Our legislature is on the verge of approving a new labor reform bill that has aroused fear among employers of another round of labor cost increases, and hope among employees of finally receiving what they consider is fair treatment by employers.
Although the bill in its current form is employee oriented, employers should not fear a negative impact in their operations. You see, the current bill is like going back to the future, all over again.
Back in 2017, Governor Ricardo Rosselló’s administration passed the Labor Flexibility and Transformation Act (“Ley de Transformación y Flexibilidad Laboral”), which wiped away many of the long-standing protections and benefits granted by laws enacted decades before. The changes were drastic and, although welcomed by some employers, it definitively went a step too far, thus sowing the seeds for the new labor reform.
In its original form, the pendulum of benefits swung back to employee benefits, but in some areas, it went too far. Through its many twists and turns as it navigates the political waters, the bill has been substantially amended from its original form, thus making it more palatable to employers and employees alike.
If approved (as expected), the new labor reform would substantially bring back rights and benefits jettisoned by the 2017 “Reforma,” while keeping some dispositions deemed appropriate. One of the main changes attends to the accrued sick and vacation leave, which had been drastically reduced in the previous Rosselló’s reform. Now, employees would once again accrue 1.25 days of leave per month, for a total of 15 days for each leave. Employees who work less than 115 hours per month will still accrue half a day per month for a total of six days per year. This reduced benefit will impact part time employees who usually accrued nothing because they did not work the 115-hour minimum. To protect small businesses with 15 employees or less, the paid vacation leave would be half a day per month and sick leave would be one day per month.
Another major change relates to the compensation for illegal or “unjust” termination. The previous “Reforma” had drastically reduced this compensation by capping the maximum amount allowable, thus making terminations without just cause easier and less risky to employers. The current bill brings back the old scheme and limits, establishing that compensation for an illegal or unjust termination may entail a compensation based on years of employment. There is a fixed compensation that may run from 2 to 6-month salary, and a progressive compensation based on years of service, which may go from one week of salary for each year of service, up to three weeks for each year of service. Most of the language and conditions existing prior to the 2017 reform regarding the definition of what constitutes an unlawful termination are kept.
The current bill also eliminates the excessively long probationary period for new employees and reinstates the 3-month period, which can be extended for an additional 3-month term under specific circumstances.
Thankfully, the five-year statute of limitations for possible labor claims, one of the most troublesome dispositions of the current labor law is being repealed. If turned into law, the current bill would reinstate the three-year statute of limitations for an employee to file a lawsuit seeking compensation for his termination. Allowing an unusually long term for former employees to initiate legal action would place employers at a greater risk of loosing in litigation because evidence and witnesses could be lost.
Regarding lawsuits, the new reform bill clearly establishes that an employer must prove termination of employment was due to a just cause. Critics of the current legislation consider that the burden of proving an employee had been unjustly terminated had been unreasonably shifted to the employee himself.
An innovation included in the 2017 Reforma was the 4-day workweek. The disposition allows for a 10-hour workday, prior an agreement between employer and employee, which translates into a four-day workweek.
The still pending bill has many other changes, most of them subtle but necessary to bring back balance to the employer-employee relationship, that was lost in Rosselló’s heavy handed Reforma. In times of economic and social turmoil, such a balanced legislation will bring calm to the rough labor waters and promote the more efficient and respectful work environment necessary for businesses to flourish.
* Manuel Quilichini, is an attorney with 30-year-experience practicing labor law.