Governor Pierluisi signed a new law on workers’ rights and employers’ responsibilities on June 20, 2022. House Bill 1244 makes a number of changes to the 2017 Employment Law Reform. The PROMESA Fiscal Oversight and Management Board (FOMB) has communicated to the governor that it objects to the law, and a federal court has recently upheld the board’s authority to block laws it considers problematic.
The law requires large companies to comply within 30 days, and smaller companies must change their policies by September. Since the FOMB has objected to the law, however, employers are left in limbo, uncertain whether to make the changes or not.
Provisions of House Bill 1244
The law removes some of the changes in the 2017 bill, and adds some elements. Specific rules include the following:
- A probationary period for workers begins at 90 days, and can be extended for another 90 days.
- Accrual of vacation and sick time begin sooner, and part-time employees are included in the rule. Workers putting in at least 20 hours per week will receive one half day each of sick leave and vacation time per month. Workers putting in at least 115 hours per month are considered full time employees and will receive 1.25 days per month.
- The Christmas bonus threshold is reduced. Currently, workers must rack up 1,350 hours between October 1 and September 30 to receive a guaranteed Christmas bonus of 6% of their annual salary. This figure is reduced to 700 hours for large employers and 900 for small employers under the new law.
- Unjust dismissal laws are returned to their previous strength. There is a presumption that termination of employment is unjust unless there is a clear reason for it, the statute of limitations is extended to three years, and the formula for payments to those who are dismissed can require payments of as much as 6 months pay plus 3 weeks’ worth of pay for every completed year of service.
- Meal breaks are required, with two meal breaks if the workday is 10 hours or longer.
- Workers are entitled to one day of rest each week. Overtime pay is required if workers perform any work during the official rest day.
The FOMB objection and the governor’s response
The PROMESA board established in 2016 as part of the Puerto Rico Oversight, Management, and Economic Stability Act filed a motion objecting to the law when it was proposed earlier this year.
“The [oversight board] is extremely concerned legislation such as this may substantially deter investment in Puerto Rico and all the jobs and economic growth and prosperity it would create for the people,” the motion said.
The board also wrote to the governor, who responded in a letter which began, “After all the progress the Government and the Board together have made to serve the people of Puerto Rico, I found the letter sent by the FOMB’s General Counsel offensive.”
The governor expressed respect for the board but strongly disagreed with the board’s interpretation of the new labor law.
“In the last eighteen months my administration has implemented many initiatives aimed at lifting people out of poverty and expanding our tax base, including raising the Puerto Rico minimum wage, which also impacted the labor market and which the Board did not object,” Pierluisi wrote. “These initiatives have helped spur Puerto Rico’s recent economic growth and [have] allowed us to reduce the unemployment rate to its lowest level in our history, all while increasing the Island’s labor-participation rate to a historic high. HB 1244 is another opportunity to further incentivize private sector labor force participation through a greater commitment to protecting employees. Such labor- friendly initiatives are compatible with expanding our tax base and spurring economic development, which is consistent with the goals of the Certified Fiscal Plan.”
The governor’s letter goes on to dispute the idea that the board is allowed input on laws which are not budgetary in nature, describing the board’s predictions of economic effects as “speculative and arbitrary.”
There are federal laws covering the safety and rights of workers throughout the United States, but most labor laws are decided at the state and local level. As a territory, Puerto Rico is under the plenary control of Congress and may have less control.
Larger employers will have to alter their policies to meet the demands of the new labor law by July 20, 2022, leaving little time for a wait and see attitude to the new law in light of the board’s objections.