Pandemic Assistance Packages And Their Effect On Christmas Bonus Exemption For Private Employers

• Published date: 27 November 2020
• Subject Matter: Employment and HR, Coronavirus (COVID-19), Employee Benefits & Compensation, Employee Rights/ Labour Relations, Government Measures, Employment and Workforce Wellbeing, Operational Impacts and Strategy
• Law Firm: Littler Mendelson
• Author: Ms Anabel Rodríguez-Alonso and Alberto Tabales-Maldonado

On November 16, 2020, the Puerto Rico Department of Labor and Human Resources ("PR DOL") issued Circular Letter No. 2020-05, discussing considerations for private sector employers when requesting an exemption from paying the Christmas Bonus to their employees where the employer received COVID-19-related economic assistance.

In Puerto Rico, Act No. 148 of June 30, 1969, as amended, better known as the Puerto Rico Christmas Bonus for the Employees of the Private Sector Act ("Act") establishes the payment of a bonus to certain private sector employees during this time of the year, as well as details the manner and terms of the payment. The Act includes, however, a provision that permits a private sector employer to request an exemption from paying all or part of the bonus. Specifically, an employer may be eligible to request the exemption if the payment of the bonus exceeds 15% of the employer's net profit earned from September 30th of the preceding year until September 30th of the year in which the bonus is paid. For the purposes of this Act, the regulation to administer the Act defines "net annual profits" as

. . . the total income less the costs of producing such income and the operating expenses of a business during the period covered by the statement of position and profit and loss, and by the internal financial statements when these are required. In order to determine the net profits, the amount of the carry-over of the net loss from previous years and the accounts receivable that have not been paid when the statements of balance are presented will be excluded. On the other hand, both extraordinary gains and losses will be included. For the purposes of Act No. 148 and this Regulation, net profit is that exclusively derived from the employer's operations in Puerto Rico.

In order to avail itself of this exemption, the employer must submit to the Secretary of Labor and Human Resources no later than November 30th of each year the required Request Form for Exemption accompanied by a general balance sheet and a profit and...