On March 8, 2017, Puerto Rico enacted Act 16, creating the Puerto Rico Equal Pay Act ("PR Equal Pay Act" or "the Act"). The law's stated intent is to eradicate the pay difference between female and male employees. To that end, the Act prohibits pay discrimination based on sex among employees performing comparable job functions or duties that require the same skill, effort or responsibilities under similar working conditions. Exceptions are recognized for: (1) bona fide seniority or merit-based systems; (2) compensation based on quantity or quality of production, sales or profits; (3) differing levels of education, training or experience to the extent these factors are reasonably related to the specific job; and (4) any other reasonable factor that is not related to the person’s sex.

Notably, the PR Equal Pay Act introduces new prohibitions during the recruitment process aimed at “breaking the vicious cycle” of pay inequality between female and male employees that arise during the hiring process and result in female candidates earning less than their male counterparts. Prohibited practices include: (1) asking applicants or their current or former employers about their current salary or salary history; or (2) conditioning current or future employment upon an employee’s or applicant’s abstention from inquiring, discussing, requesting or divulging information regarding his or her salary or the salaries of other employees performing comparable jobs.

As to the first prohibition, exceptions are made regarding applicants' voluntary salary disclosures and pay corroboration that take place after the salary has been negotiated and the employer has made an offer of employment. With respect to the second prohibition, employers can prohibit human resources employees or those with supervisory or managerial positions who have access to compensation information from making disclosures regarding other employees' compensation without previous written consent. The Act also makes it illegal for employers to take adverse employment action against employees who address or discuss pay inequality.

If pay discrimination is established, the Act provides remedies in the form of back pay equaling the difference in salary the employee would have been entitled to receive absent the discrimination. This amount may be doubled as a penalty. In addition, the Act provides for the payment by the employer of the employee’s costs and attorney's fee. An employer can avoid the double back pay penalty if it demonstrates that, within the year preceding the filing of the complaint, it began or initiated a good-faith “self-evaluation” process of its payment practices and that it has made reasonable progress in eliminating sex-based salary differences. The Act requires the Puerto Rico Department of Labor ("PR DOL") to adopt guidelines and regulations regarding this self-evaluation process. Importantly, self-evaluation documents cannot be used in proceedings in order to establish violations of the Act for events that occurred prior to or within six months of the completion of this self-evaluation process, or after a year of its completion if the employer can establish that it has in good faith begun to implement a plan to resolve any sex-based pay differences.

Finally, employers that terminate, threaten, discriminate or retaliate against an employee in violation of the Act will be liable for double damages.

Beyond regulatory powers, the Act authorizes the PR DOL to receive and investigate complaints regarding violations of the Act and, where appropriate, file legal actions on behalf of employees. The Puerto Rico Women’s Advocate Office is also empowered to receive complaints, refer them to the PR DOL and take additional measures authorized by its enabling statute, as appropriate.

The Act's provisions are to be interpreted using as reference similar provisions of the federal Equal Pay Act and its implementing regulations.

Act 16 is effective immediately. The established employer penalties, however, will not take effect until March 8, 2018, one year after the Act's approval, in order to allow for employers to implement appropriate corrective measures as provided by the Act.