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PUERTO RICO LABOR AND EMPLOYMENT LAW McConnell Valdés LLC Antonio Powered By Docstoc
                               McConnell Valdés LLC
                     Antonio Escudero Viera and Alfredo Hopgood

Table of Contents
   1. Puerto Rico Labor Law Guide
   2. Minimum Wage
   3. Verification of Identification and Authorization to Work
   4. Administration for Child Support Enforcement (“ASUME”)
   5. Independent Contractor
   6. Contracts
   7. Employment of Minors
   8. Regular Hours and Overtime
   9. Flexible Schedule
   10. Meal Period
   11. Uniforms
   12. Regulations of Operation of Commercial Establishments
   13. Employee Leaves
   14. Vacation and Sick Leave
   15. Family and Medical Leave Act (FMLA)
   16. Schedule Uniformed Services Employment and Reemployment Rights Act (USERRA)
   17. Compensation Procedures and Wages/Payroll Deductions
   18. Christmas Bonus
   19. Weekly Day Rest
   20. Unemployment
   21. Jury Duty
   22. Unions
   23. Drug Testing Act
   24. Dismissal Act
   25. American with Disabilities Act (ADA)
   26. Act of Notification for the Adjustment and Retraining of Employees (“WARN”)

1. Puerto Rico Labor Law Guide
   Applicable Law: 29 LPRA 1 et seq.

   The Constitution of the Commonwealth of Puerto Rico establishes the framework for the
   Puerto Rican labor law, through its Articles 15, 16, 17, and 18:
   Section 15:   The employment of children less than fourteen years of age in any occupation
                 which is prejudicial to their health or morals or which places them in jeopardy
                 of life or limb is prohibited.

   Section 16:   The right of every employee to choose his occupation freely and to resign
                 there from is recognized, as is his right to equal pay for equal work, to a
                 reasonable minimum salary, to protection against risks to his health or person
                 in his work or employment, and to an ordinary-workday which shall not
                 exceed eight hours. An employee may work in excess of this daily limit only if
                 he is paid extra compensation as provided by law, at a rate never less than one
                 and one-half times the regular rate at which he is employed.

   Section 17:   Persons employed by private businesses, enterprises and individual employers
                 and by agencies or instrumentalities of the government operating as private
                 businesses or enterprises, shall have the right to organize and to bargain
                 collectively with their employers through representatives of their own free
                 choosing in order to promote their welfare.

   Section 18:   In order to assure their right to organize and to bargain collectively, persons
                 employed by private businesses, enterprises and individual employers and by
                 agencies, enterprises and individual employers and by agencies or
                 instrumentalities of the government operating as private businesses or
                 enterprises, in their direct relations with their own employers shall have the
                 right to strike, to picket and to engage in other legal concerted activities.
                 Nothing herein contained shall impair the authority of the Legislative
                 Assembly to enact laws to deal with grave emergencies that clearly imperil the
                 public health or safety or essential public services.

2. Minimum Wage
   Applicable Law: Act No.180 of July 27, 1998, 129 LPRA 250 et seq. and Fair Labor
   Standards Act (FLSA) of 1938, 29 USC 208 et seq.

   The minimum hourly wage for a business covered by the Fair Labor Standards Act of 1938,
   29 USC 208 et seq. (FLSA) is:

                    Effective Date                    Minimum Wage (per hour)
                    July 24, 2008                             $6.55
                    July 24, 2009                             $7.25

   PR Act No. 84 of July 20, 1995, 29 LPRA 245 establishes that the jurisdiction will follow any
   increase in the U.S. Federal minimum wage for all industries covered by the FLSA. By the
   implementation of such act, the Minimum Wage Board (MWB) lost its authority to increase

   the minimum wage above the Federal requirement for all FLSA covered industries. As a
   consequence, the MWB was dissolved and its quasi-legislative functions were transferred to
   the Department of Labor and Human Resources. Non-exempt employees must be paid at least
   the required minimum wage. Act No. 180 of July 27, 1998 requires enterprises that are not
   covered by the FLSA, to pay a minimum of 70% of the applicable Federal minimum wage.
   The Secretary of Labor and Human Resources has the authority to decrease the percentage
   rate in order to safeguard employment in the enterprises not covered by the FLSA.

3. Verification of Identification and Authorization to Work (Applicable Law: Immigration
   Reform and Control Act (IRCA), 29 USCA 1802 et seq.2)

   All employers in Puerto Rico have the responsibility to verify the identity and work eligibility
   of its employees. The official Federal issued form to accomplish such verification and
   confirmation is Form I-9. The form details all documents that may be used to confirm an
   employee’s identity and authorization to work in the USA and Puerto Rico. An employer who
   does not comply with the requirements established by the Immigration Reform and Control
   Act (IRCA) will be imposed penalties.

4. Administration for Child Support Enforcement (“ASUME”) (Applicable Law: Act No. 5
   of December 30th, 1996, 8 LPRA 501 et seq.3)

   The Administration for Child Support Enforcement (“ASUME”) was created by Act No. 5 of
   December 30th, 1996, 8 LPRA 501 et seq. The Agency is responsible for creating and
   implementing the Commonwealth of Puerto Rico´s public policy regarding child support as
   well as the Program for the Support of People of Advanced Age (“PROSPERA”).

   ASUME imposes various crucial responsibilities upon employers, so as to guarantee that all
   individuals who are employed within the Commonwealth comply with their support duties.

   The employer´s responsibilities include the following:
   Registry of New Employees              Federal legislation requires Puerto Rico to have a
                                          registry of all new employees as of October 1, 1997.
                                          The Administration for Child Support Enforcement
                                          (ASUME) is the official governmental organization
                                          that manages the employee register. All employers
                                          must submit the required information of new
                                          employees to the State New Hire Register (RENE)
                                          within twenty (20) days of recruitment, using the
                                          ASM-5 form (New Hire Report) provided by

The employer´s responsibilities include the following:
Order of Retention of Earnings      Either a Tribunal or ASUME can request that an
                                    employer retains or discounts from the wages of an
                                    employee who owes support payments, the amounts
                                    owed, in order to comply with their support
                                    responsibilities. Said orders are mandatory and are
                                    effective on the date of notification. They will
                                    continue in effect for as long as the support
                                    obligations subsist, or until the order is modified or
                                    revoked by the Tribunal or ASUME. Retentions
                                    should begin on or before seven (7) business days
                                    after the order comes into effect, and the employee is
                                    paid. From then on, the employer will continue to
                                    retain the amounts within seven (7) business days
                                    from the next payment to the employee. The
                                    employer should include with the retentions sent to
                                    ASUME, a list with the: name, social security
                                    number of the employee, ASUME or the Tribunal´s
                                    case number, the amounts retained, and the date of
                                    retention. Employers can, instead of making the
                                    physical payments to ASUME, transfer the
                                    retentions electronically to the Automatic Clearing
                                    House (ACH). By doing so, employers do no need to
                                    submit the ASM-4 form.

