US District Court nullifies the Puerto Rico Labor Reform of 2022
By: Angel Berberena, Esq.
March 4, 2023
On June 20, 2022, the Governor of Puerto Rico, Hon. Pedro R. Pierluisi, signed Act 41-2022 amending a substantial number of labor and employment provisions including accrual of sick and vacation days, reduction to probationary period, Christmas bonus eligibility, presumption of unjustified dismissal, extension of the statute of limitations for employees to commence legal actions, and others. See: Client Alert of June 21, 2022.
Due to the nature of said amendments and their potential impact to the Puerto Rico Fiscal Plan, on September 1, 2022, the Financial Oversight and Management Board of Puerto Rico (the “Board”) filed a lawsuit in the United States District Court for the District of Puerto Rico special proceedings under the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) contending that Act 41-2022 was enacted in violation of that Act. The Court agreed.
On March 3, 2023, the Hon. Laura Taylor Swain issued an Opinion and Order nullifying Act 41-2022. The Opinion is based on the fact that the Governor declined to provide adequate and sufficient evidence on the economic impact the law would have and the mandatory certification that the law is not significantly inconsistent with the Fiscal Plan as required under PROMESA. As per the Opinion:
“The only way to prevent the enforcement and application of the law, which regulates the private sector and provides for private civil enforcement remedies, is to nullify it ab initio. Accordingly, the court hereby declares that Act 41, and any actions that have been taken to implement it, are null and void ab initio.” P. 37.
Not only are all the changes introduced in Act 41-2022 null, but consequently Act 4-2017 is in full effect. See: Client Alert of January 2017. Furthermore, because Act 41-2022 and any action to implement it is null and void ab initio, employers are not bound by its provisions during the time it was in effect.
Going forward, employers will need to reassess the benefits provided to their workforce and consider the impact these changes will have on their operations and ongoing cases.