Legislation and Agencies

Primary and Secondary Legislation

What are the main statutes and regulations relating to employment?

Employment relationships are ruled by the Labour Code. Its text was established by Decree with Force of Law (DFL) No. 1 (Official Gazette, January 2003). The Labour Code regulates the main aspects of employment, including individual and collective matters. It also considers the labour procedures and labour court regulations. Other relevant labour laws to be considered are:

  • Law No. 16,744 regarding labour accidents and professional illnesses;
  • Decree Law (DL) No. 3,500 and its modifications, which regulate the private pension system; and
  • DFL No. 2, which establishes the Labour Directorate.
Protected employee categories

Is there any law prohibiting discrimination or harassment in employment? If so, what categories are regulated under the law?

Article 19(2) of the Constitution establishes that all people are equal before the law. It expressly insists on this principle of equality between men and women.

The Labour Code (article 2) states that the working relationship must always respect the dignity of persons, stating specifically that sexual harassment behaviour is not compatible with this stipulation. The Code also prohibits any distinction, exclusion or preference made based on race, colour, sex, age, marital status, unionising, religion, political opinion, nationality, national extraction or social origin that could have the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation. Any distinction, exclusion or preference in respect of a particular job based on the inherent requirements thereof, shall not be deemed to be discrimination. Potential employers must not discriminate for economic reasons or because of the existence of debts, except for those employees empowered to represent the employer as managers, sub-managers, agents or other company representatives, or those in charge of collecting, administrating or taking care of funds or values of any nature.

The final paragraph of article 194 of the Labour Code prohibits any kind of discrimination on the grounds of pregnancy.

Article 7 of Law No. 19,779 prohibits the establishment of a condition regarding test results to detect the presence of HIV for the hiring of employees, the renewal of their contracts or promotion. It also prohibits requiring the completion of that test for such purposes.

Article 62-bis to the Labour Code was incorporated on 19 June 2009 and states that the employer must comply with the principle of equal remuneration for men and women who provide the same work, not considering arbitrary objective differences in wages that are based on abilities, skills, suitability, responsibility or productivity.

Enforcement agencies

What are the primary government agencies or other entities responsible for the enforcement of employment statutes and regulations?

The Labour Directorate, a public entity under the Labour Ministry, is in charge of interpreting and enforcing employment statutes. Additionally, any individual may seek the enforcement of labour laws before the labour courts and, when they are due, seek the payment of wages, social security payments, severance payments, compensation, etc. Employers may file lawsuits before the labour courts against fines imposed on them by Labour Directorate officers.

Worker representation

Legal basis

Is there any legislation mandating or allowing the establishment of employees’ representatives in the workplace?

There are only two committees that are mandatory. One is a joint health and safety committee, which is required whenever there are more than 25 employees in a particular workplace. The second is a bipartite training committee, which is required whenever there are more than 15 employees in the company. Both committees are formed by three members elected by employees and three appointed by the company. There are no other mandatory workers’ committees or works councils.

On the other hand, employees have the constitutional and statutory right to unionise and form labour unions. There are different types of labour unions recognised by the law, including company labour unions, intercompany labour unions, temporary workers labour unions and independent workers labour unions. Likewise, federations are formed when three or more unions come together, and confederations arise by the jointure of three or more federations or 20 or more labour unions.

Powers of representatives

What are their powers?

The joint health and safety committee is the technical body of participation between employers and current employees, whose main function is to identify and assess the risks of accidents and occupational diseases. It has to instruct on the proper use of personal protection equipment, ensure compliance of preventive hygiene and safety, investigate causes of accidents and occupational diseases in the company, decide inexcusable negligence and adopt measures of hygiene and safety for the prevention of occupational risks.

The bipartite training committee promotes the training of employees inside the company.

The unions, in general terms, represent the employees before the company. They also act on behalf of their mutual interests in collective bargaining and the fulfilment of the labour and social security laws of their associates.

Background information on applicants

Background checks

Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?