Employers who fail to retain the    If an employer stops retaining or remitting the
ordered amount from the             amounts owed by the employee, according to the
employee´s wages.                   retention order, or fail to comply with any of the
                                    responsibilities imposed on them by the law, the
                                    Tribunal or ASUME, after notifying the employer
                                    and issuing a notice for a hearing, could:
                                    Order the employer to pay whatever was not retained
                                    or remitted, plus: Impose fines; Impose interests on
                                    the defaulted payments; Command the execution of
                                    all previous orders for payments, utilizing the
                                    employer´s property as collateral.
Termination of Employment           After termination of an employee, the employers
                                    must request a certificate of debt from ASUME,
                                    which will detail any amounts to be retained from
                                    the employee´s salary at the time of liquidation, in
                                    order to remit to ASUME to cover for the
                                    employee´s debts.

5. Independent Contractor
   Applicable Law: 4

   Puerto Rican law allows employers to recruit employees for permanent or predetermined
   durations. A third option is available for employers: the independent contractor.

   The independent contractor is not considered an employee of the firm as long as certain
   requirements are met. If in fact an employee is labeled as an independent contractor, his or
   her relationship with the employer will not be covered by most of the labor legislation of the

   Examples of the Supreme Court of Puerto Rico and the IRS´ guidelines to help determine
   whether or not an employee is in fact an independent contractor:

   1.   Nature and degree of control that the employer exercises over the employee.
   2.   Degree of permanence and stability of the employer-employee relationship.
   3.   Payment Methods.
   4.   Employer´s ability to employ and manage the employee.

6. Contracts

   a. Employment Contracts
      Applicable Law: Law No. 379 of May 15, 1948, 29 LPRA 271 et seq.5

        An employment contract in the jurisdiction of Puerto Rico can be agreed upon and
        executed through includes both written and oral negotiations and pacts, whereby an
        individual agrees to work for an employer in exchange for remuneration. The PR Act No.
        379 of May 15, 1948, 29 LPRA 271 determines that employers who do not stipulate the
        wages payable to its employees, will be required to pay the wage requirements established
        by law. Along the same lines, employment contracts that do not establish termination
        dates for the employee or the service rendered, will be considered as permanent
        employment contracts.

   b. Probationary Contracts (Applicable Law: Act No. 80 of May 30, 1976, 29 LPRA

        As per Act No. 80 of May 30, 1976:

        “So that a probatory work contract may be valid…,said contract shall be executed
        in writing stating the date on which said probatory period commences and ends,
        which in no case shall exceed three (3) months, unless a written permit is issued
        by the Secretary of Labor and Human Resources. The latter may authorize the
        extension of the probatory period for up to a maximum of six (6) months when in
        his/her judgment the nature of the work may so require.

   The basic probatory work contract must be executed before the employee begins to work
   for the employer. Every probatory work contract agreed upon after the employee starts to
   render services shall be null and void. When the employees are members of a labor union,
   the stipulation on the extension of the probatory period of up to six (6) months may be put
   into effect through a collective bargaining agreement or a written agreement between the
   union and the employer, without need of the consent or approval of the Secretary of Labor
   and Human Resources. Failure to comply with the above conditions regarding the
   probatory work contract shall render it null and void.

   Should the employee continue to work for the employer after the term established in the
   probatory work contract, or the authorized extension thereof, said employee shall acquire
   all the rights of an employee just as if he/she had been contracted without a definite term.

   Every temporary employee contracted to continue working for the same employer shall be
   credited with the time worked as a temporary employee for up to a maximum of half the
   time required as probatory period for the position, provided the position to be held by the
   employee entails the performance of the same tasks and duties of the position held by the
   employee as temporary employee.

   For the purposes of the provisions of this section, "month" shall be construed to mean a
   period of thirty (30) consecutive calendar days.”

c. Temporary Contracts
   Applicable Law: Act No. 26 of July 22, 1992, 29 LPRA 5757

   As per Act No. 26 of July 22, 1992:

   “The mandatory decree that covers temporary employment companies shall apply to
   temporary employees provided by temporary service companies, as to vacation leave and
   sick leave. Provided, that with regard to the other employment conditions established by
   decree, the mandatory decree of the client company shall apply to said temporary
   employees… [F]or the purpose of temporary employee claims…both the temporary
   service company and the client company shall be deemed joint employers…Provided, that
   with regard to the legislation prohibiting job discrimination and sexual harassment, as
   well as the legislation which regulates unjustified dismissal, whoever discriminates
   against or dismisses the employee or incurs actions sanctioned by law, be it the temporary
   employment company or the client company, shall answer for their compliance.

   Regarding legislation which compels the employer to retain the employee's position
   during the term of effectiveness of the contract, when it concerns temporary employees
   provided by temporary service companies, the obligation to retain their position stated in
   these laws and according to their requirements, shall rest upon the temporary service
   company, or in the case of non-compliance by the aforesaid, upon the client company to

      which the employee was rendering his/her services at the time in which he/she availed
      him/herself of said leave.

      The temporary service company shall be responsible for the payment of the Christmas
      bonus of the temporary employees provided by the aforesaid to the client companies,
      unless said employee has worked for the client company for the seven hundred (700)
      hours required by [the law], although in case the temporary service company does not
      comply with this obligation, said client company shall be responsible instead.”

      Temporary employees cannot be contracted for the following purposes:

        1. As a method to destroy or keep labor unions out of the workplace.

        2. To carry out illegal acts of discrimination.

        3. As means to elude compliance with the indemnity for release without just cause
           laws of the jurisdiction.

        4. In order to break, weaken or interrupt strikes or work stoppages.

7. Employment of Minors
   Applicable Law: Act No. 230 of May 12, 1942, 29 LPRA 431 et seq.8

   The laws of Puerto Rico define a minor, for the purpose of employment, as any child of either
   sex under eighteen (18) years of age.

   Act No. 230 of May 12, 1942 establishes the mandatory requirement for all minors to attend
   school. However, the law also allows for limited employment of minors by stating that “no
   minor under sixteen (16) years of age shall be employed, permitted, or suffered to work in
   Puerto Rico in, or in connection with, any gainful occupation; provided, that minors between
   fourteen (14) and less than sixteen (16) years of age may be employed outside class hours and
   during school vacations”, as long as the occupations is permitted by law.

