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Puerto Rico House Seeks to Undo Sections of the 2017 Labor Reform

May 19, 2021

The Puerto Rico House of Representatives has introduced House Bill 3, which seeks to amend and repeal certain sections of the Labor Transformation and Flexibility Act of 2017, also known as the 2017 Puerto Rico Labor Reform. The House held a Public Session for Final Consideration on April 27, 2021 where it sought input from various organizations on how the proposed House Bill 3 should be amended and how it should alter the 2017 Labor Reform.

What Is the 2017 Puerto Rico Labor Reform?

The 2017 Labor Reform was passed with the goal of stimulating Puerto Rico’s economy through employer-friendly provisions intended to attract new business to Puerto Rico while also facilitating operations for existing enterprises. The Labor Reform made changes to the Unjust Dismissal Act (Law 80), overtime laws, meal break requirements, vacation accrual rates, and lactation break requirements, among other laws. House Bill 3 seeks to repeal some of the changes brought about by the Labor Reform.

Proposed Changes

The House states that its goals are to reverse the “damage” caused by the 2017 Labor Reform with a work plan with two priorities: (1) return and broaden the labor rights applicable to workers in the private sphere, and (2) reclaim that the Legislative Assembly exercise its investigative power to inquire into prevailing work conditions in Puerto Rico and propose new protections for the benefit of the working class. House Bill 3’s proposed changes to 2017 Labor Reform provisions include the following:

  • Repeals the provision in the Labor Reform that provides for consistent interpretation between federal and local laws that address a similar employment issue
  • Eliminates the provision of an irrebuttable presumption of independent contractor status in certain instances
  • Reverts to the pre-Labor Reform requirement of paying daily overtime for time worked in excess of eight hours in any rolling 24-hour period, as opposed to in a calendar day.
  • Creates a three-year statute of limitations for breach of contract claims, wage and hour claims, termination claims, and discrimination claims
  • For employees unjustly terminated under Law 80, requires a severance of three months plus two weeks of salary for each year of service for those employees who have worked between one and 15 years and a severance of six months plus three weeks of salary for each year of service for those employees who have worked more than 15 years. There would no longer be a cap on the Law 80 severance
  • Creates a presumption of dismissal without just cause in all cases except where dealing with employees employed for a bona fide fixed time or a bona fide fixed project or fixed work
  • Amends Law 80’s definitions of just cause and constructive discharge
  • For nurses, security guards, croupiers, and others authorized by the Secretary of Labor, meal periods may be reduced to 30 minutes, as opposed to the 20 minutes under the Labor Reform
  • Provides double pay for employees who are also students who are required to work on a seventh consecutive day, and consequently forfeit their day of rest
  • Increases the accrual of paid vacation and sick leave to 1.25 days for each month in which an eligible employee works at least 115 hours, irrespective of date of hire
  • Provides for the accrual of paid vacation time and paid sick leave at 0.5 day per month for employees who work at least 20 hours per week, but less than 115 hours per month
  • Reduces probationary periods to three months and require written notice
  • Reverses the Christmas bonus hours worked requirement from 1,350 hours to 700 hours as well as the percentage requirements from 2% to 6% or 3% of salary

Conclusion

If House Bill 3 passes, this will bring significant changes to employers throughout Puerto Rico, scaling back many of the employer-friendly provisions that the Labor Reform brought along. The bill is currently before the Senate’s Human Rights and Labor Affairs Commission.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the author, Melissa C. Rodriguez, in our New York office.