New fed guidelines, rules to change Puerto Rico labor landscape
The labor landscape is very uncertain right now, an expert interviewed by News is my Business said.
Recent court rulings and regulations in the United States will have a significant impact on Puerto Rico companies, local labor and employment lawyer Alfredo Hopgood warned at the Society for Human Resource Management–Puerto Rico’s annual conference held late last week.
In an interview with News is my Business, Hopgood, who presented “Challenges vs. Progress: An Uncertain Labor Atmosphere” at the SHRM-PR event, stressed that the labor landscape is currently highly unpredictable.
“Right now, we have a situation of much confusion and uncertainty because this has happened sort of under the radar in Puerto Rico,” he said. “These developments have taken place during the summer, when we are immersed in other topics, such as political campaigns, etc., but already there have been countless lawsuits in the U.S.”
Employers, he noted, “need to be aware of what’s happening, and if any of the issues they’re currently dealing with at the workplace are related to any of the new guides and regulations, they should consult their attorneys.”
The Chevron ruling
In a major ruling on June 28, the U.S. Supreme Court cut back the power of federal agencies to interpret the laws they administer, ruling that courts should rely on their own interpretation of ambiguous laws. The decision is expected to have far-reaching effects throughout the country.
By a vote of 6-3, the justices overruled a landmark 1984 decision in Chevron v. Natural Resources Defense Council, which gave rise to the Chevron doctrine or Chevron deference. Under that doctrine, when Congress had not directly addressed a question at the center of a dispute, the court was required to uphold the agency’s interpretation of the statute as long as it was reasonable.
Since the Supreme Court first issued its decision in the Chevron case more than 40 years ago, it has become one of the most important rulings on federal administrative law, cited by federal courts more than 18,000 times, according to the court’s blog.
“I would say this is one of the most revolutionary and transcendental decisions that will affect government agencies,” Hopgood said. “It’s a revolutionary paradigm change. As an attorney, I think this is comparable to the overturn of Roe v. Wade.”
The ruling has triggered an avalanche of lawsuits involving labor and employment law, with various employers and groups attacking the validity of federal regulations established under the Chevron doctrine.
Hopgood said there are three key areas of concern for employers: the new workplace guidance by the Equal Employment Opportunity Commission (EEOC), a final rule in the EEOC’s Pregnant Workers Fairness Act, and a change in the Fair Labor Standards Act by the U.S. Department of Labor.
EEOC workplace harassment guideline
In April, the EEOC published a final guidance on harassment in the workplace that establishes the legal standards and employer liability applicable to harassment claims under the federal employment discrimination laws enforced by the EEOC.
These laws protect employees from harassment based on race, color, religion, national origin, disability, age (40 or older), genetic information and sex (including pregnancy, childbirth or related medical conditions, sexual orientation and gender identity).
The new guidance consolidates and replaces the agency’s five previous documents issued between 1987 and 1999, and serves as a single, unified resource on EEOC-enforced workplace harassment law, bringing together best practices for preventing and remedying harassment, the EEOC said.
The new guidance is under attack, particularly because of the rights of trans employees, Hopgood said, referring to two areas of controversy: pronouns and sex-segregated spaces. The guide establishes that trans employees have the right to be addressed using their preferred pronouns and to use facilities, such as restrooms, that correspond to their gender identity.
Pregnant Workers Fairness Act
Also in April, the EEOC issued a final rule for the Pregnant Workers Fairness Act (PWFA), requiring most employers with 15 or more employees to provide “reasonable accommodations” for limitations related to pregnancy, childbirth or related medical conditions, unless doing so would cause undue hardship for the employer. The regulation went into effect on June 18.
Examples of accommodations include additional breaks, a stool for sitting while working, time off for health care appointments, temporary reassignment, suspension of certain job duties and remote work.
The inclusion of abortion in the final rule as a “related medical condition” – alongside childbirth, miscarriage, infertility, fertility treatments, morning sickness, lactation, contraception and menstruation – has sparked controversy.