   An employer who employs a minor must comply with the Job Description (Form NNT-16)
   and School Record (Form NNT-70) forms of the Department of Labor and Human Resources
   of the Commonwealth of Puerto Rico. The employer must submit both forms along with an
   original birth certificate of the minor in order for the Department of Labor and Human
   Resources to issue a certificate authorizing the minor to work. The certificate must be
   returned to the Department once the period of employment expires.

8. Regular Hours and Overtime
   Applicable Laws:
    P.R. Act No. 379 of May 15, 1948, 29 LPRA 271 et seq.
    Fair Labor Standards Act (“FLSA”)9

PR Act No. 379 of May 15, 1948, 29 LPRA 271 et seq, as amended, along with the Federal
Fair Labor Standards Act (“FLSA”) govern the wage and hour requirements for non-exempt
employees in Puerto Rico. The law dictates a maximum of eight (8) regular hours of work per
day with a maximum of forty (40) regular hours of work per week. Under the FLSA and PR
Act No. 180, these regular hours apply to all employees with the exclusion of executives,
professionals, administrators, travel agents, traveling salespersons, domestic employees, and
motor vehicle sales persons who earn commissions. The list of exclusions is included in
Regulation No. 13 of the Commonwealth´s Minimum Wage Board and is kept up to date with
FSLA regulations.

Under Puerto Rican law, FLSA covered employees who work in excess of eight (8) regular
hours during a twenty four (24) hour period must be compensated at one and a half times
(1.5x) their hourly wage, unless a Mandatory Decree or Wage Order of the Puerto Rico
Minimum Wage Board established a higher overtime rate. If the worker does not belong to an
FLSA covered industry, but has worked for more than eight (8) regular hours during a twenty
four (24) hour period, the compensation will equal double (2x) their regular hourly wage, as
long as their work hours do not exceed forty (40) hours. This last condition may also be
waived as long there is a Mandatory Decree or an agreement between the parties.

In Puerto Rico, the FLSA applies to:

   1. Employers with an annual business volume exceeding $500,000.
   2. Employees of an employer who does not meet the stated annual volume but whose
      employees are engaged directly in interstate commerce or in the production of goods
      for interstate commerce.
   3. To the extent that the Company’s annual business volume is in excess of $500,000, it
      will be subject to the FLSA. The Company will also be subject to Puerto Rico
      legislation with respect to wages and hours not covered by the FLSA.

   Under Federal Law:
                    Weekly:                                         Daily:
      The workweek is a fixed and                      There is no requirement to pay
         regularly recurring period of seven             daily overtime compensation
         consecutive 24-hour periods. It does            under Federal law.
         not need to be calendar nor the same
         for all employees.
      The beginning of the workweek,
         once established, may be changed
         only if the change is intended to be
         permanent and is not designed to
         circumvent the overtime
         requirements of the FLSA.

    Under Puerto Rico Law:
    Weekly:                                          Daily:
       Puerto Rico’s overtime pay                       There is a recurring problem with
          applicable to companies and                       daily overtime. While the
          employees covered by the FLSA is                  workweek is fixed, the Puerto
          the same provided by the Federal                  Rico Department of Labor has
          statute, or, time and one half (1½)               taken the position that the day is
          for all hours in excess of forty (40)             not. For purposes of daily
          during the workweek.                              overtime computation, the
                                                            Department takes into account any
                                                            twenty-four (24) hour period.

Failure to comply with the law regarding the payment of wages, including overtime, will
result in the employer being liable for: (1) the principal amount not paid, plus (2) a penalty in
the amount of an equal sum. The employer may also be liable for other costs, expenses,
interests, and attorneys’ fees.

The statutory time limitation for claims regarding unpaid wages is three (3) years beginning
on the date of termination of employment.

Summary Tables of Regular Hours and Overtime in Puerto Rico

Weekly Hours and Overtime

                   Maximum                    Rate           Overtime                Rate
                   Hours                                     Per Week
                   Per Week
Federal: FLSA      40                  Hourly              Excess of 40         1.5 x hourly
                                                               hours                wage
P.R.: Act No.      40                  Hourly             Excess of 40        1.5 x hourly
379                                                       hours               wage

Daily Hours and Overtime

                   Maximum             Rate               Overtime            Rate
                   Hours                                  Per Day
                   Per Day
Federal: FLSA      24                  Hourly             Excess of 40        1.5 x hourly
                                       wage               hours per week.     wage
P.R.: Act No.      8                   Hourly             Excess of 8         1.5 x hourly
379                                    wage               hours per day.      wage

9. Flexible Schedule

   Applicable Law: Puerto Rico Act No. 83 of July 20, 1995, 29 LPRA 27110

   A flexible work schedule may be established by mutual agreement between the employer and
   the employee, as indicated by Puerto Rico Act No. 83 of July 20, 1995 (Act No. 83). Either
   side can refuse to enter into such an agreement.

   If agreed upon, the law allows for the employee to advance the work period or delay the meal
   period for up to 3 hours. The hours resulting from the change are not considered overtime.

   Act No. 83 benefits employers by allowing employees to adjust their starting and quitting
   times for reasons of personal convenience. By this adjustment, employers do not incur the
   obligation of paying the overtime premium that would otherwise accrue if the employee
   reported for duty the following day without having had the minimum rest period between

   The following requirements must be met to validate all flexible work schedules:

   1. Existence of a voluntary agreement between employer and employee. No reprisals may be
      taken against an employee solely because of a refusal to enter into a flexible hour’s
   2. The employee may start the workday up to three (3) hours earlier or later than his regular
      starting time, without incurring in daily overtime, as long as no work is performed during
      a rest period of at least twelve (12) consecutive hours between the end of one shift and the
      beginning of the next, and the employee does not work more than eight (8) hours during
      the workday.
   3. The employee’s shift must be worked consecutively. The only valid interruption will be
      the regular meal period, as provided by law.
   4. It is prohibited to fraction an employee’s daily work shift which is subject to a flexible

10. Meal Period
    Applicable Law: Act No. 379 of May 15, 1948, 29 LPRA 271et seq.11

   Per disposition of Act No. 379 of May 15, 1948, 29 LPRA 271, all employers are required to
   grant their non-exempt employees a daily meal break. The break will consist of a minimum of
   one (1) hour which will begin anytime after the third (3rd) hour of work and will end before
   the beginning of the sixth (6th) consecutive hour of work. The aim of the law is to protect
   workers by preventing them from working over five (5) consecutive hours without taking
   their meal break.

   Act No. 379 entitles employees who are requested or allowed to work during their meal times
   to a remuneration of two (2) times their regular, hourly rate. This disposition is independent
   from any entitlement to overtime pay.

