On September 1, 2022, the Financial Oversight and Management Board of Puerto Rico (FOMB) filed a complaint in the U.S. District Court for the District of Puerto Rico against Puerto Rico’s Governor Pedro Pierluisi Urrutia (Governor) requesting a declaratory and injunctive relief and the nullification of Act 41-2022, commonly known as the New Labor Reform. Act No. 41-2022 was signed into law by the Governor on June 20, 2022. The act created new employee benefits and brought back past requirements, that were modified by Act No. 4-2017, related to the accrual of vacation and sick days, duration of the probationary period, protections against unjustified dismissal, statute of limitations period, among other benefits and requirements for the private employment sector.
The FOMB asserts that Act No. 41-2022 “repeals critical labor reforms and adds new employment law requirements that negatively impact labor market flexibility, in direct contravention of express provisions in the certified Commonwealth fiscal plans.” Complaint, ¶ 1. The FOMB had been toying for months with its intent to commence this litigation and sent various letters to the Governor requesting information and materials regarding the Puerto Rico Government’s (Government) compliance with the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Additionally, the FOMB urged the Government, without avail, to suspend the implementation and enforcement of Act No. 41-2022 until the parties completed a full exchange of their views concerning Act No. 41-2022.
The Government’s position is that Act No. 41-2022 does not have a negative fiscal impact and, if any, it would be minimal. The Government further claims that the amendments promote growth in the private workforce. On September 2, 2022, the president of the Puerto Rico House of Representatives, Rafael Hernández Montañez, vowed to defend Act No. 41-2022. The House will file a motion to intervene in the case asserting that it intends to prove that the act in no way threatens the economic development of Puerto Rico.
For the time being, private employers must comply with Act No. 41-2022. For those that their revenue exceeds $10,000,000.00 or have 50 or more employees, their obligation to comply with Act No. 41-2022 commenced on July 20, 2022. Private employers designated as micro, small, or medium size businesses under Act No. 62-2014 must comply with Act No. 41-2022 starting on September 18, 2022.
We encourage all private employers to obtain legal counsel to determine the impact Act No. 41-2022 could have on their business and discuss next steps to follow with their internal policies and employee manuals in light of the new benefits, rights and/or obligations pursuant to Act No 41-2022.
The Employment and Benefits practice area at SMC welcomes any inquiries you may have related to Act No. 41-2022. Feel free to contact us at (787) 765-5656.