The Puerto Rico Oversight Board told Gov. Pedro Pierluisi and Puerto Rico legislative leaders that the lawmakers’ effort to undo a 2017 labor law is illegal.
Versions of a bill moving through both houses of the legislature would repeal portions of Act 4-2017, the Labor Transformation and Flexibility Act, and “reestablish many of the burdensome labor restrictions that existed prior to passage of the LFTA, as well as to create new labor restrictions,” Board Executive Director Natalie Jaresko wrote to Pierluisi, Senate President José Dalmau, and Speaker of the House Rafael Hernández Montañez on Thursday.
The Puerto Rico House of Representatives passed House Bill 3-2021 27 to 18 with five absent on May 1. The Puerto Rico Senate amended the bill and passed it 22 in favor, one against, and four abstaining on Monday. The House in now considering the amended bill.
“The Oversight Board is concerned that HB 3 is inconsistent with the Commonwealth’s 2021 Certified Fiscal Plan, and specifically the fiscal plan’s human capital and welfare reforms,” Jaresko wrote. The 2017 law was intended to make Puerto Rico’s labor market more competitive globally and to promote economic development.
When the board approved a fiscal plan for the central government on April 23 it was aware of the proposal to revoke the 2017 law. In the plan the board said a revocation “would discourage new hiring and reduce labor market flexibility, thus limiting the effectiveness of the [earned income tax credit] expansion in promoting labor participation, economic growth, and the revenues associated with that growth.”
Jaresko said the bill “would be significantly inconsistent with fiscal plan in violation of Puerto Rico Oversight, Management, and Economic Stability Act section 204(a) and would impair and defeat the purposes of PROMESA in violation of section 108(a)(2).” Section 108(a)(2) says, “Neither the governor nor the legislature may enact, implement, or enforce any statute, resolution, policy, or rule that would impair or defeat the purposes of this act, as determined by the Oversight Board.”
Puerto Rico’s economy has declined in every year but one since 2006. The board’s fiscal plans include structural reforms, including those of the labor market, to promote growth of the economy and, ultimately, government revenues.
Among other things the bill would increase vacation and sick leave accrual rates; extend statutes of limitations for employment-related causes of action; modify and limit the definitions of just cause and constructive discharge and provides severance for employees terminated without just cause pursuant to Law 80 of 1976; revert to the probationary period found prior to the 2017 law so that the period goes to three months from the current nine months (12 months for exempt employees), and require written notice of the probationary period; and,return to the earlier requirement for “Christmas bonus” eligibility of 700 hours in period Oct. 1 to Sept. 30 rather than the new 1,350 hour requirement and increase the bonus to either 3% or 6% from the current 2%.
Neither Dalmau nor Hernández Montañez immediately responded to a request for a comment.