                                             - 10 -
   Act No. 83 of July 20, 1995, 29 LPRA 271 establishes that meal breaks may be reduced by
   written agreements between the employers and the employees or the unions which represent
   them, as long as all parties are benefited by the reduction. Meal period reductions cannot
   exceed 30 minutes with the exception of nurses, security guards, and croupiers; in which case,
   the period may be reduced to 20 minutes.

   Act No. 41 of August 17, 1990, 29 LPRA 271, grants a second meal break to any employee
   who works for a period longer than five (5) hours after their first meal break. This meal break
   may be reduced if both the employer and employee comply with the conditions established in
   Act No. 83 of July 20, 1995, 29 LPRA 271.

11. Uniforms
    Applicable Law: Act No. 180 of 1998 12

   Puerto Rico Act No. 180 of 1998 establishes that any employer, who requires the use of
   uniforms in the workplace, will have to provide them free of charge to its employees. Act No.
   180 does not require the employer to cover the cost of laundering the uniforms provided to its
   employees, although the Puerto Rico Department of Labor has taken the position that the
   employer should cover such cost. Nonetheless, the Department has been lax on this matter
   since it has not been adopted by law.

12. Regulations of Operation of Commercial Establishments
    Applicable Law: Closing Law of Puerto Rico, 29 LPRA 301 et seq.135

                  Half Day Openings: 
                        Day           Hours                    Hours
                                                       (If the day falls on a
                     January 5th          5am –             11am – 5pm
                   December 24th          5am –            11am – 5pm
                   December 31st          5am –            11am – 5pm
                           Monday      5am – 12am
                           Tuesday     5am – 12am
                        Wednesday      5am – 12am
                          Thursday     5am – 12am
                            Friday     5am – 12am
                          Saturday     5am – 12am
                          Sunday       11am – 5pm

                                              - 11 -
                   Full Day Closing:
                      January 1st
                      January 6th
                      Good Friday
                      Easter Sunday
                      Mother´s Day
                      Father´s Day
                      General Elections Day
                      Thanksgiving Day
                      December 25th

Work performed outside of the hours established above is at the discretion of management and
has no time limitation. This work includes anything related to the continuity of the operations and
maintenance facilities. Non-exempt employees will be paid double their regular hourly rate of
pay for their time worked on Sundays and during the days and hours the store is closed to the

The law establishes the business establishments that are not subject to the opening and closing
hours established above (29 LPRA 305):

   1. Those operated exclusively by their owners or their relatives within a second degree of
      consanguinity or affinity.

   2. Those that are owned by natural or juridical persons and that do not have more than
      fifteen (15) employees in their weekly payroll.

   3. Those located in places exclusively engaged in the development of cultural, artisanry,
      recreational or sports activities, whose articles to be sold are connected to the activity
      performed in that place.

   4. Those dedicated mainly to the manufacturing of foodstuffs and the direct sale to the
      public of cooked meals or other foodstuff (restaurants, cafes, coffee shops, bakeries,
      pastry shops, etc.).

   5. Pharmacies.

   6. Gasoline stations and convenience stores located therein or business establishments of
      similar commercial activity, whose sales area does not exceed three hundred and fifty
      (350) square meters limited to the sale of groceries, household articles, novelties, toys,

                                               - 12 -
      gifts, photography and drugstore articles, goods for outings and trips, stationary, fast
      foods, soft drinks, cigarettes, candy, milk, and ice, excluding alcoholic beverages

   7. Bookstores, newsstands, booths or kiosks for the sale of books, magazines, newspapers
      and literary or musical publications or tapes.

   8. Galleries, workshops, centers, booths that sell Puerto Rican works of art and artisany.

   9. Those that operate within the premises, buildings and terminals of airports and seaports.

   10. Those that operate within hotels, inns, condo-hotels and that are part of the facilities that
       they offer their guests or visitors.

   11. Those that operate as part of the facilities of a funeral home or cemetery.

   12. Marketplaces.

   13. Those located within the demarcation of an old or historic zone established or to be
       established pursuant to law, and those located in a zone that the Puerto Rico Planning
       Board has established as of tourist interest as of December 31, 1988, pursuant to the
       provisions of 161 et seq. of Title 23...

   14. The establishments that as a matter of exception must do urgent or necessary work to
       avoid danger or considerable loss of money.

   Employers should also be aware of the following details regarding the Puerto Rico
   regulations of operation of commercial establishments:

   1. Part time employees who have worked less than 22 hours during the week can work on

   2. Probationary employees cannot work on Sundays.

   3. Other employees who agree in writing can work on Sundays, but not 2 consecutive

   4. Technicians and exempt management cannot work two (2) consecutive Sundays, unless
      they work at the executive offices of the company.

13. Employee Leaves
    Applicable Law: See Table14

   Puerto Rican and Federal law requires employers to grant employee leaves under the
   circumstances detailed bellow. Those described as paid leaves, are mandatory by law;

                                               - 13 -
   optional payment means that the employer can voluntarily grant pay to its employment under
   those circumstances.

            TYPE OF LEAVE                 PAYMENT                APPLICABLE LAWS 
              Vacation                      Paid        Act No. 180 of July, 1998, 29 LPRA 
               Maternity                     Paid       Act  No.  3  of  March  13,  1942,  29 
                                                        LPRA 467 
                  Sick                       Paid       Act  No.  180  of  July  27,  1998,  29 
                                                        LPRA 250 
      Witness in criminal crimes             Paid       Act  No.  122  of  July  12,  1986,  29 
                                                        LPRA 193 
               Jury Duty                     Paid       Act No. 281 of September 27, 2003 
         Breast­feeding period               Paid       Act  No.427  of  December  16,  2000 
                                                        Act No. 95 of April 23, 2004 
      Renewal of driver´s license            Paid       Act  No.  22  of  January  7,  2000,  Art. 
          required to work                              3.02(b) 
              Military                     Optional     Act No. 62 of June 23, 1969, Act No. 
                                                        13  of  October  13,  1980,  29  LPRA 
                                                        811, and USERRA 
                 Sports                    Optional     Act  No.  49  of  June  27,  1987,  29 
                                                        LPRA  1101,  and  Act  No.  24  of 
                                                        January 5, 2002 
      Chauffeur´s Social Security          Optional     Act  No.  428  of  May  15,  1950,  29 
                                                        LPRA 681 
         Automobile Accident               Optional     Act  No.  138  of  June  26,  1968,  9 
                                                        LPRA 2051 
          Family and Medical               Optional     August 5, 1993, 29 USCA 2601 
         State Insurance Fund              Optional     Act  No.  45  of  April  18,  1935,  11 
                                                        LPRA 6 
     Non­Occupational Disability          Optional      Act  No.  139  of  June  26,  1968,  11 
                (“SINOT”)                               LPRA 201 et seq. 
14. Vacation and Sick Leave
    Applicable Law: Puerto Rico Act No. 180 of July 27, 1998

   The statutory requirements for the accrual and enjoyment of vacation and sick leaves for non-
   exempt employees in Puerto Rico are determined in Puerto Rico Act No. 180 of July 27, 1998
   (“Act No. 180”).

