Puerto Rico: Puerto Rico State Insurance Corporation Issues 2020-2021 Risk Classification Manual With Important Modifications

On July 1, 2020, the Puerto Rico State Insurance Fund Corporation ("SIF") announced the automatic extension of the deadline for employers to file the Payroll Statement for fiscal year 2020-2021, from July 20 to August 4, 2020. The SIF is the government agency that provides workers' compensation benefits in Puerto Rico. As previously discussed, to obtain proper insurance coverage, an employer must consider all risks associated with its operations on its payroll statement and must pay the corresponding premiums in a timely manner. The SIF also published the Risk Classification Manual ("Manual") applicable for this payroll year, which includes significant modifications that are of particular interest to those employers that plan to have employees telework during this policy year.

Acknowledging that remote work will now be the "new normal" for most employees, the SIF modified approximately 20 risk classifications to cover teleworking. Pursuant to the current Manual, auditors, accountants, lawyers, system analysts and the office personnel identified in the description of multiple classifications are covered, even when working remotely, without requiring the employee to consider remote work as an additional risk on its Payroll Statement. Nevertheless, the employer will need to report to the SIF those employees who will be working remotely. The SIF has developed a form for such purposes.

On the other hand, if the employer has employees teleworking whose risk classifications do not contemplate remote work as part of their risk classification description, then the employer must consider including remote work as an additional risk in its policy. For those employees who will be working from home permanently, the employer may consider classifying them under the Remote Work Classification. If the employee will be partially or temporarily teleworking, the employer should consider classifying them under its usual classification requesting the SIF to add the remote work classification as an additional risk. Regardless of the course of action taken, if the employer has employees teleworking, it must fill out the form provided by the SIF, which must be submitted together with the Payroll Statement.

It must be noted that most of the classifications that were amended only extend the remote work coverage to the work performed by "office personnel," which has a particular definition that must be examined under the 2017 Regulations to Govern the Workmen's Compensation Insurance and consequences depending on the operational hazards of the position. Consequently, although the employer may correctly classify the employees under the same classification, if some of the employees working remotely do not perform office-like duties, the employer may need to request additional coverage for them. The employer may therefore have employees classified under the same classification, but will need to request additional remote work coverage for some of them. The good news is that the SIF lowered the premium pay for the remote work category from $2.70 per $100 of payroll to $1.05 per $100 of payroll. In many cases, this will mean that no additional amount will need to be paid to include the remote work classification since only the higher classification will be charged.

Although the above may represent an advancement, employers must be cautious since these new changes may increase the chance of misclassifying employees under the wrong risk classification.¹ It is of utmost importance that employers ensure that all of their employees' salaries are not only included in the Payroll Statement, but also correctly included in the applicable classification. Failure to do both may result in coverage denial by the State Insurance Fund, which will make the employer liable for any damages suffered by the injured employee and for the expenses incurred by the State Insurance Fund. Moreover, the employer would also be liable for the unpaid premiums for the misclassified employees. Therefore, to avoid coverage denial and monetary liability, it is highly advisable that employers seek legal counsel to ensure all of their personnel are properly classified and covered under the SIF's workmen's compensation insurance policy.

Footnote

1. For more information regarding the general requirements under the SIF and the employers' immunity that it may provide, please refer to our previous publication, Employers in Puerto Rico: Don't forget to renew your Workers' Compensation Insurance Policy.