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Puerto Rico gov. signs new Labor Reform Act to expand workforce

Gov. Pedro Pierluisi signed House Bill 1244 into law, to expand private-sector worker rights to grow the island’s labor force, disregarding the Financial Oversight and Management Board for Puerto Rico, which had warned that he was prevented from signing it and that it would have an adverse effect on the economy.

The new law drew immediate reaction from the private sector, which slammed it for, among other things, changing the rules of the game.

The new law increases employee rest time, fringe benefits and job protection, reduces the number of hours required to qualify for the Christmas bonus, increases accrual of vacation leave and extends that benefit to part-time employees, and reduces the probationary period from nine to three months, among other changes.

“This new law makes it more attractive and safer to enter the workforce at a time when the vast majority of companies are looking for employees and when we need more workers to advance Puerto Rico’s reconstruction,” Pierluisi said in a recorded message aired on TV and social media.

“An employee must have the right to a reasonable vacation period per year, as this increases — not decreases — their productivity,” he said, noting he worked jointly with the Legislative Assembly to strike a “more balanced and beneficial law for everybody on the island.”

“Specifically, modifications were achieved in provisions that would have affected small and medium-sized businesses, and that could discourage the recruitment of employees,” he said. “More benefits will motivate our people to work, growing our workforce, accelerating reconstruction, putting more money to run through the economy and increasing government revenues.”

In his message, Pierluisi also responded to the Oversight Board’s warning that it will challenge the law in a letter dated June 13, 2022.

“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 [Board’s] general counsel offensive. The letter’s posture toward the people of Puerto Rico and their elected officials bordered on disrespect,” Pierluisi said.

He also told the regulatory body that it was wrong when it stated that the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), it has the power to prevent him “from signing any bill into law that it opposes and that my doing so would be an action in violation of a federal statute.”

“This interpretation of PROMESA would strip the government of its law-making powers and is inconsistent with the procedure PROMESA establishes to review laws after they are enacted,” Pierluisi said.

The governor also rejected the Board’s claims that the new law would reduce economic growth and market competition and would ultimately deprive the Commonwealth of the revenues associated with such revenue growth.

“The Board has no data to support its assertion; it is mere speculation and arbitrary at this point based on the Board’s own view of what the law accomplishes. If the Board’s claim is correct, then the economic impact of the Bill may indirectly affect government revenues, but those potential impacts are several degrees removed from the direct mandates of the law,” Pierluisi said.

The newly signed law modifies, but does not repeal, Act 4 of 2017, known as the “Puerto Rico Employment Law Reform,” which made substantial changes to most employment laws in Puerto Rico at the time.

Consumers will pay”
In a letter to Board Chairman David Skeel, the Puerto Rico Chamber of Commerce blasted the new law, saying, among other things, that the statute violates PROMESA, as it failed to provide a cost estimate and certification of compliance with the government’s approved Fiscal Plan.

The trade group also said some of the changes will affect the government’s coffers, fueling that possibility of incompliance with the Fiscal Plan.

The CofC also balked at having to pay overtime to employees who work on their day off, saying that represents a burden that the employer will have to assume — opting to absorb it or pass it on to consumers.

“These burdens for the employer affect the way of doing business in Puerto Rico, and the availability of companies to invest and hire employees. The most affected employees will be the least skilled and those who are not studying,” said CofC President Luis Gierbolini in the lengthy letter sent to the Board and obtained by News is my Business.

Meanwhile, Iván Báez, president of the Puerto Rico Retailers Association, said the new law “represents another hard blow to retail businesses and once again changes the rules of the game for doing business on the island.”

“It also again exposes the absence of public policy aimed at creating an integrated economic development plan that harmonizes all the sectors concerned,” said Báez, who is director of public affairs and government relations at Walmart Puerto Rico.

“It’s another economic blow that all businesses will have to face, thus adding to the excessive cost of electricity, the increase in transportation costs that were implemented in 2020, as well as the confiscatory inventory tax that they refuse to eliminate,” he said on behalf of the trade association known as ACDET in Spanish.

“These changes will also mean an increase in the basket of consumer goods for all Puerto Ricans, since the cost of all these measures will end up being paid by consumers,” he said.

In recent months, the private sector’s concern — pretty much across the board — has been a shortage of employees for different types of jobs, particularly those paid hourly.

Author Details
Author Details
Business reporter with 30 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.

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