Supreme Court Of Puerto Rico Rules PR-DOL Christmas Bonus Exemption Decree Was Inapplicable To Unionized Employees

• Published date: 18 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Littler Mendelson
• Author: Ms Anabel Rodríguez-Alonso

On June 30, 2023, the Supreme Court of Puerto Rico issued an Opinion and Order interpreting an employer's obligation to pay the Christmas Bonus to employees covered by a Collective Bargaining Agreement (CBA). Writing for the Court, Judge Rafael Martínez Torres reasoned that because the Puerto Rico Department of Labor and Human Resources ("PR-DOL") exempted unionized employees from its decision to relieve an employer of its obligation to pay a Christmas Bonus for financial reasons, the employer could not escape its obligation to pay the negotiated bonus under the CBA to its unionized employees.

Generally, the Christmas Bonus for Private Employees Act, or Act 148 of 1969 ("Christmas Bonus Act" or "the Act") mandates the distribution of Christmas Bonuses in the private sector. Article 7 of the Christmas Bonus Act gives the PR-DOL the authority to adopt any rule or regulation the Department deems necessary when it comes to the application of the Act's provisions. Article 6 specifically states that the provisions of this Act are not applicable to workers or employees who receive their Christmas Bonus under their CBAs, unless the sum provided is less than what the Act requires. Importantly, Article 7 of the Act allows an employer to request from the PR-DOL an exemption from paying the Christmas Bonus when it can assert a financial hardship defense. Specifically, an employer can make this request if it "has not obtained profits from his business, industry, trade, or firm or when the profits are not sufficient to cover the total amount of the bonus without exceeding the fifteen percent (15%) limit of the net annual profits." Once the request is received, the PR-DOL evaluates the documents presented in support and decides whether or not to grant an exoneration decree relieving the employer of its Christmas Bonus obligation.

In this case, the employer, Hospital HIMA San Pablo Caguas ("HIMA"), entered into two CBAs with a union representing a number of its employees. In both, HIMA agreed to pay Christmas Bonuses to all bargaining unit employees under certain conditions. Notably, the CBA expressly stated that HIMA would pay the bonus "under the terms established by law." Thereafter, in 2015, HIMA requested from the PR-DOL an exemption under the provisions of the Act, claiming that it could not comply with its obligation to pay the statutory bonus because of the operational losses experienced that year. After reviewing the request, the PR-DOL granted a preliminary...