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Fiscal board threatens court action to nullify new labor reform


Gov. Pedro Pierluisi

By The Star Staff


The Financial Oversight and Management Board has threatened to take the government to court to nullify Act 41, the latest labor reform.


“If the Governor does not cooperate, he leaves the Oversight Board with a single option you identified, namely an action to nullify Act 41,” the oversight board said in a letter dated July 30 to Omar Marrero Díaz, executive director of the Fiscal Agency and Financial Advisory Authority. “The Oversight Board reserves the right to take all actions it deems necessary, consistent with PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act]. … We hope such actions will be unnecessary.”


On June 20, Gov. Pedro Pierluisi Urrutia signed into law Act No. 41-2022, extending employment rights for employees in the private sector. In doing so, the governor rejected the oversight board’s position that the bill is inconsistent with the fiscal plan. The new law intends to restore certain rights that had been eliminated or reduced by the 2017 Labor Transformation and Flexibility Act and, further, to create additional rights for part-timers and students. Among the changes, the law amended the formula for calculating severance payment and the language of the “just causes” for termination under the Unjustified Dismissal Act, the hours of work required to accrue vacation and sick leave as well as the monthly accrual rates for those benefits, meal period provisions, and Christmas bonus provisions.


The governor has refused to yield to requests from the oversight board to refrain from enforcing the law.


“Absent a consent order suspending Act 41 while the parties discuss the issues, the Oversight Board will have no choice, as you point out, other than to commence an action to nullify the statute and to seek other appropriate relief to deter future violations,” the board said. “The Oversight Board hopes the Governor will immediately agree to consent to the order described above. If the Governor does not do so, he will be creating an extremely difficult situation for employers and employees acting under a law subject to nullification, while impairing the Commonwealth’s ability to achieve the growth and revenue requirements in the certified Fiscal Plan and Plan of Adjustment.”


The oversight board said the governor also did not comply with PROMESA in determining the economic impact of the law and dismissed assertions that doing so is a complicated task.


“Before getting into the specifics, however, we cannot accept your premise that assessing Act 41 is a complex and potentially undoable project,” the oversight board said. “To begin with, Act 41 imposes on businesses additional expenses for employment and termination, which obviously deters new hiring and investment. Moreover, the Oversight Board’s economist has determined not only that estimating the economic impact of Act 41 is feasible, but also that Act 41 will have a significant negative impact on the Fiscal Plan, including a reduction in GNP growth and tax revenues.”


The governor said later on Monday that he will insist on the amendments to the Labor Reform despite the oversight board’s ultimatum.


“We have already supplied all the information required, both under PROMESA and under the board itself,” Pierluisi said at a press conference at La Fortaleza. “Our intention is that these amendments to the Labor Reform be implemented and as we go along we will see if the impact is positive or negative. I anticipate that it will be positive.”

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