In general, the law does not consider restrictions or prohibitions against background checks. Information regarding applicants could be obtained from applicants without statutory restrictions. Notwithstanding, companies should avoid questions, tests or searches that could be considered discriminatory.

It is expressly prohibited to require certificates or declarations regarding an applicant’s credit and financial background.

Medical examinations

Are there any restrictions or prohibitions against requiring a medical examination as a condition of employment?

Pre-employment examinations are permitted under Chilean law, with the exception of HIV testing (Law No. 19,779, article 7), pregnancy testing (Labour Code, article 194) and genetic diagnosis (Law No. 20,120, article 4). Knowledge of the results of the testing by the employer would require express written consent by the candidate.

Articles 185 and 186 of the Labour Code state that a medical certification of aptitude must be required prior to working in dangerous or hazardous activities or industries.

Although there are no specific provisions in the law, an employer has the option of not hiring an applicant who does not submit to an examination when compatible health conditions are required for performing a particular job.

Drug and alcohol testing

Are there any restrictions or prohibitions against drug and alcohol testing of applicants?

Drug, alcohol and tobacco tests are not prohibited under Chilean legislation. However, the consumption of illegal drugs cannot be the sole reason for refusing to hire an applicant. The decision to not hire someone must be based exclusively on the fact that the consumption affects his or her employment capacity or personal fitness. Also, a fundamental consideration would be whether such consumption increases the risk of accidents in certain work activities. In addition, past drug consumption cannot be taken as the basis to discriminate against a rehabilitated person. Any information obtained must be treated in a strictly confidential manner.

Hiring of employees

Preference and discrimination

Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?

There are no statutory requirements regarding this matter.

Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?

The employment contract must be in writing and executed within 15 days of the initiation of services. This term is reduced to five days when the contract duration is less than 30 days or if it is not specifically mentioned in the contract and it is exclusively determined by the specific work for which the employee was hired (typically in construction). Article 9 of the Labour Code states that if the labour contract is not put in writing within the aforementioned 15-day period, the terms and conditions thereof shall be those indicated by the employee. Additionally, the employer shall bear the burden of proof of the real conditions and terms agreed on.

The labour contract must contain the following clauses:

  • place and date of contract;
  • individualisation of the parties, indicating nationality, birth date and the date the worker begins employment;
  • nature of services to be provided and place or city where they are to be rendered. The contract may indicate two or more specific services that may be alternate or complementary;
  • amount, form and payment period of the remuneration agreed to;
  • duration and distribution of work schedule, except if the company has a work system based on shifts, in which case internal regulations must be observed; and
  • term of the contract.

The parties may include other clauses they may agree upon in the labour contract; for example, voluntary benefits.

To what extent are fixed-term employment contracts permissible?

Fixed-term contracts can be made for a maximum duration of one year. In the case of managers or individuals that have obtained a professional or technical degree granted by a state-recognised institution, the maximum duration is two years. The continued performance of services after this period turns the contract into one of indefinite duration. A second extension of a fixed-term employment contract produces the same effect.

Probationary period

What is the maximum probationary period permitted by law?

In general, the Labour Code does not consider a probationary period. The only exception is a two-week term provided for domestic workers. During this time, the employment contract may terminate at the will of either party, with a notice of three days in advance, paying the employer the time served. Regarding other employees, Chilean companies usually use fixed-term agreements as a de facto probationary period (first employment contract term is set for a couple of months), and if the employee fits in the position the labour agreement is renewed, or the employee can sign an indefinite (permanent) contract, otherwise the employee is dismissed at the initial term’s completion. This ‘probationary period’ could be extended at the discretion of the employer, for the maximum periods indicated in question 11.

Classification as contractor or employee

What are the primary factors that distinguish an independent contractor from an employee?

This distinction is made based on the characteristics of the services rendered. The employer-employee relationship exists when it qualifies as subordination or dependency between the parties. On the other hand, when the services are performed without such subordination or dependency, the individual is considered an independent contractor.

Temporary agency staffing

Is there any legislation governing temporary staffing through recruitment agencies?

