonus paid by the employer must not exceed 15% of the employer’s annual net earnings.
- Payment Dates and Penalties: The bonus must be paid between November 15th and December 15th of each year. Penalties for late payment are specified, including additional compensation if the payment is delayed.
- Legal Procedure for Claims: The law establishes a procedure for making judicial claims related to the Christmas bonus.
- Definitions and Exclusions: The law defines the term “employer” and excludes certain types of employees.
- Exceptions for Collective Agreements: The law does not apply if workers receive larger annual bonuses through collective agreements.
- Powers of the Secretary of Labor and Human Resources: The Secretary has the authority to administer the law and request relevant information from employers.
Here are the provisions of Law 41-2022 that was repealed by court order:
Law 41-2022 amended Law 148-1969 known as the Christmas Bonus Law (“Christmas Bonus”) for Workers and Employees of Private Companies. The new law provides the following important provisions regarding the Christmas bonus.
General Norm
Any company that employs one or more workers or employees within the 12-month period, from October 1 of any year to September 30 of the subsequent calendar year, will be obliged to grant each employee who has worked 700 hours or more (or 100 hours or more in the case of dock workers) within the indicated period, a Christmas bonus equivalent to 6% of the total maximum salary of $10,000 earned by the employee within said period of time. It is provided that every employer who employs 15 employees or less for more than 26 weeks within the 12-month period from the 1st. October of any year until September 30 of the following calendar year will grant a Christmas bonus equivalent to 3% of the total maximum salary of $10,000.
Employees hired after the previous reform
A different structure is used for those workers who were hired as of the effective date of the “Labor Transformation and Flexibility Law”, Law 4-2017, which was approved on January 26, 2017. In these cases, any employer who employs more than 20 employees for more than 26 weeks within the 12-month period from October 1 of any year to September 30 of the subsequent calendar year, it will be required to grant each employee who has worked at least 700 hours or more within said period, a Christmas bonus equivalent to 3% of the total salary earned up to the amount of $600.00. In cases where an employer employs 20 or fewer employees for more than 26 weeks within the 12-month period from October 18 of any year to September 30 of the subsequent calendar year, it will be obliged to grant each employee who has worked at least 700 hours or more within said period, a Christmas bonus equivalent to 3% of the total salary earned up to a maximum of $300.00.
Micro-enterprises or small or medium merchants
There is another compensation structure for so-called micro-enterprises or small or medium-sized merchants that is cataloged by Law 62-2014. In these cases, the employer will be obliged to pay the Christmas bonus benefit mentioned in the previous paragraph to each employee who has worked nine hundred (900) hours or more within the period indicated above. Law 62-2014 classifies companies in the following categories:
Microenterprise- A business or company that generates a gross income of less than $500,000.00 each year, and has 7 or fewer employees.
Small Merchants – business or company that generates a gross income of less than $3,000,000.00 each year, and that has twenty-five employees or less.
Medium Merchants – business or company that generates a gross income of less than $10,000,000.00 each year, and has 50 employees or less.
Bonus Limit
The total of the amounts paid by Christmas bonus will not exceed 15% of the employer’s annual net earnings, earned within the period from September 30 of the previous year to September 30 of the year to which the bonus corresponds. When computing the total hours worked by an employee to receive the benefits of this Act, those hours worked for the same employer must be counted, even if the services have been provided in different businesses, industries, and other activities of that employer. To determine the net profit, the amount of the carryover of the net loss from previous years and the accounts receivable that have not been paid at the end of the period covered by the statement of position and profit and loss will be excluded.
This Christmas bonus will constitute an additional compensation to any other salaries or benefits to which the employee is entitled. The employer may credit against said obligation any other bonus previously paid to the employee during the year for any concept, as long as he has notified the employee in writing of his intention to credit said other bonus to the payment of the bonus required under the Christmas Bonus Law.
Payment waiver
Under certain circumstances an employer can avail himself of the provision that exempts him from paying in full or in part the Christmas bonus when he has not obtained profits in his business, industry, commerce or when these are insufficient to cover the entire bonus, without exceeding limit of 15% of annual net earnings, must submit to the Secretary of Labor and Human Resources, no later than November 30 of each year, a statement of position and profit and loss for the period of 12 months from October 1 of the previous year to September 30 of the current year, duly certified by an authorized public accountant, evidencing said economic situation, among other requirements.
Secretary of Labor
The law empowers the Secretary of Labor to approve regulations to enforce the law and require companies to provide profit and loss statements, balance sheet, and others regarding the financial position of the company for the exemption of the Christmas bonus.