English Translation

GOVERNMENT OF PUERTO RICO

18th Legislative Assembly 3d Ordinary Session

______________________________

___ Bill

__ APRIL, 2017

Submitted by _______________________________________________

Referred to _____________________________

LAW

To enact the “Labor Reform Law of 2018”, in order to amend Article 2 of Law No. 180-

1998, as amended; repeal Law No. 148 of June 30, 1969, as amended; repeal any 

mandatory decree approved before the effective date of this law; repeal Article 5; 

amend Article 6(a) and renumber it as Article 5; renumber Article 7 as Article 6; 

renumber Article 8 as Article 7; renumber Article 9 as Article 8; renumber Article 

10 as Article 9; renumber Article 11 as Article 10; renumber Article 12 as Article 

11; renumber Article 13 as Article 12 of Law No. 180-1998; repeal Law No. 80 of 

May 30, 1976, as amended; amend Articles 2(a) and 2(b) of Law No. 115-1991, as 

amended; and for other related purposes. 

STATEMENT OF INTENT

By approving the Transformation and Flexibility Law, Law No. 4-2017, this 

Administration acknowledged the urgent need to establish a clear and consistent public 

policy, aimed at transforming Puerto Rico into an attractive jurisdiction to establish 

businesses that create employment opportunities; to foster employment growth in the 

private sector; and to move more individuals from the informal to the formal labor 

market. In order to attain these objectives, we made a commitment to institute a series 

of structural measures to improve existing labor rules. This new vision of flexible 

employment regulations, as well as other measures, will allow businesses to grow and 

prosper resulting in increased and improved employment opportunities for our 

residents. 

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The Statement of Intent of the Transformation and Flexibility Law describes the reasons 

why changes in labor regulations are essential to transform Puerto Rico into a more 

competitive and attractive jurisdiction in order to entice and retain the type of 

investment that will create employment in our island. 

By increasing the employment participation rate in Puerto Rico, the income of our 

labor force will increase, poverty levels will decrease, and government revenues will 

increase. Unless Puerto Rico’s employment participation rate is substantially increased, 

the income of our people will always remain significantly below the income prevailing 

in the continental states and Puerto Ricans will continue to seek employment elsewhere

and leave Puerto Rico.

On April 19, 2018, the Financial Oversight and Management Board for Puerto Rico, 

created under the Puerto Rico Oversight, Management and Economic Stability Act of 

2016 (“PROMESA”), certified a fiscal plan for the Government of Puerto Rico that 

covers fiscal year 2018 through fiscal year 2023 (the “New Fiscal Plan”). An integral 

component of the New Fiscal Plan is the adoption of certain reforms related to our labor 

laws, the establishment of a local Earned Income Tax Credit (EITC), and the creation of 

certain work requirements and work bonuses for the participants in the Nutritional 

Assistance Program (PAN). The New Fiscal Plan projects that the adoption of the 

certain reforms related to our labor laws would generate a positive impact of $330 

million in additional revenues collected by the government over the period covered by 

the New Fiscal Plan. Pursuant to the New Fiscal Plan, these projected revenue increases 

are conditioned on the enactment of these certain labor law reforms no later than May 

31, 2018. Consequently, the implementation of said labor law reforms shall have an 

immediate impact on the economy’s growth, thus improving government finances and 

the government’s ability to appropriate such funds for essential healthcare and higher 

education programs.

After little over a year of the approval of the Transformation and Flexibility Law, a 

review of the impact of said legislation shows the need to make deeper structural 

measures in order to have our current regulatory system resemble the regulatory 

system prevailing in the continental states. 

The time has come to acknowledge that Puerto Rico’s competitiveness has been 

undermined by the cumulative effect of decades of employment legislation that is 

significantly different from the regulatory system prevailing in the continental states.

Improving our competitiveness and ability to attract and retain more and better jobs is 

urgent for the island’s wellbeing. 

There is reasonable basis to conclude that imposing mandatory fringe benefits 

without considering the productivity of the employee or the situation of the entity 

paying the benefits stifles salaries; reduces personnel recruitment and negatively 

impacts a country’s employment levels. Relaxing the economic burden of such fringe 

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benefits translates into increased compensation, increased production and allows 

benefits to be granted according to the particular circumstances of each business. This 

is precisely the approach followed in the regulatory systems prevailing in the 

jurisdictions to which thousands of Puerto Ricans migrate every year. 

On the other hand, it must be recognized that the labor regime applicable in the 

continental states to the private sector has remained consistent on the principle that, 

except for reasons prohibited by law, the hiring and employment tenure should not be 

subject to government control through employment termination laws. The EmploymentAt-Will system has been widely examined. Such system ensures that employment is 

based on productivity and good conduct and prevents any undue government 

intervention in critical business decisions. 

