The Puerto Rico Oversight Board moved one step forward on its effort to repeal a labor law, only to run into new opposition from the leader of the Puerto Rico Senate.

The board's struggle to establish at-will employment on the island signals the uphill struggle it faces persuading the local government to go along with a broader array of austerity measures as it seeks to strengthen fiscal management in the Commonwealth.

On Thursday the Puerto Rico House of Representatives voted to repeal Law 80, a 1976 law that allows employees in the private and public sectors to force employers to compensate them after wrongful terminations. In a deal the board reached in late May, Gov. Ricardo Rosselló agreed to repeal the law and, in exchange, the board agreed to end its demand for austerity measures that would limit compensation for Puerto Rico workers.

The leaders of the Puerto Rico House of Representatives and Senate talk with Gov. Ricardo Rosselló.  From left to right Carlos Méndez Núñez, Thomas Rivera Schatz and Rosselló.
The leaders of the Puerto Rico House and Senate, left and center, are struggling among themselves and with the governor, right, on how to handle a Oversight Board demand for island at-will employment.

“The Financial Oversight and Management Board welcomes the legislation on the repeal of Law 80 adopted by the Puerto Rico House of Representatives today,” the board said in a press statement Thursday. “We believe this is a valuable step towards a more vibrant business environment that will help create jobs, attract new investment, and boost the growth of Puerto Rico’s economy.”

On May 30 the Puerto Rico Senate had approved a measure that would have introduced at-will employment only for employees entering the workforce in the future. The board had demanded the repeal for all employees.

On June 4 board executive director Natalie Jaresko sent a letter on behalf of the board to Puerto Rico Rep. Jorge Navarro Suárez explaining what the board would do if the House failed to repeal Law 80. Jaresko said that “at a minimum” the board would revert to the April fiscal plan and submit a budget consistent with the fiscal plan.

Jaresko said this would mean the board would reduce the number of mandatory sick and paid leave days and eliminate: a public employee Christmas Bonus appropriation; requirements for the bonus for private sector as well as public sector employees; an annual appropriation of $50 million for municipal economic development initiatives; a multiyear $345 million economic development and reform implementation initiatives fund; and an annual $25 million appropriation for University of Puerto Rico scholarships.

The Puerto Rico House voted to repeal Law 80 with certain conditions. First, for employees with more than 15 years tenure at a firm Law 80 would continue until 2021.

Second, the government would provide money to a fund to compensate employees who are wrongfully terminated or simply laid off.

The fund would provide up to $9,500 to employees who are wrongfully terminated. According to the governor’s Friday announcement, the fund would draw $100 million from a $345 million multi-year allocation for economic development. The governor and the board agreed to this allocation in the May compromise.

On Thursday after the House repeal of Law 80, the governor said in a written statement that “he will continue his dialogue with the president of the Senate, Thomas Rivera Schatz, and with the majority delegation of that body to approve the measure that ensures the benefits guaranteed in the agreement with the [Oversight Board].”

On Saturday, according to the El Vocero news website, the governor said at most $60 million would be needed for the fund. Also on Saturday according to the same news outlet, Rivera Schatz said he would oppose the new House-approved package of labor reform measures.

“Normally, [the disagreement between the Puerto Rico House and Senate] would go to a conference committee that would iron out any discrepancies,” wrote attorney John Mudd in his Control Board Watch blog. “However, the budget, which must be approved by June 30, is dependent on its repeal. If not, the board will reinstate the previously approved fiscal plan with deep cuts on the budget including the elimination of Christmas bonuses. A total mess.”

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