Can the employer suspend the employment contracts of his staff?

In Guatemala, employers may suspend the employment contracts of their personnel, provided that the economic activity of the employer does not fall within the exceptions established in the government provisions due to COVID-19.

In the case of El Salvador, for activities that can operate, it is possible to proceed with a suspension by mutual agreement in accordance with Art. 37, paragraph 1 of the T.C., which must be in writing. For activities that are not authorized to operate, a suspension for Force Majeure is made in accordance with Art. 36 ord. 1 of the Labor Code.

In the case of Nicaragua, the employer may suspend individual labor contracts by means of an agreement with the worker in accordance with Article 37, paragraph g, of the Labor Code. The employer may initiate an administrative procedure with the Ministry of Labour to obtain authorization for the collective suspension of employment contracts.

Finally, in the case of Costa Rica, the request for the temporary suspension of contracts must be submitted, in accordance with Article 75 of the Labor Code and based on facts that obey the emergency measures dictated by the Executive, for the cases regulated in paragraphs a) and b) of Article 74 of the Labor Code. The suspension may be established for a period of 3 months, extendable for up to 2 more periods, if the conditions and declaration of emergency persist.

What is the procedure for suspending employment contracts?

Guatemala

  1. Request authorization from the Ministry of Labor and Social Welfare. Submit an electronic application (https://www.mintrabajo.gob.gt/index.php/igt/solicitud-de-suspension-de-contratos-de-trabajo)
  2. Once the authorization is received, the workers must be notified in writing. If the suspension does not exceed 50% of the workers, an agreement must be reached with the workers to suspend the employment relationship.
  3. Once the agreement is signed, notice is submitted to the Ministry of Labour in electronic form.
  4. In order for the workers to be eligible for the employment assistance fund, the employer must first give notice or obtain authorization from the Ministry of Labor and it must also be the employer who files an application with the Ministry of Economy.

El Salvador

  1. Suspension due to Force Majeure, proceeds automatically by demonstrating upon arrival of a work inspection, that the requirements of the same were configured due to impossibility of operation.
  2. Suspension by Mutual Agreement, it is required to sign a written document between employer and worker and show it if an inspection arrives.

Honduras

  1. Notify each employee of the suspension. This can be for a maximum term of 120 days.
  2. Submit a request for authorization to suspend employment contracts to the Secretary of Labor within 3 days after the employees are notified.
  3. If the company wishes to take advantage of the benefits of the Aid Law, it must notify the Secretary of Labor in order to obtain the registration certificate and request the payment of L. 6,000.00 per month for a maximum period of three months to the private contribution regime, if the suspended employees contribute to the referred institute.

Nicaragua

  1. Written agreement between employer and employee signed by both parties
  2. The collective suspension of employment contracts must be approved by the Ministry of Labour and must be subject to an oral administrative procedure in which workers may be represented by a lawyer or a member of the Joint Commission on Health and Safety.

Costa Rica

  1. The application for authorization must be submitted to the National Directorate of Inspection of the Ministry of Labour and Social Security. It may be submitted before the suspension of contracts and the notice to workers is executed, or within three working days following the execution of the suspension of employment contracts.
  2. The notice of application must be signed by the company’s legal representative. If it is not signed and submitted by the representative, a special administrative power of attorney must be provided, which must be notarized.
  3. The application must be clear, specific and well-founded according to the business activity carried out by the employer.
  4. The application must include all the data of the company and of the workers: total number of workers, number of female workers, number of male workers, e-mails of each of them, telephone and position.
  5. We recommend providing the necessary evidence that, for the purposes of the company, will strengthen the request for suspension made.
  6. An affidavit must be presented indicating the cause that gives rise to the request.
  7. The employer must be up to date with the payment of the CCSS and INS.
  8. The documents must be sent digitally via email to the Ministry of Labor.
  9. It is recommended that each of the workers be given a notice that he or she is going to be suspended.