“As you can imagine, with abortion being such a hot topic in the U.S., this has generated numerous lawsuits,” Hopgood said. “States and organizations are challenging the rule because it forces an employer to not only tolerate but also to accommodate a woman who is ending her pregnancy, meaning that employer must participate in that process by accommodating the woman.”
He added that most lawsuits are taking place in conservative states, particularly in Texas.
Fair Labor Standards Act: Employee and independent contractors
In March, the U.S. Department of Labor (DOL) announced a final rule providing guidance on when an employee may be considered an independent contractor under the Fair Labor Standards Act (FLSA).
The rule, known as the 2024 Rule, implements an Economic Reality Test to address employee misclassification, a problem that undermines workers’ rights to minimum wage and overtime pay, facilitates wage theft, allows some employers to undercut their law-abiding competition, and harms the broader economy, according to the Labor Department said.
Rule 2024 replaced the 2021 Independent Contractor Status Under the FLSA rule, aiming to be more consistent with the law as interpreted by judicial precedent, the department added.
The new rule addresses six factors, or economic realities, that guide the analysis of a worker’s relationship with an employer, including any opportunity for profit or loss a worker might have, the financial stake and nature of any resources invested in the work, the degree of permanence of the work relationship, the degree of control an employer has over the worker, whether the work is essential to the employer’s business, and a factor regarding the worker’s skill and initiative.
Under the six criteria, an individual is more likely to be classified as an employee than under previous tests, Hopgood said.
“Before this change, a person who was classified as an independent contractor — that same person, with that same relationship with that organization — can now be classified as an employee,” he said, adding that further complicating matters is Puerto Rico’s 2017 labor reform.
The Labor Transformation and Flexibility Act of 2017 was passed to stimulate the local economy through employer-friendly provisions intended to attract new business to the island while facilitating operations for existing enterprises. The act includes provisions for probationary periods, vacation and sick leave, meal periods, bonuses, statute of limitations and employment contracts.
The 2024 Rule “will have more repercussions in Puerto Rico because the federal law will take precedence over the 2017 Labor Reform,” Hopgood noted.
Employers have obligations to employees related to vacation and sick pay, benefits, Social Security, Medicare, the Internal Revenue Service, Puerto Rico Treasury Department, Puerto Rico State Insurance Fund Corp., and other responsibilities that do not apply to independent contractors.
“This can have significant economic consequences to the employer, especially if, under the economic realities criteria, it is determined that an individual previously classified as an independent contractor is an employee,” Hopgood said. “There are many in this situation, and over many years the risk for the employer can be monumental. We’re talking about a lot of money.”
Ironically, though the new rule seeks to protect workers, it might go too far.
Hopgood mentioned lawsuits filed by numerous individuals, and groups representing them, who wish to remain independent contractors, such as truckers, freelancers, writers, and IT workers.
“They’re saying that they can’t be forced to be someone’s employee, that they’re happy to be independent contractors. They don’t want to be subjected to having an employer govern them as their boss. Rarely do you see the people who a regulation pretends to protect questioning that regulation,” Hopgood said.
On the other hand, “there’s a lot of abuse in that area,” he continued. “There are many individuals who employers classify as independent contractors using the professional services description to evade legal and economic responsibilities. These workers are not receiving overtime and vacation pay, benefits, etc., and that’s what this regulation is trying to correct.”
For now, in this current environment, employers should run everything by their attorneys when it comes to controversies in any of these areas, Hopgood advised.
“Unfortunately, this (SHRM) presentation couldn’t offer solutions because there aren’t any. Right now, today, we don’t have answers in black and white. It’s a recent development, there’s a lot of controversy, and this will extend not for months but for years,” he said.
“Until there’s more clarity, employers facing any situation related to these areas must, imperatively, consult their attorneys, evaluate their risks and make informed decisions,” Hopgood reiterated.
