Months after its introduction, a proposal to reverse portions of the 2017 employment reform law sits on Puerto Rico Governor Pedro Pierluisi’s desk. By March 5, 2022, Governor Pierluisi must decide whether to veto House Bill 3 (HB 3) or sign into law a partial repeal of Law 4-2017, commonly known as the Employment Law Reform.

Legislators introduced HB 3 as a full reversal of the 2017 Employment Law Reform and have passed a scaled-back version. If HB 3 becomes law, employers will be faced with changes to the statutory probationary period, daily overtime computation, vacation and sick leave accrual, and independent contractor definition, among many others. HB 3’s proposed changes also create inconsistencies with prior versions of the laws it amends. All these changes would be effective immediately with no grace period for most employers.

HB 3 calls for the following key changes:

Daily Overtime Computation

Before 2017, Puerto Rico defined one type of overtime as time worked over eight hours in a rolling 24-hour period. The Employment Law Reform amended this definition to time worked over eight hours in a calendar day. This eliminated “technical” overtime resulting from changes in daily schedules and meal periods.

HB 3 reverts to the pre-2017 definition of daily overtime and the rolling 24-hour computation. Thus, employers would immediately have to make changes to payroll configurations for overtime.

HB 3 changes both the threshold for accruing paid vacation and sick leave for...

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