The prevailing experience in the continental states clearly shows that the existence of 

an “at will” employment rule does not produce employer conduct that is detrimental to 

the wellbeing of the workers. However, the existence of legislation such as Law No. 80 

of May 30, 1976, as amended, in fact increases the economic risks faced by the 

employers for every dismissal decision taken. The evidence available fails to support 

the conclusion that the repeal of Law No. 80 and the establishment of the regulatory 

system prevailing in the states will result in a deterioration of local working conditions. 

On the other hand, keeping Law No. 80 in effect will maintain Puerto Rico as a less 

attractive jurisdiction, restrict employers in a very important aspect of the management 

of their businesses and continue to reduce employment opportunities. 

Consistent with the new labor policy that supports the Transformation and Flexibility 

Law, these measures continue the process of adjusting some aspects of our employment 

laws in order to stimulate economic growth and create more employment opportunities.

IT IS DECREED BY THE LEGISLATIVE ASSEMBLY OF PUERTO RICO:

1 Chapter I. Title.-

2 Article 1.1- This Law shall be named “Labor Reform Law of 2018.”

3 Chapter II. Minimum Wage4 Article 2.1- Article 2 of Law No. 180-1998, as amended, is amended to read as 

5 follows:

6 “Article 2.-

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1 The federal minimum wage set by the Fair Labor Standards Act, approved 

2 by the United States Congress on June 25, 1938, as amended, or as subsequently 

3 amended, shall automatically apply to the Puerto Rico workers covered by said 

4 federal law. 

5 Notwithstanding, effective January first of the year following the effective date of 

6 the repeal of Law No. 148 of June 30, 1969, as amended, the employer covered by this law 

7 shall pay any employee of twenty-five (25) years of age or more a minimum wage of no 

8 less than seven dollars and fifty cents ($7.50) per hour, unless the applicable federal 

9 minimum wage is higher or the employee is totally or partially exempt from the federal 

10 minimum wage provisions. 

11 Suject to the conditions and limitations of this Article, the minimum wage for the 

12 covered employees shall increase to seven dollars and seventy five cents ($7.75 ) once the 

13 labor participation rate in Puerto Rico exceeds forty five percent (45%); to eight dollars

14 ($8.00) once the labor participation rate in Puerto Rico exceeds fifty percent (50%); and 

15 to eight dollars and twenty-five cents ($8.25) once the labor participation rate in Puerto 

16 Rico exceeds fifty five percent (55%). For purposes of this Article, the annual 

17 determination published by the U.S. Bureau of Labor Statistics shall be used to determine 

18 the labor participation rate in Puerto Rico, and the increase of the minimum wage shall 

19 be effective after ninety (90) days of its publication. 

20 The small and medium-sized employers (“PyMEs”), as definined by Law No.

21 120-2014, shall be subject only to the applicable federal minimum wage and not to the 

22 increases provided by this Article. 

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1 When applying the federal minimum wage, the provisions of federal laws 

2 and regulations in connection with the manner in which the minimum wage is 

3 paid, the definition of working hours, employees and positions which are 

4 exempt of the minimum wage, and the definition of hours or time worked shall 

5 be adopted.

6 Chapter III. Voluntary Christmas Bonus.-

7 Article 3.1- Law No. 148 of June 30, 1969, as amended, is repealed effective 

8 September 30, 2018. Notwithstanding, the rights, obligations and limitations provided 

9 by said law shall apply to the bonus for year 2018. 

10 Chapter IV. Vacation and Sick Leave.-

11 Article 4.1- Any mandatory decree approved before the effective date of this Law 

12 is repealed.

13 Article 4.2- Article 5 of Law No. 180-1998, as amended, is repealed.

14 Article 4.3- Article 6(a) and Article 5 of Law 180-1998, as amended, are amended 

15 and renumbered, respectively, to read as follows: 

16 “Article 5.-Provisions on Vacation and Sick Leave.-

17 (a) All employees shall be entitled to a minimum accrual of vacation 

18 and sick leave by working at least one hundred and thirty (130) hours a month. 

19 The minimum monthly accrual for vacation leave and sick leave shall be a 

20 proportional amount of seven (7) days per year for each benefit. [it shall be half (1/2) a 

21 day during the first year of service; three fourths (3/4) of a day after the first 

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1 year of service until five (5) years of service; one (1) day after five (5) years of 

2 service until fifteen (15) years of service; and one and one fourth (1 1⁄4) of a day 

3 after completing fifteen (15) years of service. The monthly minimum accrual 

4 for sick leave shall be of one (1) day per month.]

5 Notwithstanding, in the case of employers who are residents of Puerto 

6 Rico with an amount of employees not exceeding twelve (12), the minimum 

7 monthly accrual for vacation leave shall be of half (1/2) a day per month. This 

8 exception is available to the employer while its amount of employee remains at 

9 twelve (12) or less, and shall cease on the calendar year following the year in 

10 which the employer’s payroll is in excess of twelve (12) for twenty-six (26) weeks 

11 or more in each of two (2) consecutive calendar years. [The minimum monthly 

12 accrual for sick leave for the employees of these employers shall be of one (1) 

13 day for each month.]

