An extract from The Employment Law Review, 11th Edition

Basics of entering into an employment relationship

i Employment relationship

According to the Labour Code, a labour contract is formed when one party undertakes to provide personal services to another in exchange for compensation, under the supervision and immediate or delegated guidance of the latter. There is a presumption that a labour contract exists whenever a person renders a personal service to another, even if the terms of this relationship are not recorded in writing.9 An agreement must be in writing in three exceptional cases: apprenticeship contracts; contracts for a fixed term; and contracts with foreign employees.

When the agreement is in writing, the following terms must be included:

  1. the names, credentials and addresses of the employer and employee;
  2. the work to be performed by the employee, and the salary and benefits that the employee will receive for the work;
  3. the place and hours of work; and
  4. the term of employment if it is for a fixed term, or an indication that it is for an indefinite period.10

Some terms will apply by law even if not provided in the employment agreement, such as vacation leave, Christmas bonus and compensation for profit sharing.

The parties are free to agree to additional terms provided that they are not less favourable than the rights afforded by law. Under the principle of inalienability of rights established in the Labour Code, labour regulations are binding on the employer and employee even if the parties decide to amend the provisions. The employee may claim at all times the rights granted by the law, despite any attempted limitation, termination, loss or waiver, even by a judicial act. Any agreement or document that attempts to limit, or contains a waiver of, the employee's rights is void.

When an employment agreement is entered in writing, any amendment to its terms must also be in writing.11

Employment agreements can be for a fixed term or an indefinite period. The latter is defined as a contract for the services provided by the employee on a permanent and uninterrupted basis (i.e., it goes towards satisfying the normal, constant and uniform needs of a company).

A fixed-term agreement is a contract in which the parties set a date for the expiry of their labour relationship. Only the complete execution of the work or providing services as promised will extinguish the contractual relationship; once the term is expired, the contract ceases to exist without any liability. The Labour Code establishes that this type of agreement can be entered into if (1) it is in accordance with the nature of the service to be provided, (2) its objective is to provisionally substitute an employee who is absent because of permitted leave, vacation, or another temporary impediment, and (3) it is agreed to be in the interests of the employee.

Under Dominican law, an employment agreement is presumed to be for an indefinite period, until proven otherwise.12

Changes to an employment agreement can result as a consequence of the provisions in the Labour Code and subsequent labour laws, collective bargaining agreements or mutual consent. Also, the employer is allowed to enforce necessary changes to the employment agreement, as long as they do not imply an unreasonable exercise of this power, alter the essential conditions of the contract, or cause material or moral damage to the employee.13 The right awarded to the employer to enforce unilateral amendments to the employment agreement is known as jus variandi. This right is limited, and mutual agreement is sometimes required. Abusive use of jus variandi can be a just cause for the resignation of an employee.

ii Probationary periods

There is no express probationary period established in the Labour Code. However, according to Article 88(2) of the Labour Code, the employer may dismiss the employee with cause for 'performing the job in a manner that shows his incapacity and inefficiency. This cause ceases to have effect after the employee has provided services for 3 months'. The three months is considered a trial period during which the employer has the opportunity to decide whether the employee is capable of providing the services in the required manner.

Termination of a labour contract during the first three months is not subject to any severance or indemnity payment.

iii Establishing a presence

Every employer must register at the National Labour Registry of the Ministry of Labour or the competent local labour authority, if the employer is located outside the National District. Each employer is assigned a registration number that will be used as a reference for any filed documents or communications (i.e., dismissal letters and admonitions to employees).

Currently, an employer can file various records electronically through the Integrated System for Labour Registration.14 By acquiring an access code from the Ministry of Labour for 150 pesos for every 25 employees, the company can file all the registers regarding the salaries of permanent personnel,15 records of overtime hours, and changes to the salaries of permanent or temporary personnel, among others.

The employer is also subject to payment of a monthly quota to INFOTEP. This contribution is equivalent to 1 per cent of the total payroll and 0.5 per cent of the annual bonuses paid to the employees, if any.

In addition, every employer must register with the Treasury of Social Security and register its list of personnel. Employers and employees contribute to coverage for labour risk insurance, family health insurance, and old age, disability and survival insurance (pension funds). The three regimes are administered with separate funds and independent accounts. Specifically, employers contributes 70 per cent of the costs for financing family health insurance and old age, disability and survival insurance, and pays 100 per cent of the cost of labour risk insurance.

In terms of the amount apportioned each month to the social security system, the employee contributes 5.91 per cent of his or her quotable salary. The remainder is directly assumed by the employer and distributed between the different types of insurance, as follows:

CoverageProportion
Labour risk insurance1.30%
Family health insurance10.13%
Old age, disability and survival9.97%
Total21.40%
Employee5.91%
Employer15.49%

Family health insurance and administration of pension funds are provided by private institutions, which employees can choose at will.

Additionally, employers must file with the General Agency for Internal Revenues the monthly declaration and payment of the withholdings made to employees, since the employer acts as a withholding agent of individual income tax.16 The income tax rate for individuals is up to 25 per cent of his or her taxable income.