Puerto Rico has enacted the Minimum Wage Act, Act No. 47-2021, increasing the Island’s minimum wage from $7.25 to $8.50 effective January 1, 2022.
Additional increases will take effect on July 1, 2023, when the minimum wage will be raised to $9.50, and potentially on July 1, 2024, when it will reach $10.50, unless a mandatory decree alters that increase.
Act 47-2021, enacted on September 21, 2021, establishes as public policy the periodic revision of the minimum wage to bring it in line with the cost of living and to ensure that people earn enough to meet their basic needs.
To this end, Act 47-2021 creates the Minimum Wage Evaluation Commission, which will prepare an annual report analyzing work conditions, benefits, cost of living and other factors that should be considered in establishing the minimum wage. The report will also explain how the minimum wage for each calendar year has been calculated. The minimum wage will be set by the Commission each year in a mandatory decree. This process will launch in July 2024, when the Commission will determine if the increase will reach $10.50 or another amount.
The Commission, which is conferred quasi-legislative powers by the law, cannot establish an increase of more than 25 percent over the preceding year’s minimum wage; nor can the Commission reduce a previously approved minimum wage.
The Commission will be composed of the Puerto Rican Secretary of Labor, two worker representatives recommended by labor unions, two employers representatives recommended by business or industry associations, an economist recommended by the University of Puerto Rico’s Economy Department and the Puerto Rico Economists Association, and another economist with expertise in labor relations recommended by the University’s Labor Relations Institute.
Puerto Rico’s minimum wage, including its regular increases, will prevail as long as it is higher than the US federal minimum wage, currently set to $7.25.
Who is covered?
The minimum wage increase applies to non-exempt employees covered by the federal Fair Labor Standards Act (FLSA).
Puerto Rico’s minimum wage will not apply to the following:
- agriculture workers
- administrators, executives and professionals
- employees covered by a collective bargaining agreement establishing a higher wage
- governmental employees, including the government’s executive agencies, legislative and judiciary branches, municipalities, and instrumentalities, but excluding employees of public corporations and other public entities that operate as private corporations.
The Commission is authorized to issue special mandatory decrees setting minimum wages for agriculture workers; administrators, executives, or professionals; and tipped workers.
Employees whose compensation includes receiving tips will be entitled to be paid the federal minimum wage plus tips, and both amounts should add up to at least the local minimum wage.
Employees will be entitled to any increase in the minimum wage approved after their hiring date.
Any employer who does not comply with Act 47-2021 or with mandatory decrees or regulations issued under this law will be subject to fines of $500 to $5,000. In cases of repeated violation, the fines will be of $5,000 to $10,000.
The employer may also incur civil responsibility to the employee, who may be entitled to recover statutory damages of $500 to $5,000 or actual damages, which amount will be duplicated in the judgment. Additionally, the employee will be entitled to receive the difference between the wage paid below the minimum and the minimum wage, as well as an equivalent amount as additional compensation, plus costs and attorney’s fees. An agreement between employee and employer to the contrary will not be valid. The statute of limitations for this claim for wages is five years, which will run from the date in which the employment relationship ends; Act 47-2021 does not specify a date for the statute of limitations to lapse when the employee is still employed.
Nevertheless, in either case, only wages for the last five years of employment may be claimed. The Secretary of Labor may file the claim on behalf of an employee or group of employees.
Moreover, the Secretary of Labor may request injunctive relief to impede any action in violation of Act 47-2021. The Secretary of Labor is also granted investigation powers to verify compliance with the minimum wage mandates. Any obstruction of these investigations may lead to a $600 fine, which may be increased to $1,500 in event of recurrence.
Cases pending before the courts prior to the enactment of Act 47-2021 will not be affected by its provisions.
If you have any questions about the implications of Puerto Rico’s Minimum Wage Act, please contact the authors or your DLA Piper relationship attorney.