14 The use of vacation and sick leave shall be considered time worked for 

15 purposes of accrual of said benefits. 

16 Article 4.4- Article 7 of Law 180-1998, as amended, is renumerated as Article 6.

17 Article 4.5- Article 8 of Law 180-1998, as amended, is renumerated as Article 7.

18 Article 4.6- Article 9 of Law 180-1998, as amended, is renumerated as Article 8.

19 Article 4.7- Article 10 of Law 180-1998, as amended, is renumerated as Article 9.

20 Article 4.8- Article 11 of Law 180-1998, as amended, is renumerated as Article 10.

21 Article 4.9- Article 12 of Law 180-1998, as amended, is renumerated as Article 11.

22 Article 4.10- Article 13 of Law 180-1998, as amended, is renumerated as Article 12.

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1 Chapter V. Employment at Will.-

2 Article 5.1- Law No. 80 of May 30, 1976, as amended, is repealed effective January 1, 

3 2019. Notwithstanding, the rights, obligations and limitations under said law shall 

4 continue to apply for dismissals occurring before the effective date of its repeal. 

5 Article 5.2- The repeal of Law No. 80 of May 30, 1976, as amended, shall not affect 

6 any rights to which the employee was entitled before the approval of this law; to obtain 

7 a relief for damages from tortious actions by the employer unrelated to the mere 

8 termination of employment or the employment contract; to any additional relief 

9 provided by special laws and those granted for a dismissal with the main purpose and 

10 intent to violate clear public policy by the State or any applicable constitutional right of 

11 the employee. By repealing Law No. 80 of May 30, 1976, as amended, a legal standard 

12 is established allowing the employee or the employer to terminate at will, without 

13 incurring is civil liability, any employment contract of indefinite duration. 

14 Chapter VI. Retaliation.-

15 Article 6.1- Articles 2(a) and 2(b) of Law No. 115-1991, as amended, are amended to 

16 read as follows: 

17 “Article 2. —

18 (a) No employer shall dismiss, threat or discriminate against an employee in 

19 relation to the terms, conditions, compensation, location, benefits or privileges of 

20 employment because the employee offers or attempts to offer, verbally or in 

21 writing, any testimony, statement or information before a legislative, 

22 administrative or judicial forum in Puerto Rico, as well as testimony, statements

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1 or information offered or attempt to offer, through internal proceedings 

2 established by the company, or before any employee or representative in a 

3 position of authority, alleging the employer violated any employment law, provided 

4 such statements are not difamatory in nature and do not disclose privileged 

5 information as defined by law. 

6 (b) Any person alleging a violation of this law may file a civil action against the 

7 employer within [three (3) years] one (1) year from the date in which the violation 

8 occurred, to request compensation for real damages suffered, and mental 

9 anguish, reinstatement to the employment, back pay, benefits and attorneys’ fees. 

10 [The employer’s liability in connection with the damages and the back pay 

11 shall be double the amount awarded for the violation of the provisions of this 

12 law.] The employer’s liability in connection with the violations of this law shall be 

13 determined on the basis of the provisions of Articles 6.1 and 6.2 of Law No. 4-2017. 

14 Chapter VII. Final Provisions.-

15 Article 7.1.- Severability.-

16 If any clause, paragraph, subparagraph, sentence, word, letter, article, provision, 

17 section, subsection, title, chapter, subchapter, heading or part of this law is annulled or 

18 declared unconstitutional, the resolution, ruling or judgment issued to that effect shall 

19 not affect, prejudice or invalidate the remaining parts of this law. The effect of such a 

20 judgment shall be limited to the clause, paragraph, subparagraph, sentence, word, 

21 letter, article, provision, section, subsection, title, chapter, subchapter, heading or part of 

22 the same that is annulled or declared unconstitutional. If the application to a person or 

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1 circumstance of any clause, paragraph, subparagraph, sentence, word, letter, article, 

2 provision, section, subsection, title, chapter, subchapter, heading or part of this law is 

3 invalidated or declared unconstitutional, the resolution, ruling or judgment issued to 

4 that effect shall not affect or invalidate the application of the remainder of this law to 

5 those persons or circumstances to which it may be validly applied. It is the express and 

6 unequivocal will of this Legislative Assembly that the courts enforce its provisions and 

7 that this law be applied as widely as possible, even if some of its parts are declared 

8 ineffective, null, invalid, prejudicial or unconstitutional, or even if its application to any 

9 person or circumstances is declared ineffective, invalid or unconstitutional. The 

10 Legislative Assembly would have approved this law regardless of the severability 

11 determination that a court may issue. 

12 Article 7.2.- Effective date.-

13 This law shall be effective immediately after its approval. 

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