Insight: Puerto Rico Labor secretary clarifies application of Act 27-2024

Littler San Juan’s Verónica M. Torres-Torres and Mariel Torres explain new guidance on exemptions for remote workers and airline staff.

On Sept. 10, 2024, the Puerto Rico Secretary of Labor issued an Opinion No. 2024-02 to clarify and provide additional information about the application of Act 27-2024, known as the Act to Facilitate the Implementation of Remote Work in the Private Sector and to Incentivize the Establishment of Airline Bases in Puerto Rico. 

Act 27-2024 exempts certain employees from employment law coverage, including domiciled and nondomiciled employees working remotely from Puerto Rico for out-of-state employers with no business nexus to Puerto Rico, as well as certain unionized airline employees.  

Remote employees domiciled in Puerto Rico
The new guidance clarifies that employment relationships between covered employers from out-of-state jurisdictions and remote employees domiciled in Puerto Rico (physically present with the intention to remain in Puerto Rico indefinitely) are governed by their employment agreements when all of the following conditions are met: (i) the employee is an “exempt employee” under the Fair Labor Standards Act and Puerto Rican regulations; (ii) resides in Puerto Rico; (iii) the employer is covered by Act 27-2024; and (iv) the employee works remotely. These relationships are generally excluded from Puerto Rican employment laws, except as specifically stated.

Covered employers are not required to provide workers’ compensation and nonoccupational temporary disability if they offer equivalent or better coverage than required by Puerto Rican laws. However, for unemployment insurance, covered employers must follow Puerto Rico’s unemployment insurance statute, Act 74-1956, the Puerto Rico Employment Security Act, unless the employee can claim unemployment benefits elsewhere.

If not, employers may delegate to the domiciled remote employee the responsibility of obtaining unemployment insurance with the Puerto Rico Department of Labor, including filing tax quarterly forms.

Remote employees not domiciled in Puerto Rico
If an employee relocates to Puerto Rico on a nondomiciled basis to work remotely for a covered employer, the employer is exempt from Puerto Rican employment laws, including those related to benefits and insurance. The employment relationship will be governed by the employment agreement or, if none exists, by the laws of the employee’s original domicile.

This exemption applies to both exempt and nonexempt employees. However, if a nondomiciled remote employee becomes domiciled in Puerto Rico and is exempt, the relationship will be governed by Act 27-2024. Non-exempt employees who become domiciled in Puerto Rico will not benefit from Act 27-2024, so Puerto Rico employment laws will apply.   

Unionized employees of airlines opening bases in Puerto Rico
Under Act 27-2024, unionized employees of airlines that establish air or crew bases in Puerto Rico and are covered by collective bargaining agreements are excluded from Puerto Rican employment law protections and will be governed solely by their agreements.

It remains unclear whether these airlines are required to provide workers’ compensation insurance to their unionized employees. Nonunionized airline employees at these bases will remain protected by Puerto Rico employment laws.

Through Act 27-2024, Puerto Rico aims to be better positioned to promote itself as a viable jurisdiction for remote work, both for current residents and out-of-state individuals. Employers are encouraged to seek legal advice should any questions arise.