   Per mandatory decree effective August 1, 1995, employees who work more than 115 hours
   per month and who are covered by the provisions of Act No. 180, have the right to accrue
   vacation leave at a rate of 1 ¼ days per month.

                                             - 14 -
Accrual Rate of Vacations and Sick Leave: 
                                Per Month                        Per Year
Vacations                       1¼ days per month                15 days
Sick Leave*                     1 day                            12 days
*Provided that the employee works at least 115 hours during the month

Vacation and Sick Leave Mandatory Decree Guidelines: 
Date of 
Prior to     Employees covered by a mandatory decree (“MD”) with more than fifteen
August 1,    (15) days of vacation and/or for more than twelve (12) days of sick leave per
1995         year, will continue enjoying those benefits.
Prior to     Employees covered by a MD providing for vacation and/or sick leave
August 1,    benefits below the statutory limits, will continue to receive the benefits
1995         provided by the specific decree covering the employer’s operation, until the
             P.R. Secretary of Labor revises those benefits to equate them with the new
             statutory limits as soon as the economic conditions of the particular industry
             allows this to be done.
             Employees will only be entitled to the lesser benefit provided by the
After        statutory limits as stated in Act No. 180 or the one provided by the
August 1,    mandatory decree applicable to the industry in question. Insofar as the
1995         Company’s employees will have been hired after the threshold date of
             August 1, 1995, the Act No. 180 statutory accrual rates provided in section 1

Probationary periods do not entitle employees to accumulate vacation or sick leave for the
first 90 days of work. This time period may be increased to 180 days, per disposition of the
Secretary of Labor and Human Resources. If the employee becomes a regular employee, the
accrual of vacation time and sick leave will apply retrospectively to the first day of work as
indicated by Act No. 96 of June 26, 1956, 29 LPRA 245.

a. Vacation and Sick Leave Benefits

   These benefits are enjoyed and paid based on the regular working day prevailing during
   the months in which those benefits have been accrued. Vacation and sick leave are
   enjoyed and paid based on the regular working day prevailing at the time of payment
   and/or enjoyment of this benefit. The last two (2) months of employment of the employee
   in question may be taken in consideration in calculating leave entitlement pay.

   In the case of employees with different daily schedules, the regular day will be
   determined dividing the total regular hours worked during the month by the total working

                                           - 15 -
   days. In those instances in which the daily work schedule of the employees cannot be
   determined, they will be computed on the basis of eight (8) hours per day.

   Vacation and sick leave time will be considered time worked for purposes of the accrual
   of said Benefits and will be equivalent to at least the regular hourly rate earned by the
   employee during the month in which said leave was accrued. In the case of employees
   whose salary is based on non-discretionary commissions or other incentives, the employer
   may calculate the regular hourly salary by dividing the total commissions or incentives
   earned during the year by 52 weeks.

b. Vacation

   Vacation days may be enjoyed after the first full year of employment on a consecutive or
   fragmented manner. Mutual agreement between the employer and the employee is needed
   to fragment the vacations; nonetheless, the employee will always maintain a right to enjoy
   at least five (5) consecutive working days of vacation leave per year.

   The employer will be responsible for establishing and/or authorizing the employee´s
   vacation schedule so as to prevent any interruption of normal operations of the business.
   Vacation leave may be accrued up to two (2) years, by mutual agreement between the
   employer and the employee. The employer who fails to provide vacation leave to an
   employee after he/she has accrued same in excess of (2) years, must grant the employee
   vacation leave for the total number of days accrued, and pay the employee twice the
   amount for the vacation accrued in excess of two (2) years.

   In case the employee’s employment is terminated for whatever reason after the first ninety
   (90) days of probationary employment, the employer must pay the employee the total
   vacation leave he/she has accrued, even if it is less than one year’s accrual. At the written
   request of the employee, the employer may “liquidate” or pay-off the vacation leave
   accrued by the employee in excess of ten (10) days.

c. Sick Leave

   Except in cases of acts of force majeure, the employee must notify about his/her illness as
   soon as possible and not later than the same day of his/her absence to work.

   The enjoyment of sick leave does not excuse the employee from compliance with those
   rules of conduct validly established by the employer, such as, for example, those dealing
   with attendance, the requirement of providing a medical certificate if the absence exceeds
   two (2) working days and the requirement of periodical reports about the continuation of
   the illness. Sick leave not taken by the employee during the year will remain accrued for
   successive years up to a maximum of fifteen (15) days.

                                          - 16 -
        Failure to comply with the payment of vacation and sick leave as required by law will
        result in the employer being liable for the principal amount not paid, plus an equal sum as
        a penalty for failure to pay; and costs, expenses, interest and attorney’s fees.

15. Family and Medical Leave Act (FMLA)
    Applicable Law: 29 U.S.C. § 2601 et seq. and 29 LPRA 260115

   The Family and Medical Leave Act of 1993 requires employers with 50 or more employees in
   a 75 mile-radius, to grant certain eligible employees up to 12 weeks per year of unpaid leave
   time for the:

   1.   Birth of a Child
   2.   Adoption or foster placement of a child
   3.   To care for a family member with a serious health condition, or
   4.   For treatment of the employee’s own serious health condition.

   The FMLA applies concurrently with other Puerto Rico laws providing leave for the same
   reasons, i.e., maternity, workers’ compensation, and non-occupational disability leaves. Any
   paid or otherwise compensated leave taken under said laws may also count towards the
   twelve-week leave entitlement provided by the Family and Medical Leave Act.

   Employees are eligible for a family or medical leave if they have worked for the employer for
   a minimum of a year or 1,250 hours during the previous 12 months. Additionally, to qualify
   for said leave, employees must comply with certain notification and medical certification

   During the pendency of the leave, the employer will maintain the coverage of the employee´s
   previous health plan and other health care benefits, without altering them. At the end of the
   leave, the employee must be reinstated in his/her former position or an equivalent one with
   the same benefits.

   If the reasons for the unpaid leave also qualify for a paid leave entitlement, the employer can
   require the employee to substitute his/her accrued sick, vacation or personal paid leave, for
   any portion of the family and medical unpaid leave.

