SCMP Breaking News - Labor & Employment
Year 8, Vol. 7 - August 11, 2023
On August 10, 2023, the First Circuit Court of Appeals issued a decision confirming the Federal District Court’s holding declaring Puerto Rico Law No. 41-2022, also known as the 2022 Puerto Rico Labor Reform, null and void ab initio.
The Appeal, which was filed by the Governor of Puerto Rico (Hon. Pedro Pierluisi-Urrutia) and the Speaker of the House of Representatives of Puerto Rico (Rafael Hernández-Montañez), alleged that the District Court’s holding should be reversed because: (1) the Federal District Court (a Title III Court) lacked subject matter jurisdiction over this dispute concerning PR Law 41-2022; and (2) because the Governor had complied with the exigencies of section 204 of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”).
In rejecting the Governor’s arguments on appeal, the First Circuit Court of Appeals first determined that the Federal District Court indeed had jurisdiction over the controversy because the enactment of Law 41-2022, and its potential effect on the government’s expenditures and revenues, “related to” the Oversight Board’s efforts to enforce the certified fiscal plan under PROMESA.
Further, the Court determined that the Governor of Puerto Rico had failed to comply with the requirements of section 204(a) of PROMESA, as he did not provide a formal estimate, prepared by an appropriate entity, of the impact that Law 41-2022 will have on the government’s expenditures and revenues.
The Court also rejected the Governor’s arguments that a formal estimate would be too speculative and/or that such an estimate would be too difficult and onerous. In so holding, the Court stated that the procedures and obligations contemplated by section 204(a) of PROMESA serve the critical purpose of allowing the Board to determine that the legislation at issue adheres to the fiscal plan and will not impair PROMESA’s purpose of restoring Puerto Rico to fiscal stability. Moreover, the Court held that section 204(a) of PROMESA provides no exception for economic analysis that is “difficult to perform”.
What does this decision mean and how does it impact your business?
This decision means that Law 41 and all actions to implement it are deemed null and void ab initio, that is, as if it never had any legal effect.
What should employers do?
Employers should revert and amend any changes to their employee manuals, policies or payroll procedures and should be governed by Puerto Rico Law 4 of January 26, 2017.
SCMP will continue to monitor developments regarding this important article and will provide updates in our newsletter as new information becomes available.
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Because of the general nature of this newsletter, nothing herein should be construed as legal advice or a legal opinion. SCMP Breaking News and all its content is property of Silva-Cofresí, Manzano & Padró, LLC
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