On the same day the U.S. Department of Labor released its Final Rule updating regulations under the Fair Labor Standards Act (“FLSA”) governing overtime exemptions for executive, administrative, and professional employees (commonly known as the “white collar exemptions” or “EAP exemptions”), a bill was introduced in the U.S. House of Representatives that would delay implementation of the Final Rule in Puerto Rico for at least two years after December 1, 2016, until certain conditions are met. (For details on the Final Rule, see our article, Labor Department Announces Final Rule Amending Overtime Regulations for ‘White Collar’ Workers.)

Representative Sean P. Duffy (R-Wis.) introduced the “Puerto Rico Oversight, Management, and Economic Stability Act” (“PROMESA”), H.R. 5278, to establish an Oversight Board to assist the Government of Puerto Rico in managing its public finances and for other purposes. Section 404 of PROMESA establishes that the DOL’s Final Rule shall have no force or effect in Puerto Rico until:

  1. The Comptroller General of the United States completes an assessment and transmits a report to Congress assessing the impact of applying the regulations to Puerto Rico, taking into consideration regional, metropolitan, and non-metropolitan salary and cost-of-living differences. The report should be submitted not later than two years after the enactment of PROMESA.
  2. The Secretary of Labor, taking into account the assessment and report of the Comptroller General, provides a written determination to Congress that applying such rule to Puerto Rico would not have a negative impact on the economy of Puerto Rico.

If PROMESA is enacted into law as is, the Final Rule would not apply to Puerto Rico for at least the next two years, until these requirements are met. However, PROMESA faces opposition from different groups and the likelihood of passage of the House bill in its present form is uncertain.

Section 403 of PROMESA also amends the FLSA to allow employers in Puerto Rico to pay employees aged 25 or younger, who are employed initially after the enactment of PROMESA, a wage which is not less than $4.25 an hour. But an employer may not take any action to displace employees (including partial displacements, such as reduction in hours, wages, or employment benefits) for purposes of hiring individuals at the $4.25 rate. Any employer disregarding this prohibition shall be considered to have violated the non-retaliatory provisions found in section 15(a)(3) of the FLSA.