   As of January 28, 2008, the National Defense Authorization Act of 2008 (H.R. 4986) has
   been in effect. Its section 585 amends the FMLA to allow a spouse, son, daughter, parent or
   next of kin to take a leave of absence up to 26 workweeks during a 12-month period to take
   care of a member of the U.S. Armed Forces, National Guard, or Reserve suffering a service
   injury or illness. Additionally, the FMLA has also been amended by H.R. 4986, to provide,
   under certain circumstances, for employees to take up to 12 workweeks if they are family
   members of a service member called up to active duty. Both leaves may be taken on an
   intermittent or reduced schedule basis. The amendment also authorizes the substitution of

                                               - 17 -
   paid leave for unpaid leave. There are prior notification and medical certification
   requirements that the employee has to comply with before going on family and medical leave.

16. Schedule Uniformed Services Employment and Reemployment Rights Act (USERRA)
    Applicable Law: USERRA 38 U.S.C. 4301-4335
    Useful Link:

   The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)
   was created to strengthen the Veteran´s Reemployment Rights (VRR) Statute. The act serves
   as a protection for veteran and members of the Reserve components who wish to regain their
   rights to civilian jobs and benefits. It serves as prevention against discrimination regarding
   the recruitment, retention, promotion, and reemployment of veterans.

   USERRA requires that employees notify, with as much anticipation as it is possible, the need
   for the leave. Additionally, said leave can no exceed five (5) years.

   Employee Rights under USERRA include:

   1. An employee on a military leave has the same rights as employees on sick leave.
   2. Employees maintain the same seniority rights when they return as they would have
      enjoyed, had they remained working instead of joining the armed forces.
   3. Before entering service, the employee has the right to enjoy any leave of absence with
      pay that had been previously accrued.
   4. Employees maintain the employer´s health coverage, even if they receive further
      health benefits from the armed forces.
   5. All military service time will count towards the employee´s benefits and retirement

Leave                 Employee´s                        Employer´s             Possible Dismissal
1 – 30    Report to work during the next        Reinstate the employee to
 days     scheduled work shift after a          the position held before
          reasonable time to rest.              the leave.

31 – 90   Report to work within 14 days of      Reinstate the employee to     Without a just
 days     the end of service.                   the position held before      cause, the employer
                                                the leave.                    cannot dismiss the
                                                                              employee for six (6)
91- 180   Report to work within 14 days of      Reinstate the employee to     Without a just
 days     the end of service.                   the position held before      cause, the employer
                                                the leave or the next in      cannot dismiss the
                                                scale according to the        employee for six (6)
                                                employee’s seniority.         months.

                                              - 18 -
 Over        U.S.: Report to work within 90          Reinstate the employee to   Without a just
 180         days of the end of service.             the position held before    cause, the employer
 days        P.R.: Request reinstallation within     the leave or the next in    cannot dismiss the
             180 days of the end of service, as      scale according to the      employee for one
             long as the service was a regular       employee’s seniority.       (1) year
             military duty (Act No. 13 of
             October2, 1980, 29 LPRA 811).

17. Compensation Procedures and Wages/Payroll Deductions
    Applicable Law: Act No. 17 of April 17, 1931, 29 LPRA 173 et seq.17

   According to Puerto Rico law, employees will be paid on a weekly, by weekly, or every 15
   day basis. Mutually agreed upon pay advances can be lawfully deducted from the next
   paycheck by the employer.

   Employees have the right to choose their preferred payment method. The primary methods of
   payment of salaries in Puerto Rico include:

        1.       Cash
        2.       Check
        3.       Direct Deposit
        4.       Electronic Transfer of Funds
        5.       Direct deposits to the checking or saving accounts of the employees.
        6.       Payment to a Payroll card
        7.       Other electronic means

   Act No. 17 allows for the discount of mandatory federal and state taxes as well as for some
   optional deductions, if done with the written consent of the employee. The Act does not allow
   for deductions of the payment of benefits covered by the Employment Retirement Income
   Security Act (ERISA).

   Please consult Act No. 17 to review the salary deduction guidelines, since many deductions
   are prohibited unless covered by law or the Act.

   Crucial Information for Employers:

   1. Returned checks may result in a 100% penalty for the employer

   2. Employers who do not compensate their employees within 10 days of the official pay day
      will commit a criminal offense that could result in prison time or other penalties.

   3. Employers who default on their payments may be reported to the Secretary of Labor.

                                                   - 19 -
18. Christmas Bonus
    Applicable Law: Act No. 148 of June 30, 1969 , 29 LPRA 50118

   The privilege of an annual Christmas bonus applies to all employees in Puerto Rico, including
   executives, professionals, administrative employees, and outside salespersons.

   Employers must pay a Christmas bonus to all employees who worked a minimum of 700
   hours during the one year period beginning on October 1st and ending on September 30th of
   the following year, as long as the employee has generated sufficient profits to do so.

   The law establishes the payment period for the bonus from December 1st to December 15th of
   each year, but allows for a different payment date as long as it is agreed upon by both the
   employer and the employee. This agreement must be in writing.

   As of September 29, 2005, Act No. 124 amended Act No. 148 of June 30, 1969 to establish
   consecutive increases to the minimum statutory annual bonus, beginning in 2006. The
   following table summarizes the increases.

   Employers who fail to pay the Christmas bonus on time to its employees will face the
   following penalties:

                 Time of Overdue Payment          Penalty          Payment
                      Up to 6 months               50%        bonus payment x 1.5
                   More than 6 months              100%        bonus payment x 2

Other requirements for the annual Christmas bonus include:

   1. Total bonus payments may not exceed 15% of the company´s net profits derived from
      their Puerto Rico operations.

   2. Employers seeking to be partially or completely exempted from their legal obligation
      to pay Christmas bonuses must submit their certified financial statements to the
      Secretary of Labor and Human Resources by November 30th.

   3. Employers legally obligated to pay employees who no longer work for the company at
      the time of payment of the Christmas Bonus, and who cannot be located, are required
      to deposit the amount at the Department of Labor and Human Resources.

19. Weekly Day Rest
    Applicable Law: Puerto Rico Act No. 289 of 1946, 29 LPRA 29519

   As per Puerto Rico Act No. 289 of 1946, 29 LPRA 295:

                                             - 20 -
       “All employees of any commercial or industrial establishment, enterprise or
       lucrative or non-lucrative business, including those operated by nonprofit
       associations or organizations and charitable institutions, not subject to the
       provisions…relative to the closing to the public, shall be entitled to one day of rest
       for every six (6) working days… [O]ne day of rest shall be understood as a period
       of twenty-four (24) consecutive hours.”

20. Unemployment
    Applicable Law: Act No. 74 of June 21, 1956, 29 LPRA 701 et seq.20

   The Puerto Rico Employment Security Act, No. 74 of June 21, 1956, 29 LPRA 701 et seq,
   covers all workers in the jurisdiction of Puerto Rico. Employers are required to pay to the
   Secretary of the Treasury a payroll tax that could be adjusted annually.