As a general rule under Chilean labour law, employees should be directly hired by the employer to which they render services. Therefore, the scheme of employees provided by an external company is exceptional and needs to be duly justified based exclusively on legal causes, and for limited periods of time. Temporary personnel may be supplied by specialised companies called transitory services companies (ESTs) when the user company is under one of the following circumstances, indicated in article 183-Ñ of the Labour Code:

  • suspension of the labour contract or suspension of the rendered services, as a consequence of sick leave, maternity leave or holidays;
  • extraordinary events, such as the organisation of congresses, conferences, fairs, expositions or others of similar nature;
  • new and specific projects of the user company, such as the construction of new facilities, expansion of the facilities or expansion to new markets;
  • initial period of activities at new companies;
  • occasional or extraordinary increase, either regular or not, of the activity on a determined section or establishment of the user company; and
  • urgent and specific works, which require an immediate execution, such as facility repairs of the user company.

These ESTs must appear enrolled in a special registry of the Labour Authority, and have to pay a monetary deposit as guarantee. There are certain cases where the provisory supply of personnel is not allowed: to fill managerial, sub-managerial, agent or representative job positions; and to replace regular employees during a strike.

Foreign workers

Visas

Are there any numerical limitations on short-term visas? Are visas available for employees transferring from one corporate entity in one jurisdiction to a related entity in another jurisdiction?

There are no numerical limitations on short-term visas. The applicable statutes - DL No. 1,094 of 19 July 1975 and Supreme Decree No. 597 of 14 June 1984 - do not consider specific visas for transferred employees. However, having an employment contract with a Chilean company or with a foreign company to render services in Chile shall be sufficient to request a visa to render services in Chile.

Spouses

Are spouses of authorised workers entitled to work?

Family members of a foreign employee in possession of a visa may be granted visas as dependants of the holder of the visa. A visa granted to a dependant of a visa holder does not authorise the dependant to carry out remunerated activities in the country (article 49 of Supreme Decree No. 597 of 1984, which approves the Foreigners’ Regulations). Therefore, if dependants expect to carry out any remunerated activity in Chile, they must request, as may be pertinent, a temporary visa or an employment-contract visa as main holders.

General rules

What are the rules for employing foreign workers and what are the sanctions for employing a foreign worker that does not have a right to work in the jurisdiction?

With regard to foreign workers and those foreigners who are seeking to study or develop their business in Chile, whether they are professionals, employees, students or investors, the Constitution establishes in article 19(16) that every person has the right to free undertaking and free selection of work, with just compensation, prohibiting any discrimination that is not based on personal capacity. In fact, article 2 of the Labour Code establishes that acts of discrimination are contrary to the principles of the labour laws, indicating any distinctions, exclusions or preferences based on nationality.

Any foreign worker must apply for a visa or permit in order to carry out any activity in Chile. An employment-contract visa or a temporary visa authorise foreign workers to render services in Chile. The Department of Foreign Affairs of the Ministry of the Interior may authorise foreign workers, in their capacity as tourists, to provide services or develop some type of labour activity. The permits that allow foreign workers to perform a labour activity in Chile are the following: permission to work under a tourist visa, permission to work with a visa under proceeding, an employment-contract visa, a temporary visa and a permanent residence.

The granting of a visa is at the discretion of the immigration authorities: the Ministry of Foreign Affairs, through its consuls in different countries and the Ministry of the Interior, through the Foreigners’ Department in the city of Santiago or in the provincial governments in the regions. Before granting a visa, they should consider how convenient or useful it would be for the country and also consider international reciprocity.

Article 19 of the Labour Code states that at least 85 per cent of employees who serve the same employer must be of Chilean nationality. Article 20 of the same Code establishes that to calculate the above proportion, the following rules must be applied:

  • the total number of employees that an employer occupies within the national territory and not of the different branches separately will be considered;
  • the specialist technician personnel will be excluded;
  • a foreigner whose spouse or children are Chilean will be considered as Chilean, or if he or she is a widower or widow of a Chilean spouse; and
  • foreigners who have resided for over five years in the country, without taking into account accidental absences, will also be considered as Chilean.

