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  • Writer's pictureThe San Juan Daily Star

Bankruptcy Judge preempts unionization, defined contribution laws to consummate debt plan

By The Star Staff

To help with the consummation of the commonwealth’s debt plan, Puerto Rico Title III Bankruptcy Court Judge Judge Laura Taylor Swain has preempted sections of the 1998 law that allows public workers to organize in unions.

In an order this week, the judge also preempted a provision from Act 106-2017, which is the law that establishes new defined contribution accounts for government employees, under which employees are to contribute 8.5% of their base compensation on a pre-tax basis.

She allowed the preemption of a section that calls for bonuses to be excluded from the compensation that may be contributed to Act 106-2017 defined contribution accounts because it conflicts with PROMESA’s provision that grants the Financial Oversight and Management Board the power to propose and confirm a plan of adjustment that maximizes labor support for the debt restructuring.

Preemption is a legal doctrine that allows a higher level of government to limit or eliminate the power of a lower level of government to regulate a specific issue.

Regarding Act 45 of 1998, the unionization bill, the judge preempted a section that provides for the Puerto Rico Labor Commission to establish collective bargaining units for government employees, and that only one union may be the exclusive representative of such units. She also preempted a section that prohibits collective bargaining agreements of government agencies executed pursuant to Act 45-1998 to have three or more years and another section that bans collective bargaining agreements from increasing the ratio of an agency’s total budget to line items for fringe benefits of employees during the four years prior to the entry of the collective bargaining agreement.

The judge allowed the preemptions because the sections conflict with PROMESA by imposing a financial condition on the Plan, which is exclusively within the Oversight Board’s province, and the Board’s right to determine financial conditions, according to the January 24 order.

The filing was published in the commonwealth bankruptcy case. The commonwealth confirmed in 2022 the debt adjustment plan for its debt.

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