Puerto Rico, a Remote Work Haven at Last!

By Ferraiuoli LLC

In keeping with initiatives to make Puerto Rico an attractive place to work and to free employers from regulatory burdens, on January 17, 2024, the Puerto Rico legislature took another step towards eradicating a label of a one-sided, pro-employee jurisdiction with the approval of Act 27-2024, the Law to Facilitate the Implementation of Remote Work in Private Companies and to Encourage the Establishment of Air Operations Bases in Puerto Rico (the “Act 27”). Employers with no business on the island who may have been reluctant to let their remote workers move to Puerto Rico and benefit from its natural wonders while continuing employment can think again. Now liberated under certain circumstances from a wide-array of employee protective laws and statutory benefits, Puerto Rico offers employers and employees alike more clarity and appeal for remote work.

The new law seeks to incentivize employers with no presence or business in Puerto Rico to hire or continue employing Puerto Rico domiciled employees; thus, attracting new individuals to the island, and increasing new job opportunities for locals. It also invites airlines with unionized employees to create home bases in Puerto Rico with virtually no impact on their employment relationships by local employment law. Act 27 builds upon Act 52-2022, which introduced important tax-related concessions for these entities, subject to certain conditions, through amendments to the Puerto Rico Internal Revenue Code of 2011. Act 27 creates two different rules depending on whether the employee is domiciled in Puerto Rico or not (physical presence with the intention of remaining indefinitely).

In addition, Act 27 provides for an exclusion from Puerto Rico employment laws to unionized employees of airlines with a Puerto Rico home base, in which case the employment relationship shall be governed by the collective bargaining agreement.

This document has been prepared for informative purposes. It is not intended, and should not be relied upon, as legal advice. If you have any questions or would like more information on the topic, or about its possible effect(s) on policy or operational matters, please contact us at your convenience.

Rules for Employees Domiciled in Puerto Rico:

If,
1. the employee is an executive, administrator or professional under the Fair Labor Standards Act and the PR Department of Labor regulations;
2. the employer is not engaged in trade or business in Puerto Rico and has no economic nexus therein; and
3.the employee works remotely…
Then,
1. the employment agreement shall govern; and
2. the employment relationship will be excluded from most local employment laws.

* Puerto Rico law related to occupational accidents insurance, non-occupational short-term disability, and [although unlikely] chauffeurs’ insurance will apply if no equivalent insurances with equal or superior coverage are offered by the employer.
** Unemployment insurance under Puerto Rico law will apply unless the employee may receive benefits in another jurisdiction.

Rules for Employees Not Domiciled in Puerto Rico:
If,
1. the employee voluntarily decides to relocate to Puerto Rico;
2. to work remotely;
3. for an employer not engaged in trade or business in Puerto Rico and with no economic nexus therein…
Then,
1. the employment agreement shall govern; if none, the law of the jurisdiction where the employee is domiciled will apply; and
2. the employer will be exempt from all local employment laws.

*Once the employee becomes domiciled in Puerto Rico after the employer’s consent to the relocation, the Rules for Employees Domiciled in Puerto Rico will apply.