With The New Year, Puerto Rico Enacts New Legislation Facilitating Remote Work And Providing Exemption To Airlines Opening Operation Hubs On The Island

• Published date: 24 January 2024
• Subject Matter: Employment and HR, Contract of Employment, Employee Benefits & Compensation
• Law Firm: Littler Mendelson
• Author: Ms Anabel Rodríguez-Alonso

In the summer of 2022, Puerto Rico enacted Act 52-2022, which amended the concept of "engaged in trade or business" under the Puerto Rico Internal Revenue Code of 2011 to address the pandemic-related issue of employees working remotely from the Island for "out-of-state" employers with no business nexus to Puerto Rico. Act 52 stipulated that businesses with employees working remotely from Puerto Rico would not be deemed "engaged in trade or business," provided certain conditions were met. At the time, we cautioned Act 52 was only a piece in the "wandering worker" puzzle and that companies still needed to be careful about allowing workers to telework from Puerto Rico since Puerto Rico labor and employment law still applied to the employment relationship.

A year and a half later, on January 17, 2024, Governor Pedro R. Pierluisi signed into law House Bill 1745, the "Act to Facilitate the Implementation of Remote Work in Private Enterprise and to Encourage the Establishment of Air Bases in Puerto Rico." Recognizing how Covid-19 paved the way to working from home, the Act seeks to encourage employees and employers without local presence or businesses to consider Puerto Rico the ideal place to work remotely, either temporarily or permanently. The new measure recognizes it is the government's public policy to support remote working alternatives as it helps attract more people to Puerto Rico and expands the opportunities for Puerto Ricans to secure jobs in industries that do not necessarily have a presence on the Island. Moreover, considering that Puerto Rico is currently experiencing a boom in the tourism industry, which makes it attractive for airline carriers to establish air bases in our jurisdiction, the Act also expressly excludes their employees from the application of Puerto Rico employment laws provided they are covered by a collective agreement.

The Act creates different requirements depending on whether or not the employee is considered domiciled in Puerto Rico.

A. Domiciled Employees

For the employee to be covered under the Act, the employment relationship needs to comply with the following:

• The employee must be an executive, manager, or professional under the Fair Labor Standards Act and regulations of the Puerto Rico Department of Labor and Human Resources;
• The employee is domiciled in Puerto Rico; and
• The employee executes the work remotely.

Pursuant to the Act, these employment relationships will be governed by what is stipulated in the...