PUERTO RICO GOVERNOR PROPOSES LABOR REFORM

On September 9, 2015, the Working Group for the Fiscal and Economic Recovery of Puerto Rico commissioned by Gov. Alejandro García Padilla, released its “Fiscal & Economic Growth Plan” (“FEGP”). The FEGP contains an encompassing blueprint for the local government to follow during the next five years, to reduce staggering public debt and overcome decade-long economic stagnation.

The FEGP follows the footsteps of a recent report issued by Dr. Anne O. Krueger and a group of former International Monetary Fund economists, which concluded structural reforms were required in conjunction with a restructuring of the Commonwealth’s debt, in order to restore Puerto Rico’s long term economic growth.

Section 1.1 of the FEGP is aimed at stimulating job creation in the private sector. To that end, it proposes significant changes in several labor laws applicable to the private sector (“Labor Reform”); modifying eligibility criteria for welfare programs (“Welfare Reform”); and an Earned Income Tax Credit (“EITC”) for low-income workers.
This Alert provides a bird’s eye view of the Governor’s Labor Reform for the private sector; identifies additional proposals being advanced by several local business organizations; and initial guidance on actions you may consider to undertake.