The Immigration Authority or the Labour Inspectorate can apply fines to those companies that have foreign workers rendering services without an authorisation to do so.

Resident labour market test

Is a labour market test required as a precursor to a short or long-term visa?

A labour market test is not required at any instance.

Terms of employment

Working hours

Are there any restrictions or limitations on working hours and may an employee opt out of such restrictions or limitations?

Article 22 of the Labour Code provides a maximum permissible working schedule of 45 hours a week distributed in no more than six and no fewer than five days. Managers, employees with powers to manage, as well as those who work without direct supervision, at home or in another location than the workplace are excluded from the application of such limit. An employee cannot choose to be excluded from such restrictions or limitations.

In July 2008, Law No. 20,281 limited the exceptions to the maximum working hours regulations, stating three cases wherein it is assumed that employees are under the work hour system: employees whose entrance and exit from the company is formally registered; employees whose wages are withheld in cases of lateness; and employees who are functionally and directly controlled by a supervisor, regarding the way and opportunity their work is performed. There is no such control if employees only report occasionally and work in different cities to the address of the employer.

Ordinary work per day cannot exceed 10 hours. Additionally, only two hours of overtime are allowed per day. The labour authority may authorise a special distribution of the work period, whenever the nature of the activity performed requires an ad hoc regime.

Overtime pay

What categories of workers are entitled to overtime pay and how is it calculated?

All employees who are not excluded from the application of work hours’ limitations are entitled to overtime pay. It is calculated at a rate of one and a half times the ordinary hourly salary.

Can employees contractually waive the right to overtime pay?

No, overtime pay cannot be waived by the agreement of the parties.

Vacation and holidays

Is there any legislation establishing the right to annual vacation and holidays?

Article 67 of the Labour Code establishes an annual holiday of 15 working days. After the first 10 years of work for one or a number of employers, it is increased by one day for every three years in employment with the current employer.

Workers in the 11th and 12th regions and the province of Palena in the 10th region are entitled to 20 days, as increased by Law No. 20,058.

Public holidays are only those stipulated by law and, in general, employees cannot work on those days or on Sundays, with certain exceptions, such as:

  • employees who work in retail and provide direct attention or service to the public;
  • those who work on ports or in ships;
  • those who provide services that require continuity owing to the nature of the services, technical reasons or to avoid damage to the public interest or to the industry; and
  • those who work to repair damage caused by force majeure if works cannot be delayed, etc.
Sick leave and sick pay

Is there any legislation establishing the right to sick leave or sick pay?

Supreme Decree No. 3 of 1984 recognises the right of the employee to sick leave following a doctor’s orders. During this absence, the employee will receive an amount equivalent to his or her salary paid by the respective health institution. Regarding absences owing to work-related accidents, such leave of absence will be paid by a special entity in charge of overseeing these types of accidents. There is no annual limit on the number of days of sick leave that an employee can take; this will depend on the medical licence extended by the doctor.

Leave of absence

In what circumstances may an employee take a leave of absence? What is the maximum duration of such leave and does an employee receive pay during the leave?

The Labour Code sets out specific circumstances under which an employee may take a paid leave of absence, such as:

  • marriage or civil union: five working days of paid leave;
  • female employees over 40 years and male employees over 50 years: half a working day once in a year of paid leave to have a mammography and prostate examination;
  • during the period of time in which an employee is engaged in military service, the employer must reserve the employee’s position, but without pay;
  • death of a child or spouse: seven working days of paid leave;
  • death of unborn child or a parent: three working days of paid leave;
  • birth of a child: male workers receive paid leave of five days, which he may use as he requests after the baby is born or during the month following the birth; this leave is also granted in the case of adoption of a child; and female workers are entitled to paid maternity leave starting six weeks prior to the birth of the child (prenatal maternity leave) and continuing 12 weeks thereafter (postnatal maternity leave); and
    • carer’s leave: employees are entitled to request leave to care for a sick child under one year old, with a medical certificate. Either the mother or father can request this leave from the employer. During the leave, the employee receives an amount equivalent to his or her salary, and this is paid by the health insurance provider.

