Employment Law Reform In Puerto Rico: Take Two

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 The proposed bill contains similar changes to those proposed and then withdrawn by the Governor last month.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...