At a glance: hiring employees in Puerto Rico

Background information on applicants

Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?

The Puerto Rico Equal Pay Act prohibits employers covered under the Act from asking a job applicant or the applicant’s current or former employer about the applicant’s current or past compensation rate, subject to the following exceptions:

• if a job applicant voluntarily discloses his or her current or past wages, the potential employer may confirm or allow the applicant to confirm the information; and
• the potential employer may inquire into or confirm an applicant’s current or past wages if it negotiated the compensation rate with and made an offer of employment to the applicant. 

Further, except with respect to certain exempt positions (eg, positions for which a credit report is required by federal law), Act 150-2019 prohibits covered employers from verifying or investigating an employee’s or applicant’s credit history or requesting or obtaining from a credit agency an employee's or applicant's credit report.

Private employers in Puerto Rico can perform background checks (including criminal and credit checks) on job applicants subject to federal parameters, including the Fair Credit Reporting Act and recent guidance from the Equal Employment Opportunity Commission concerning the potential disparate impact of background checks. See the United States chapter for further information.

Puerto Rico courts attach great importance to the constitutional provisions protecting human dignity and privacy from invasion by both public and private parties. These provisions include article II, sections 1 (‘The dignity of the human being is inviolable’) and 8 (‘Every person has the right to the protection of law against abusive attacks on his honour, reputation and private or family life’) of the Puerto Rico Constitution.

The Act enumerates certain rights conferred upon employees, including respect for dignity and protection of privacy, subject to the employer’s legitimate interests in protecting its business, property and workplace, or as provided by law.

Further, the Puerto Rico Supreme Court found in Rosario Diaz v Toyota de Puerto Rico, Corp, 2005 TSPR 154 (2005) that discrimination on the basis of a prior criminal conviction is prohibited under Puerto Rico law and falls under the category of ‘social condition’, which is protected under the General Anti-Discrimination Act. The Puerto Rico Supreme Court set out seven factors that employers should consider in connection with an applicant who has criminal convictions:

• nature and magnitude of the crime committed;
• relationship between the crime committed, the position being applied for and the requirements and responsibilities of that position;
• the degree of rehabilitation of the applicant and any other information that the applicant or a third party can legitimately provide about that issue;
• the circumstances under which the crime was committed, including particular circumstances that were present at the time of the commission of the crime;
• the applicant’s age at the time the crime was committed;
• the time period between the conviction and application for employment; and
• the legitimate interest of the employer in protecting its property, security and well-being, as well as that of third parties and the public in general.

An employer can make an adverse decision against an applicant because of a previous conviction only when, after careful consideration of these factors and under a standard of reasonableness, the employer determines that the previous conviction makes the employee unfit for the position.

The aforementioned considerations apply irrespective of whether the employer conducts its own background or criminal checks or hires a third party to do so.

Are there any restrictions or prohibitions against requiring a medical examination as a condition of employment?

Subject to limited exceptions, requiring job applicants’ or employees’ genetic, medical and disability-related information is not permissible. See the United States chapter for further information.

Are there any restrictions or prohibitions against drug and alcohol testing of applicants?

Puerto Rico Law No. 59 of 8 August 1997 (the Act to Regulate Controlled Substances Detection Testing in the Private Work Sector) permits (but does not require) private employers to establish a testing programme for the detection of controlled substances to promote the health and welfare of its employees through random selection methods. Under this law, controlled substances are defined as those substances included in the Controlled Substances Act of Puerto Rico or any other legislation of the Commonwealth of Puerto Rico or the United States of America (eg, cocaine and heroin), but specifically excludes controlled substances used by medical prescription or any other legal use.

Employers may require employees, candidates for employment and candidates for rehire to submit to a controlled substances detection test as a condition of employment or continued employment under the following circumstances, among others:

• when an accident occurs in the workplace, attributable to the employee, in connection with his or her functions and during working hours;
• when there is reasonable individualised suspicion that the employee is using controlled substances. The test shall be made within the term of 24 hours; and
• as a precondition for recruitment and as part of a general physical medical examination required of all candidates for employment.

Prior to implementing a drug testing programme, the employer must provide written notice of the programme to employees 60 days in advance of the implementation of the programme (and to candidates upon submitting an employment application). The notice must include very specific information about the programme (eg, effective date and the specific law that authorises its adoption). The drug testing must be carried out in accordance with the programme adopted by the employer, through regulations that shall also be provided to all employees and candidates for employment. The regulations to be implemented as part of the drug testing programme must include:

• a statement including a description of the sanctions and penalties that apply to the production, distribution, possession or illegal use of controlled substances under Puerto Rico and federal law;
• a statement specifying that the possession, distribution, use, consumption and illegal trafficking of controlled substances is conduct forbidden in the company;
• a plan developed by the employer to educate and inform the employees of the health risks associated with the illegal use of controlled substances;
• the adoption and description of programmes for assistance, treatment or orientation on the rehabilitation available to the employees; and
• the company’s rules of conduct on the use of controlled substances by its employees and a description of the sanctions to be imposed on the employees if such rules of conduct are violated or if the test is positive for the use of a controlled substance.

