The Island’s newly elected administration has enacted a comprehensive labor reform to balance “expenditures and revenues, reducing the level of government intervention in Puerto Rico’s economy and providing a competitive business environment.” The government is betting that reducing the historically restrictive and protectionist labor laws will promote economic activity, grow tax revenue, and increase both employment and labor participation rate. The effect on employees remain to be seen.
The new regulations of the labor reform seek to provide businesses with flexible hiring options and broader work scheduling possibilities, while reducing fringe benefits and severance payments under local wrongful termination law. They will also make it easier for foreign companies to manage their locally-stationed employees with favorable choice of law provisions.
It is important to note that there are numerous grandfather provisions in the labor reform which must be carefully considered before making any decisions or changing existing conditions.