The period of suspension of employment contracts is one month, which can be extended for two equal periods, i.e. up to a maximum of three months, provided that the cause for the suspension is still present. According to the above-mentioned decree, the MTSS has 3 working days to resolve the request; however, due to the number of requests submitted, the resolution takes from 2 weeks to 8 weeks to be released. This does not mean that the employer is acting illegally, since the important thing is to comply with the 3-day deadline for submitting the documentation to the Inspection Department of the Ministry of Labor and Social Security once the suspension of the contracts is executed.

Is it possible to reduce the wages and/or working hours of workers?

Yes, workers and employers may agree to reduce the salary and/or working hours, provided that there is an express agreement between the parties.

In the case of Guatemala, this is done in accordance with Article 20 of the Labour Code. The legislation also provides for the possibility of the conditions of an employment contract being varied unilaterally provided that this is authorized by the Labour Inspectorate when the economic situation of the company so warrants.

In the case of El Salvador, it would only be applicable to the activities authorized to work. This is done in accordance with Article 34 of the Labour Code and is protected in principle in the case of fortuitous events or force majeure. However, as the emergency has not caused the impossibility of operating, it is advisable to sign a document of mutual agreement on the reduction of the working day between both parties, paying during the first 3 days, the salary for the time worked and an equivalent to 50% of the salary that would cease to accrue for the reduction and from the 4th day only the time worked. The reduction of wages without a reduction of the working day is not allowed and could lead to lawsuits and administrative sanctioning procedures.

In the case of Honduras, workers and employers may agree to reduce working hours temporarily, without affecting wages, since wage reductions may be considered as indirect layoffs under the Labor Code.

In the case of Nicaragua, the worker and employer may agree to reduce the working hours determined in the employment contract. Considering that the time that the worker is working for the employer has been reduced, a reduction in the worker’s remuneration may also be agreed upon that is proportional to the reduced time.

Finally, in the case of Costa Rica, Law 9832 authorizes the request for a reduction of working hours in the event of a declaration of national emergency. The electronic request must be made to the Ministry of Labor, demonstrating that the gross income of the company has decreased by at least 20% in relation to the same month of the previous year (or in comparison to the last 3 months prior to the declaration of the emergency, if the company is less than one year old). This would make it possible to apply for a reduction of up to 50% of the working day or up to 75% in cases where the gross income is affected by more than 60%. By reducing the working day, the salary is reduced in the same proportion. This measure may be established for a period of three months, extendable for up to two more periods, if the conditions and declaration of emergency persist.

* This measure cannot be applied to pregnant or nursing women.

Can I fire any workers during the state of calamity?

In Guatemala, the employer may dismiss his workers during the state of calamity as long as the relationship remains in effect, that is, the provision of services has not been suspended. If the contract is suspended, the employer could not dismiss without just cause. It is important to consider that employers who take advantage of the ISO deferral benefit cannot fire without just cause during the time it takes them to catch up with the tax.

In El Salvador, this will depend on the case, since for activities that are not authorized to operate it is risky, since it could be determined that the dismissal does not take effect because the contract was already suspended due to the impossibility of operating, and also that the worker has a restriction that could be considered as a quarantine decreed in the framework of the COVID-19. In the case of activities that are authorized to operate, it is viable because the service can be provided and the relationship is active; however, especially in the current context, it would be advisable to pay severance pay, and to have it recorded in a private document authenticated by a notary. In the event of a serious breach by the employee, it is possible to proceed to terminate the contract by proving the cause for termination alleged by the company.

Likewise, in Honduras it is not recommended to apply dismissals in companies that are not authorized to operate, only in those authorized or within the exceptions, in which the sanctioning procedures may be applied, including dismissals.

In Nicaragua, no state of emergency has been declared at present, so the employer has the power to terminate employment contracts as long as they are not for pregnant workers, subsidized workers or workers on vacation.

Finally, in Costa Rica, the employer may dismiss his workers during the state of emergency (with employer liability, under Article 85(d)) as long as the relationship remains in effect; that is, the provision of services has not been suspended. If the contract is suspended, the employer shall not.