An employee’s first positive drug test result shall not constitute just cause for dismissal without first requiring and allowing the employee to attend an appropriate rehabilitation programme.

The employer may require an employee with a positive test result to periodically submit to additional tests as part of the rehabilitation programme.

If the employee expressly refuses to participate in the rehabilitation programme, or if the result of the additional test is positive, the employer may impose corresponding disciplinary actions, pursuant to the regulations implemented by the employer. In imposing the disciplinary measures, the employer shall do so taking into account the relationship between the employee’s conduct and his or her duties, its effect on the proper and normal function of the enterprise, and the risk to the safety of other employees and the public in general.

Before the employer can take any disciplinary action based on the positive result of a test, the result must be verified through a confirming laboratory test. The employee or candidate for employment shall have the opportunity to notify the laboratory of any information that is relevant to the interpretation of the result, including the use of prescribed or over-the-counter drugs.

The unjustified refusal of an employee to submit to a required drug test shall constitute prima facie evidence that the result would have been positive, and shall result in the application of disciplinary measures. Employees engaged in certain activities, such as driving railroad trains, transporting passengers in a motor vehicle, handling drugs or controlled or dangerous substances, and providing security guard services, are required to submit to mandatory testing.

Other circumstances include:

• a warning that the employees or candidates for employment shall be subject to drug tests;
• a detailed description of the procedures to be followed to conduct the tests (which must be urine tests, except in very limited circumstances), including the mechanism for the resolution of disputes over the results of the tests; and
• a provision to the effect that the result of the tests shall be deemed to be and kept as confidential information. A positive drug test result cannot be used as evidence in a criminal suit against the employee, unless it is used by the employee in his or her defence.

The employer has to cover the expenses associated with the drug tests. Further, employees must be compensated for any time spent submitting to the tests.

Tests must be confidential and administered by a certified laboratory according to scientifically accepted analytical and chain-of-custody procedures, and under the Mandatory Guidelines for Federal Workplace Drug Testing Program. Every sample with a positive result shall be submitted for a second corroborative analysis. The employee shall be advised in writing that he or she is entitled to contact another laboratory to obtain a second result from the same sample, should he or she wish to do so, and the employer (or its testing agent) will be required to provide the minimum amount required of the sample to the employee’s independent laboratory. If the employer’s test is positive, and the employee’s own laboratory’s test is negative, then the employer may suggest three laboratories from which the employee is to choose one to conduct a third final and binding test at the employer’s expense.

An employee may have a cause of action against an employer if: the employer took disciplinary action or refused to hire the employee based on an erroneous test result and the employer relied on the erroneous test result through fraud, fault or negligence; or the employer damages the reputation of the employee by revealing the test results through fraud, fault or negligence. In addition, in lieu of filing suit, an employee who suffers damages as a result of a drug test performed on his or her sample may seek benefits under Puerto Rico’s workers’ compensation statute. However, with respect to applicants for employment, where a drug test is a precondition for recruitment required from all candidates, refusal to submit to a test may constitute unjustified refusal subject to the consequences of the employer’s drug testing programme.

Hiring of employees

Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?

Employers are prohibited from discriminating against applicants or employees on the basis of sex, age, race, colour, marriage, political affiliation, political or religious ideas, national origin, social origin, social condition, disability, pregnancy, genetic information, being or being perceived as a victim of domestic violence, stalking or sexual aggression, sexual orientation or gender identity, veteran status and other categories protected by law.

Further, the Unjust Dismissal Act, as amended by Law No. 4 of 26 January 2017 (the Labor Transformation and Flexibility Act (Law No. 4)), requires that seniority preference be given to employees who were laid off owing to business necessities recognised under the Unjust Dismissal Act in the event that the employer needs to employ a worker in the same or similar occupational classification to that held by the employee at the time of discharge within six months following the lay-off, except in those cases in which there is a reasonably clear and evident difference in favour of the capacity, productivity, performance, competence, efficiency or conduct record of the workers compared, in which case the employer may select the less senior worker on the basis of such criteria.

Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?

No. In general, employment contracts do not have to be in writing. Certain specific, employment-related provisions – such as agreements with non-exempt employees to reduce the statutory meal period, alternate workweek or work schedule agreements, and non-compete agreements – require a valid written agreement, some with specific terms required for enforceability.

To what extent are fixed-term employment contracts permissible?

Temporary employment contracts for fixed periods are permissible in Puerto Rico and, if valid, are an exception to the ‘just cause’ requirement under the Unjust Dismissal Act. Prior to the passage of Law No. 4, to be valid:

• the contract had to be in writing;
• the contract had to be for a fixed term or a fixed project, or for replacing a regular employee during a temporary absence;
• the purpose of the temporary contract and the duration of the employment period had to be expressly stated in the written contract; and
• the contract had to be signed during the employee’s first work day or, in the case of employees hired through a temporary employment services company, within the first 10 days of work.

