What are the projections on the Fiscal Oversight Board in the face of Labor Reform?

Carlos Saavedra Gutiérrez assured us that it is impossible to predict exactly what will happen, mentioning that the JSF has never lost one of these lawsuits.

Carlos Saavedra Gutiérrez, Esq. (supplied)

After the Fiscal Oversight Board (FOSB) granted the last warning to the government to desist from the implementation of Law 41-2022, attorney Carlos Saavedra Gutiérrez emphasized that the oversight agency is expressing itself with a language of urgency.

The lawyer said that, from his experience, the JSF has written more letters to the government regarding the new Labor Reform than with other issues. "In other cases where the Board sues, it always sends letters and warnings, but in the case of Law 41 the Board is being very incisive," he said. "I would describe it as a last chance, but I admit that I have not seen a previous letter in which the Board gave the government so many chances", he said.

Regarding the most recent letter, the former secretary of the Department of Labor and Human Resources indicated that the JSF claims that the government did not debate the study sent in one of the past communications. He explained that in the last letter, the fiscal agency said it concluded that Law No. 41-2022 violates PROMESA, attached an economic study, and allowed the government to review it. "This letter is saying: 'You did not debate the study, I sustain that the law is inconsistent with the fiscal plan and violates PROMESA and I inform you that I have decided to sue you”. Other letters were 'we are basically considering suing you'. This letter is an announcement that litigation is coming," Saavedra Gutierrez said.  


Although the attorney assured that it is not possible to predict exactly what will happen, he mentioned that the JSF has never lost one of these lawsuits. "There are about a dozen statutes that have been invalidated under the same arguments that the Board is making with Law 41.”

"The slope is steep for the government, certainly. In this letter are already the arguments that the Board is going to present to the court. It seems to me that the Board is complying with a recent First Circuit opinion [...] It was a challenge that the Board had to four laws and the First Circuit upheld Judge Swain's decision invalidating the laws," he said.

"That opinion said that the Board has to be very clear with the Government when it notifies it that the laws are flawed. It has to notify why. The Board cannot speak ambiguously. It has to say the specific reasons why the Board concluded as it did," he added.

Precisely, he shared that, in this letter, the JSF highlighted two main arguments: procedural and substantive. 

The first reason, according to Saavedra Gutiérrez, is because Act 41 contradicts the fiscal plan and for not sending a formal estimate required by the PROMESA law. "It raises procedural arguments to the government." 

On the other hand, regarding the substantive argument, he detailed the following: "The Board is basically saying: 'Law 41 in its face increases the costs of doing business in Puerto Rico and therefore will affect the government's revenues”.

What will the JSF ask for?

The attorney said that the fiscal entity indicated in the letter that it will ask to "nullify the law". "If Judge Swain nullifies the law, that means that Law 41 was never in effect," he said. 

In the event that the judge determines that the law is null, Saavedra Gutiérrez stressed that "there will not be any employer in Puerto Rico that has violated Law 41 because the judge basically said: 'that law never came to life'". 

However, he acknowledged that Swain could also issue an injunction "so that the government does not put the law into effect." "So, there the decision would be prospective. From the day the judge decides and onward, then the law cannot be put into effect. That does not mean that it was not in force for as long as it was in force after July 20," he said.  

When asked how long the process could take, the attorney indicated that it could take months if they do not request an expedited timetable. 

"It can take time. If the Board does not ask for an injunction or what is called a TRO, what is known as a Temporary Restraining Order, it will take months. Usually, Judge Swain decides this type of case in four to six months," he concluded.

This piece appear originally in Spanish in Microjuris.com 

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