Law No. 21,063 created a mandatory insurance for those caring for children suffering from certain serious diseases. The purpose of the Law is to create insurance for parents who need to support or take care of their children if they are affected by:

  • cancer or conditions requiring an organ or bone marrow transplant;
  • conditions that are in the terminal stage or phase of life; or
  • severe accidents with risk to life or of severe and permanent functional disability.

In the case of cancer or organ or bone marrow transplants, the Law grants parents a leave of absence from work of a maximum of 90 days during a period of 12 months. The individuals who trigger the benefit are children over one and under 18 years of age.

In the case of a child with a condition that is in the terminal phase, the term of the leave of absence can be until the death of the child. The individuals who trigger the benefit are children over one and under 18 years of age.

In the case of children affected by a severe accident causing risk to life or of severe and permanent functional disability, the term of the leave of absence for their parents is 45 days. The individuals who trigger the benefit are children over one and under 15 years of age.

During this period, parents will receive a subsidy that replaces, totally or partially, their remuneration. In addition, the employer is not authorised to terminate their employment contract at will, or on the grounds of company requirements. To access this new insurance, parents have to fulfil the following requirements:

  • they must have a current employment contract relationship; and
  • they must have made at least eight social security payments during the 24 months before the leave period begins.

There is an additional permit - introduced by Law No. 20,545 (effective from 17 October 2011) - of 12 weeks (during which female employees will receive the same subsidy of the pre- and postnatal maternity leave) that starts immediately after the termination of postnatal maternity leave. Female employees may choose between this new permit or working half of their ordinary working hours for 18 weeks (part-time). In the latter case, they are entitled to receive 50 per cent of their salary and all their variable remunerations (eg, commission). A female employee can also decide to transfer this new permit - with the same option she has chosen - to the father of the child, starting on the seventh week (Labour Code, article 197-bis).

Mandatory employee benefits

What employee benefits are prescribed by law?

In general terms, the Labour Code does not consider employee benefits, but the rights and duties of employees and employers. Benefits may be stipulated in the individual or collective employment contracts or otherwise granted by the employers’ policies or handbooks.

Part-time and fixed-term employees

Are there any special rules relating to part-time or fixed-term employees?

Fixed-term employee conditions are explained in question 11.

The Labour Code considers a part-time employee to be anyone who works no more than 30 hours per week. Part-time employees are entitled to the same rights and benefits as full-time employees, proportional to the number of hours effectively worked. Although there are no special rules related to part-time employees, according to article 40-bis(C) of the Labour Code, they are allowed to agree different workday distributions.

Public disclosures

Must employers publish information on pay or other details about employees or the general workforce?

No, employers should not publish information on pay or other details about employees or the general force. In addition, according to Law No. 19,628 (regarding private data on general terms) and in accordance to article 154-bis of the Labour Code (specifically for labour relationships), employers shall keep as confidential all the information and private data of employees that the employer has access to because of the labour relationship, which includes their remuneration.

Nonetheless, pursuant to article 316 of the Labour Code, employers shall provide specific information to unions, at the request of the unions, in order for them to prepare collective bargaining. The information should be requested by the union during 90 days prior to the expiration of the collective agreement. Among the specific information that can be requested by the union is the remuneration of the members of such union, who shall provide their authorisation individually to the union to request such information.

Post-employment restrictive covenants

Validity and enforceability

To what extent are post-termination covenants not to compete, solicit or deal valid and enforceable?

In Chile, there are neither labour rules nor civil rules expressly regulating non-compete covenants. Nevertheless, they are regarded similarly to clauses forbidding the transfer of goods in civil law, where there is a conflict with property rights and some principles such as free movement of goods. Considering the above, non-compete clauses after the employment relationship has ended are accepted provided they are not absolute; that is, they do not impose a perpetual or long-lasting prohibition and they are justified by a lawful interest. Non-compete clauses made after termination of the employment contract are only accepted to a limited extent as they are deemed to conflict with the constitutional rights established in article 19(16) and (21) of the Chilean Constitution, freedom to contract in labour matters and the right to develop any economic activity. In connection with the latter, the Constitution provides that unless it is contrary to morality, public security or health, or unless it is so demanded by public interest or the law so declares it, no activity may be forbidden.

