In Puerto Rico, labor laws differ somewhat from the mainland United States. Most notably, there is no general legal requirement mandating employers provide advance notice of termination to employees. Similarly, employees are not required to give advance notice of resignation.

Exceptions to Notice Requirement

There are limited exceptions to the absence of a notice requirement:

• The federal Worker Adjustment and Retraining Notification Act (WARN Act) triggers a 60-day notice requirement for mass layoffs and plant closings under specific circumstances.
• If an employment contract or collective bargaining agreement has clauses specifying a notice period, those would be legally binding.

Just Cause Termination

Puerto Rico's central labor law concerning terminations is Act No. 80 of May 30, 1976, also known as the Unjust Dismissal Act. This law mandates that employers can only terminate employees for "just cause" as outlined by the law. Reasons constituting "just cause" relate to an employee's conduct (negligence, poor performance, etc.), or economic and operational reasons impacting the employer's business.

Key Points for Employers

Employers should thoroughly document any reason for employee termination to establish "just cause" should a dispute arise.

In Puerto Rico, severance pay laws are primarily governed by Act No. 80 of May 30, 1976, also known as the Unjust Dismissal Act.

Severance Pay Eligibility

Employees who are terminated without "just cause" (as defined by Act No. 80) are entitled to severance pay, which is referred to as "mesada" in Puerto Rico.

Severance Pay Calculation

The calculation of severance pay depends on the employee's date of hire.

For Employees Hired Before January 26, 2017:

• For 0-5 years of service, the severance pay is 2 months' salary plus 1 week of salary for each completed year.
• For 5-15 years of service, the severance pay is 3 months' salary plus 2 weeks of salary for each completed year.
• For 15+ years of service, the severance pay is 6 months' salary plus 3 weeks of salary for each completed year.

For Employees Hired On or After January 26, 2017:

• For all lengths of service, the severance pay is 3 months' salary plus 2 weeks of salary for each completed year.

Additional Information on Severance Calculation

The salary used in the calculation typically refers to the employee's base salary. Severance pay is capped at nine months' salary. If an employee experiences an interruption in service of more than 2 years, their prior tenure may not count towards the severance calculation.

Tax Considerations

Severance payments up to the statutory severance amount are typically exempt from Puerto Rico income tax. However, any amount exceeding the statutory amount may be subject to taxation.

In Puerto Rico, the Act No. 80 of May 30, 1976, also known as the Unjust Dismissal Act, mandates that employers must have "just cause" to terminate an employee. This "just cause" can be related to the employee, such as a pattern of misconduct, negligence, poor performance, insubordination, or violating workplace rules. Alternatively, it can be business-related, such as economic necessity, restructuring, or reduction in workforce due to genuine operational reasons. Employers must carefully document evidence supporting the existence of "just cause" to defend potential disputes.

While Puerto Rico doesn't generally require advance notice of termination, there are exceptions. The federal WARN Act may require 60 days' notice for mass layoffs or plant closings. Additionally, specific employment contracts or collective bargaining agreements might include notice period provisions.

During the termination process, it's important to provide a written termination letter specifying the reason(s) for termination. Employers should keep detailed records of the termination meeting and the contents of the termination letter.

If termination is without "just cause," employers need to calculate severance ("mesada") per the guidelines in Act No. 80 based on employee tenure and salary. However, severance payments are capped at nine months' salary.

Finally, employers must ensure that termination decisions and processes are free from any discriminatory basis, such as age, race, gender, religion, etc.