   Employees may be eligible for unemployment benefits, for up to 26 weeks per year, if their
   services were conducted in the United States, the U.S. Virgin Islands, and/or Canada, or as
   long as the work is controlled from Puerto Rico and the employee is not covered by other
   unemployment acts. Unemployment premiums are based on the employer’s experience rating.

21. Jury Duty
    Applicable Law: PR Act No. 87 of June 26, 1964, 29 LPRA 15221

   As per PR Act No. 87 of June 26, 1964, 29 LPRA 152:

       “The right is hereby established of any person dismissed from employment on
       account of his having been called upon to serve, or having served, as a jury member
       in a court of justice of Puerto Rico, whether commonwealth or federal, to be
       reinstated in his office or employment, or in one of like category, status and salary.
       Such a person shall also be entitled to any additional benefits as would have,
       naturally, accrued to him had he not been unlawfully dismissed from his

       The reinstatement shall take place within the forty eight (48) hours following the
       termination of his functions as juror. To be reinstated the interested party must appear
       personally at his employment before the said term; otherwise it shall be understood
       that he waives his right to reinstatement.

       Any person who has had to absent himself from his job to act as juror may, at his
       discretion, charge the time that he has been absent to act as such, to his regular
       vacation leave. The provisions of this subsection shall in no way affect the rights
       acquired through collective bargaining to these effects.

                                               - 21 -
       Any employer who dismisses a person for having served as a juror, or refuses to
       reinstate him for this reason or reinstates him in a position of an inferior category,
       status, or retribution than what he held at the moment he started to serve as a juror,
       provided the provisions of subsection (b) of this section are met, shall incur civil
       liability for a sum equal to twice the amount of damages caused by his action to this
       person, or for a sum of not less than one hundred dollars ($100) nor more than
       one thousand dollars ($1,000) at the discretion of the court, if the pecuniary damages
       cannot be determined.”

22. Unions
    Applicable Law: Taft-Harley Act or Labor Management Relations Act of 194722

   The Taft-Harley Act or Labor Management Relations Act of 1947 applies to Puerto Rico in
   order to regulate unions and their relationships with employers.

23. Drug Testing Act
    Applicable Law: Act No. 59 of August 8, 1997, 29 LPRA 161 et seq.23

   Puerto Rico Law does not impose mandatory drug testing for employees; therefore private
   employers are not obligated to set up drug testing programs. Any employee who wishes to set
   up a drug testing program should comply with the requirements established by the Law to
   Regulate Tests to Detect Controlled Substances in the Private Sector.

   Employers that comply with the requirements of the Act No.59 of August 8, 1997, limit their
   liability against employee lawsuits. However, there are exceptions to the limitations of
   liability established by Act 59. These exceptions include all acts that cause harm to the
   employee as a consequence of the employer´s fraud, fault, or negligence. Nonetheless, the
   limitations apply if the employee decides to accept benefits under the workmen´s
   compensation statute in relation to the damages suffered as a result of the employer´s fraud,
   fault, or negligence.

   Employer´s who establish the drug testing programs must comply with the following
   requirements (Act No. 59 of August 8, 1997, 29 LPRA 161b):

   1. “Tests shall be conducted in a uniform and consistent manner for all employees and
      candidates for employment; and pursuant to the terms of a written program, adopted
      by the employer and notified to the employees through delivery of a copy of the same,
      which shall contain its effective date and shall identify the law that authorizes its
      adoption. This notice shall be given at least sixty (60) days before its effective date
      and to candidates for employment upon filing a job application with the employer.
      The same terms and conditions shall apply to notices and delivery of copies made
      with respect to subsequent amendments thereto. However, any testing program for the
      detection of controlled substances established and implemented prior to the effective

                                              - 22 -
   date of this chapter and which meets these requirements, shall be deemed to be a valid
   testing program.”

2. “Tests shall be administered according to the program adopted by the employer,
   through regulations, which shall be notified to all employees and candidates for

3. “The employer shall defray the expenses of the controlled substances detection tests.
   The employer shall deem as working time, the time needed to submit to the tests and
   shall compensate the employees for such time, correspondingly. The absences of an
   employee to attend a rehabilitation program may be charged, in the first place, on sick
   leave, and then on vacation leave. Should all paid leave be exhausted, the employee
   shall be entitled to leave without pay for a maximum of thirty (30) days.”

4. “The drug tests shall be made through an urine sample, except for those circumstances
   in which it is not possible to take the same and shall be administered in accordance
   with scientifically accepted analytical and sample custody chain procedures, so that
   the privacy of the employee may be protected to the maximum, and pursuant to the
   Mandatory Guidelines for Federal Workplace Drug Testing Program. The sample
   shall not be submitted to any type of test other than that which is strictly necessary for
   the detection of controlled substances. The urine test shall be used, for which there
   shall be no on site observer while the employee provides the sample; but one person
   shall take the sample handed by the employee at the exact moment that the employee
   abandons the bathroom. For greater reliability, the temperature of the sample shall be
   taken in the presence of the employee who has been submitted to the test, as a
   measure to determine if the sample has been adulterated. In the event that the
   adulteration of a sample is determined, the same shall be discarded and the employee
   shall be requested to provide a new one, this time in the presence of a person of
   his/her same sex, who is a member of the laboratory personnel.”

5. “The tests made on the sample shall be conducted pursuant to scientifically acceptable
   analytical procedures for such type of test, by a certified laboratory, as recommended
   in the Mandatory Guidelines for Federal Workplace Drug Testing Program. Every
   sample with a positive result shall be submitted to a second corroborative analysis by
   the gas spectrometry chromatography method. Only after having obtained a positive
   corroborated result of the presence of opiates in the urine, shall a supervising
   physician, contracted by the laboratory conducting the tests, ask the person whose
   result was positive if he/she is taking any medication that could have some effect on
   the result of the test, provided there is no test that will allow the differentiation of the
   different types of opiates by analytical methods.”

                                            - 23 -
   6. “The employee shall be advised in writing that he/she is entitled to contract another
      laboratory to obtain a second result from the same sample, and should he/she wish to
      do so, the minimum amount of the obtained sample needed shall be transferred to an
      independent laboratory contracted by him/her, to conduct the tests.”

   7. “If the test conducted by the employer is positive, and the second test made at the
      request of the employee is negative, the employer may suggest three laboratories, of
      which the employee must choose one, so that a third test can be conducted at the
      expense of the employer. The result of this third test shall be binding on both parties.”

   8. “Every employee may be submitted to a maximum of two tests each year, unless a
      duly corroborated positive result has been obtained from one of such tests or as part of
      a counseling, treatment or rehabilitation program.”

