Employment Law Reform in Puerto Rico: Take Two

by Littler

Last month, we reported that the Governor of Puerto Rico announced his “Initiative to Reform the Labor Force,” which would have created significant employment law changes to increase the employment participation rate on the Island.  One week later, on March 28, 2018, in response to strong opposition from the Puerto Rico Legislature, the Governor withdrew his proposal.  Now, it is the Fiscal Oversight and Management Board (FOMB) that is proposing additional employment law reform. 

On April 26, 2018, the FOMB sent, for the first time since its creation, a proposed bill to the Puerto Rico Legislature.  The proposed bill contains similar changes to those proposed and then withdrawn by the Governor last month.  These proposed changes have been classified by the FOMB as an important factor for the success of Puerto Rico’s fiscal plan, the Island’s economic recovery and the creation of more employment opportunities.  In summary, the proposed bill introduces changes to Puerto Rico’s minimum wage, Christmas bonus, vacation and sick leave, and employment retaliation statutes. The FOMB is looking to obtain the bill’s approval by May 31, 2018.  

If approved, effective in 2019, the proposed employment law reform bill would repeal Act No. 80, Puerto Rico’s unjustified dismissal statute, making Puerto Rico an employment-at-will jurisdiction.  The Christmas bonus would also be eliminated effective 2019, meaning the last payment of this bonus would be made this coming December.  Furthermore, the proposed bill limits the minimum monthly accrual for vacation and sick leave to a proportional amount of 7 days per year, per benefit for employees who work at least 130 hours a month.  For employers that are residents of Puerto Rico with 12 employees or less, the minimum monthly accrual for vacation leave would be half a day per month, meaning a total of 6 days per year.

Additionally, effective January 1, 2019, the proposed bill would increase the minimum wage to $7.50 for employees age 25 years or older and those not otherwise exempted from federal minimum wage provisions.  Further, it provides for progressive increases to $7.75, $8.00 and $8.25 when the labor participation rate in Puerto Rico reaches 45%, 50%, and 55%, respectively.  As proposed, the minimum wage increase, however, would not apply to small and medium-sized employers or to employees under 25 years of age.  

Lastly, the FOMB proposes an amendment to Act No. 115, Puerto Rico’s anti-retaliation statute, which would reduce from three years to one year the period during which an employee may file a civil action against the employer.  Notably, in the case of internal complaints, the proposal would limit actionable protected conduct to those instances in which the employee offers or attempts to offer testimony or information that the employer violated any employment law.  

On April 26, 2018, the President of the Puerto Rico Senate announced that he would file, on behalf of the FOMB, the proposed labor reform.  The FOMB’s President has been summoned to a public hearing on May 1, 2018 to discuss the proposed bill.  It remains to be seen how this proposal will fare in the Puerto Rico legislature and if it will ultimately be approved. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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