The Act expands the definition of temporary employment by identifying some of the situations where it may exist, such as a specific project, fixed work, replacing a regular employee during a leave or temporary absence, or an extraordinary or short-term project (including, without limitation, equipment or facility repairs, cargo loading or unloading, seasonal work, temporary order for production increases, annual inventories, or any other particular project or activity). After the passage of Law No. 4, written temporary agreements are no longer required (though are advisable).

There are no specific limitations as to the maximum duration of temporary contracts but, by their very nature, they must be ‘temporary’ and reasonably limited in duration. If the employee continues working after the end of the temporary period, he or she will become a regular employee.

The Act also recognises fixed-term employment contracts, defined as contracts for a specific period of time or for a particular project. Written agreements are not required (though are advisable). Although fixed-term contracts may be renewed, if the practices create an expectation of continuity, the relationship will not be interpreted as being for a fixed term. Fixed-term contracts not exceeding three years will be presumed to be valid and bona fide. In the case of exempt executive, administrative and professional employees, fixed-term contracts will be interpreted by the parties’ will as expressed in the contract.

What is the maximum probationary period permitted by law?

Probationary periods are permissible in Puerto Rico and, as noted below, automatic for most employees hired after the passage of Law No. 4 on 26 January 2017. For the probationary period to be valid for employees hired before the passage of Law No. 4 on 26 January 2017:

• the probationary contract had to be in writing;
• the probationary contract had to be signed before engaging in any type of work;
• the probationary period included in the written contract had to be for a fixed period not to exceed the first 90 calendar days of employment (which could be extended up to 180 days with Secretary of Labor approval); and
• the contract had to establish the specific date on which the probationary period would commence and the precise date on which it would end. The probationary period could not be extended at the discretion of the employer. If the employee continued working after the end of the probationary period, he or she would become a regular employee.

For employees hired on or after 26 January 2017, when Law No. 4 came into effect, the following rules apply: exempt executive, administrative, and professional employees have an automatic probationary period of 12 months, and all other employees have an automatic probationary period of nine months. Written probationary agreements are no longer required. If there is a union, the probationary period will be set by the employer and the union.

What are the primary factors that distinguish an independent contractor from an employee?

Unless another special law applies, Law No. 4 creates an irrebuttable presumption that a person is an independent contractor if:

• he or she possesses or has requested an employer identification number or employer social security number;
• he or she has filed income tax returns claiming to own a business;
• the independent contractor relationship is established by written contract;
• he or she is contractually required to have licences or permits; and
• he or she complies with three or more of the following:
  • he or she has control or discretion in the way the work is performed;
  • he or she has control over the timing of the work;
  • there is no requirement to work exclusively for the principal;
  • he or she may hire employees to assist; and
  • he or she has invested to provide the services, including buying or renting tools, equipment or materials; obtaining leave from the principal to access the worksite; and renting space or equipment from the principal.

If the factors to establish the independent contractor presumption are not met, the ‘common law test’ is used to determine whether there is an employee or independent contractor relationship, including what the parties expressed in their contract and the degree of direct control exercised over the manner in which the work is performed. Unless required by a federal law applicable to Puerto Rico, the ‘economic reality’ test should not be used to evaluate whether an independent contractor relationship exists.

Is there any legislation governing temporary staffing through recruitment agencies?

Law No. 26 of 22 July 1992 regulates the provision of temporary employees to client companies by temporary service companies. As a general rule under Law No. 26, both the temporary service company and the client company are considered joint employers. However, Law No. 26 delineates certain responsibilities of the temporary service company and those of the client company.

For acts constituting unlawful job discrimination, sexual harassment or unjustified dismissal, whichever discriminates against or dismisses the temporary employee or takes actions sanctioned by law, be it the temporary service company or the client company, will be responsible.

Regarding an employer’s obligation to retain a temporary employee’s position during the effective term of the contract when the employee takes a leave of absence, the temporary service company is responsible for retaining the employee’s position. But if the temporary service company does not comply, the client company where the employee was rendering services at the time he or she took the leave will be held responsible.

The temporary service company bears the responsibility for payment of the temporary employee’s Christmas bonus, unless the employee has worked for the client company for more than 700 hours, or more than 1,350 hours for employees hired on or after 26 January 2017, as required by law. In any case, where the temporary service company does not comply with its obligation, the client company will be responsible instead.

Further, pursuant to Law No. 26, temporary employees may not be contracted for the following purposes:

• as a method or mechanism for destroying or keeping labour unions out of the workplace;
• to perform any act of discrimination prohibited by law;
• as a means of evading compliance with the Unjust Dismissal Act; or
• as a means of breaking, weakening or interrupting strikes or work stoppages.