   9. “Before the employer can take any disciplinary action based on the positive result of a
      test, said result shall have to be verified through a confirming laboratory test. The
      employee or candidate for employment shall have the opportunity to notify said
      laboratory of any information which is relevant to the interpretation of said result,
      including the use of prescribed or over the counter drugs.”

24. Dismissal Act
    Applicable Law: Act No. 80 of May 30, 1976, 29 LPRA 185 et seq.24

   Employers must adopt rules of conduct that are both reasonable and non-discriminatory. An
   employee who does not comply with the rules of conduct promulgated by the employer could
   be subject to disciplinary action. However, along the same lines, employers who dismiss
   workers without just cause are imposed penalties.

   Act No. 80 serves as the sole remedy for discharge without cause, although other actions such
   as torts or discriminatory actions can also be brought against the employer, if they apply. The
   law establishes the compensation awarded to those individuals hired for indefinite periods
   and discharged without just cause. Although the law explicitly covers employees who are
   hired for an indefinite period of time, it does not automatically exclude workers with a
   defined work period, since in some instances, Act No. 80 may serve to protect them as well.
   Nonetheless, the law will never apply to an employee that is working under a probationary

   The Law also establishes various situations under which a discharge of an employee is
   considered as “just cause”. These include (29 LPRA 185):

   1. That the worker indulges in a pattern of improper or disorderly conduct.

                                              - 24 -
   2. The attitude of the employee of not performing his work in an efficient manner, or of
      doing it belatedly and negligently or in violation of the standards of quality of the product
      produced or handled by the establishment.

   3. The employee's repeated violations of the reasonable rules and regulations established for
      the operation of the establishment provided a written copy thereof has been opportunely
      furnished to the employee.

   4. Full, temporary or partial closing of the operations of the establishment.

   5. Technological or reorganization changes as well as changes of style, design or the nature
      of the product made or handled by the establishment, and changes in the services rendered
      to the public.

   6. Reductions in employment made necessary by a reduction in the anticipated or prevailing
      volume of production, sales or profits at the time of the discharge.

   The Law also establishes situations where the discharge of an employee is NOT considered as
   “just cause”. These include (29 LPRA 185):

   1. A discharge made by the mere whim of the employer or without cause relative to the
      proper and normal operation of the establishment

   2. A discharging an employee, his/her collaboration or expressions made by him/her
      pertaining to his/her employer's business before any administrative, judicial or legislative
      forum in Puerto Rico when said expressions are not of a defamatory character nor
      constitute disclosure of privileged information according to law

25. American with Disabilities Act (ADA)
    Applicable Law: The Americans with Disabilities Act (ADA) 29 USCA 706 et seq. 25

   The Americans with Disabilities Act (ADA) applies to Puerto Rican companies and
   individuals who employ fifteen (15) or more employees. Its main objective is to protect all
   qualified, disabled employees, from discrimination. ADA requires that employers grant all
   qualified, disabled employees equal opportunities in all aspects of their jobs. The Act requires
   employers to make reasonable accommodations for disabled employees or applicants. Failure
   to comply with the Act could result in penalties against the employer which include:

   1. Compensatory and punitive damages

   2. Reinstatement of the employee with or without accommodation

   3. Back and front pay as remedies.

                                              - 25 -
   Puerto Rican legislators passed 26Act No. 44 of July 2, 1985, as amended, which serves to
   complement ADA. Act No. 44 prohibits discrimination against employees as a result of their
   physical and/or mental disabilities. The Act applies to both public and private entities and
   provides administrative remedies that include fines of up to $5,000.00 and cease and desist

   Per Act No. 355 of September 16, 2004, it is now a legal obligation of all courts and
   administrative agencies to interpret liberally, all statutes related to the rights of disabled

26. Act of Notification for the Adjustment and Retraining of Employees (“WARN”)
    Applicable Law: 29 USCA 2101 et seq. 27

   The Worker Adjustment and Retraining Notification Act of 1988 (“WARN”) requires that all
   employers provide written notice to its employees or their representatives, a minimum of
   sixty (60) calendar days before any closing or massive lay-off. The notice must also be
   given to the state dislocated worker unit and the mayor of the town where the plant is located.

   Employers required to provide such notice are those with 100 or more full time employees or
   with 100 or more employees (full time or part time) who in the aggregate work at least 4,000
   hours per week. WARN will not apply to an employer who does not meet the minimum
   threshold previously established.

   Although the sixty (60) day notice period is mandatory, Congress recognized three (3)
   situations under WARN in which an employer can give less than sixty-days advance notice:

      Natural Disaster           (1) Applies to:
                                     (a) Plant closings
                                     (b) Mass layoffs
                                 (2) Makes it lawful to provide less than sixty days notice if
                                 a plant closing or mass layoff is due to a natural disaster,
                                 such as flood, earthquake or drought.
     Faltering Company           (1) Applies to:
                                     a. Plant closing
                                 (2) Makes it lawful to provide less than sixty days notice
                                 where, among other things:
                                    (a) The employer was seeking additional capital or
                                 business which the employer lacked at the time 60 days
                                 notice of the closing would have been required.
                                     (b) The capital or business, if obtained, would have
                                 enabled the employer to avoid or postpone shutdown.
                                    (c) The employer reasonably and in good faith believed
                                 that giving notice would have prevented the employer from
                                 obtaining the needed capital or business.

                                                - 26 -
                             (3) This exception can be invoked in the event that the
                             closing of the plant becomes imminent a month or two
                             following the mass layoff.
                             (4) This Federal law applies to Puerto Rico. There are no
                             requirements under Puerto Rico laws with respect to
                             notification of plant closing or mass layoffs.
   Unforeseeable Business

Important Terms Regarding WARN:
    Plant Closing        “. . . the permanent or temporary shutdown of a single site of
   Section 2101a(2)      employment, or one or more facilities or operating units within a
                         single site of employment, if the shutdown results in employment
                         loss at the single site of employment, during any 30-day period for
                         50 or more employees excluding any part-time employees.”
     Mass Layoff         A reduction in force which:
                              (1) Is not the result of a plant closing; and

                             (2) Results in an employment loss at the single site of
                                during any thirty-day period for:
                                 (a) At least 500 (excluding part-time employees) at a
                                    particular site; or
                                 (b) At least thirty-three percent (33½) of an employment
                                    site’s full-time employees provided that at least fifty
                                    employees (excluding part-time) are affected.
 Part Time Employee      (1) An employee who is employed for an average of fewer than 20
  Section 2101 (a) (7)   hours per week or
                         (2) An employee who has been employed for fewer than six (6) of
                         the 12 months preceding the date on which notice is required. This
                         definition has been interpreted to include even those workers who
                         have been hired as regular, full-time employees within the period
                         previously specified.

                                           - 27 -