Puerto Rico Gov. Ricardo Rossell- proposed new labor laws to improve the commonwealth's employment and economy.
The proposal, mostly aimed at lowering employers' costs, comes after the economy declined for nine of the last 10 years and total employment fell by 22% to November 2016 from 10 years earlier. Puerto Rico officials have said that the amount of money available for paying its debts will partly depend on how much economic growth it can generate.
Local economists had a mixed take on the new proposals. Heidi Calero, president of H. Calero Consulting Group, said that the proposals were a "shopping list" of measures favored by the private sector that will be hard to put into productive practice. On the other hand, Vicente Feliciano, president of Advantage Business Consulting, said "reform of Puerto Rico labor laws should have been done long ago. Better late than never."
The new law, which would only affect employees hired after the bill's enactment, is intended to give employers more flexibility in their handling of workers.
The bill would reduce Puerto Rico's mandatory Christmas bonus for private sector employees. Employers with more than 20 employees would be required to pay a bonus of 2% of wages rather than 3%.
For non-exempt employees (non-managers), the new law would lower Puerto Rico's mandated rate of increase of sick days and vacation over the course of employee's stay with an employer. Only those working 115 hours a month would be eligible for these mandated sick and vacation days.
The law extends the probationary period for new employees to 18 months from the current three months. During probation, workers would be subject to employment-at-will, as in the states, and ineligible for coverage under Puerto Rico's Wrongful Discharge Act. It reduces the maximum awards that could be paid under that act.
Currently Puerto Rico law requires the payment of overtime rates when workers work more than eight hours in a day. The new law would allow employers and employees to reach agreements without the payment of overtime for 40 hour work weeks, with some days extending beyond eight hours.
The law would eliminate a requirement that large businesses on Sundays open no earlier than 11 a.m. and close no later 7 p.m.
Calero said she would have preferred all measures to have been treated to cost-benefit analysis both before being proposed and after being enacted. They should have come with a sunset clause to allow an end to those measures that don't pass muster.
Puerto Rico's Senate and House of Representatives will make changes to the law and the Oversight Board may make further changes as well, Calero said. Further, how the law works will depend largely on how it is instituted.
Feliciano was more optimistic. "Nothing demonstrates better the potential benefits of labor reform than the Lufthansa Technik investment in jet repair and maintenance," he said. "The Germans chose Puerto Rico [for the plane maintenance facility] over low-wage Mexico because of other issues, from skilled labor force to better coordination with Homeland Security.
"However, Lufthansa informed the Puerto Rico government that overtime pay after an 8-hour day was a deal breaker," Feliciano said. "The Puerto Rico legislature passed a law specifically for the aircraft repair and maintenance industry that exempted this industry from the 8-hour overtime requirement.
"Lufthansa is currently operating and growing in Aguadilla [Puerto Rico]. If this happened to one industry, imagine what could happen when labor reform is applied throughout the economy."
