Puerto Rico feud indicates local government problems

Puerto Rico’s local government received another strike against its efforts to change its labor laws after the U.S. Court of Appeals for the First Circuit Thursday ruled the U.S. District Court for Puerto Rico in March was correct in upholding the Oversight Board’s right to reject a 2022 labor law.

The law, Act 41, did not comply with the Puerto Rico Oversight, Management and Economic Stability Act because it was not submitted to the board with a formal estimate of its financial impact and because the board did not subsequently declare the act consistent with the fiscal plan, U.S. District Court Judge Laura Taylor Swain ruled.

Act 41 would have cut the probationary period for new employees; reduce the number of hours required for a Christmas bonus; mandate sick and vacation day benefits for part-time employees; increase wrongful termination indemnity pay; and require employers to prove dismissals were justified.

President of Puerto Rico House of Representatives Rafael "Tatito" Hernández Montañez

President of Puerto Rico House of Representatives Rafael “Tatito” Hernández Montañez has submitted a modified labor law to will address the Oversight Board’s objections.

Puerto Rico Gov. Pedro Pierluisi signed Act 41 in 2022. After this the board filed suit against it. Last week Pierluisi’s spokesperson said he was reviewing the appeals court decision.

Puerto Rico House of Representatives President Rafael “Tatito” Hernández Montañez on Saturday submitted a new bill that he said addressed the board’s and the court’s concerns.

A board spokesman said he couldn’t immediately comment on the bill. Puerto Rico’s legislature has set up an office to review the financial impact of bills and this will have to review it first before the board reviews it.

Analysts are skeptical of the local government’s ability to pass legislation that will pass muster with the board and PROMESA, arguing the government is likely more focused on future elections than meaningful legislation.

University of Puerto Rico Political Science Professor José Garriga Picó said, “Now, more than ever before, all the actions of local politicians in matters that may be related to PROMESA and the [board] are completely oriented to political positioning in view of the primaries or the elections. Hence no real public policy content can be read into them. 

“They do not care if the board vetoes their proposals,” Garriga Picó said. “They just need to put themselves on record for the election.” Puerto Rico’s general election will be held November 2024.

Interamerican University of Puerto Rico Professor Antonio Fernós Sagebien said all the local legislators “knew the bill was going nowhere as they did not perform the necessary economic/financial impact analysis… . They are unfit to serve.”

If Hernández Montañez and the legislature passes another labor bill, the board could reject it, Fernós Sagebien said, “but then Tatito will want to appeal and it’s all the cycle over and over again. See, the key to all this is the board needs the analysis and the Legislative Assembly know they can’t produce one.”

University of Puerto Rico Associate Professor José Caraballo Cueto said, “This is just another battle in an ideological war: the local government said that restoring benefits is a good thing for the economy and the board stated that it is a bad thing, but none have studied the impact of removing fringe benefits in 2020, which would reveal who is right. Both the local government and the board have access to the data to study the 2020 labor reform, but they did not want to study it.”

“I have little hope that one day these debates can fluctuate around rigorous statistical estimates and not on general points that are made to defend ideologies,” Caraballo Cueto said.

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