On June 30, 2016, President Obama signed the Puerto Rico Oversight, Management, and Economic Stability Act (S. 2328), commonly known as “PROMESA.” This measure, which was enacted with bipartisan support, effectively delays application of the U.S. Department of Labor's (DOL) new overtime rule to employees in Puerto Rico.

As previously discussed, PROMESA provides for the establishment of an Oversight Board to address Puerto Rico’s current debt crisis. Section 404 of PROMESA provides that the final rule published by the U.S. Department of Labor's Wage and Hour Division on May 18, 2016, which updates the Fair Labor Standards Act (“FLSA”) regulations governing the “white collar” overtime exemptions, “shall have no force or effect in the Commonwealth of Puerto Rico” until the Comptroller General of the United States conducts an assessment and issues a report to examine the impact of the rule's application on Puerto Rico’s economy. PROMESA dictates that the report shall take into consideration “regional, metropolitan, and non-metropolitan salary and cost-of-living differences.” The Comptroller General has two years from PROMESA's enactment to complete the report. Once completed, PROMESA requires the Secretary of Labor to consider the Comptroller General’s report and certify that the rule will not have an adverse impact on Puerto Rico’s economy for it to apply.

As such, employers in Puerto Rico are currently not covered by the new DOL overtime rule, which takes effect on December 1, 2016. Nevertheless, given that PROMESA merely provides a moratorium on the new overtime rule's application to the Island, Puerto Rico employers do need to be aware that changes may need to be implemented eventually, if the Comptroller General and the Secretary of Labor give the green light to its application. In any case, under the terms of PROMESA, a decision on the matter will have to be made no later than June 30, 2018.

It remains to be seen how the local government will react and whether the Puerto Rico Department of Labor and Human Resources will adopt new local regulations in light of the DOL's overtime rule. This is relevant inasmuch as local regulations regarding white collar exemptions to Puerto Rico's daily overtime, 24-hour overtime, 7th day of work, sick and vacation leave accrual, and meal period legislation have historically mirrored the U.S. DOL FLSA regulations.