The following requirements have been established for the non-compete clauses to be valid:

  • they must be made in writing;
  • there must be pecuniary indemnification or compensation for the employee;
  • their duration must be reasonable;
  • they must be agreed only for a certain category of employees (not for all the personnel; only for those related to the competitive interests of the company); and
  • they must be exclusively related to the company’s activities of a commercial or industrial interest.

Pursuant to the above-mentioned, notwithstanding that non-compete covenants are difficult to enforce under Chilean labour law, some companies include them in the employment contracts in order to ensure that the employee undertakes not to compete with his or her employer and develop activities within its business for personal gain or for the benefit of another organisation. Employers aim to reduce the risk posed by certain employees competing directly with them, or the risk of employees’ being tempted by competitors to provide services to them. They are generally included in the employment agreements of employees holding managerial or strategic positions, or in the contracts of employees who deal with confidential information on behalf of the employer, or in the contracts of some senior employees. These clauses exist where, because of the circumstances and knowledge of the employee, there is a risk of serious harm to the employer in case of infringement. The non-compete covenant remains in force during the course of the labour relationship. During such period, the infringement of this employment obligation would constitute justifiable cause for termination of the employment agreement without severance payment. Upon the termination of the labour relationship, the non-compete clauses in labour contracts are included mainly to obtain a dissuasive effect and are very difficult to enforce. In order to prevent ex-employees from competing once the labour agreement has finished, the labour courts have stated that it is required to have a non-compete covenant in the labour agreement release or in another document issued after the termination of the labour contract. This document must fulfil all the requirements previously mentioned.

Validity and enforceability

Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

If the employer and the employee agree post-employment restrictive covenants subject to a pecuniary indemnification or compensation for the employee, the former employee will be entitled to request such payment from the employer. For the employer to enforce these covenants and, consequently, for the former employee to request the payment of this compensation, they must be stipulated in the relevant labour agreement release or a post-termination non-compete or non-solicitation agreement.

Liability for acts of employees

Extent of liability

In which circumstances may an employer be held liable for the acts or conduct of its employees?

In general, employers may be liable for the acts or conduct of their employees when executed while performing their services. The above is unless the employer is able to prove that the employee acted improperly and the employer had no means of preventing such conduct or the employer proves it has exercised due care. The employer should take special care with key executives who have powers of representation of the company.

Taxation of employees

Applicable taxes

What employment-related taxes are prescribed by law?

The law prescribes a second-category tax that applies to income from dependent employment. This is a progressive tax, with rates ranging from zero to 35 per cent. This second-category tax is calculated on the total salary and remuneration of the employee. The employer must withhold the monthly tax and, subsequently, pay it to the tax authority.

Employee-created IP

Ownership rights

Is there any legislation addressing the parties’ rights with respect to employee inventions?

Article 68 of Law No. 19,039 on Industrial Property provides that in the employment and service agreements, whose nature is the fulfilment of an inventive or creative activity, the power to request registration as well as the eventual industrial property rights will exclusively belong to the employer or to whomever the service was assigned, unless there is an express stipulation to the contrary.

The second and third paragraphs of article 8 of Law No. 17,336 on Intellectual Property, state that in the case of computer programs, the individual or entities whose dependants, in the performance of their labour duties, have produced them, will be the title holders of the respective copyright, unless there is a written stipulation to the contrary.

With respect to computer programs produced by assignment of a third party to be commercialised for its account and risk, the copyright will be understood to have been assigned to it, unless there is a written stipulation to the contrary.

Trade secrets and confidential information

Is there any legislation protecting trade secrets and other confidential business information?

The primary protection for employers against theft of trade secrets is article 284 of the Chilean Criminal Code. It provides that anyone who, in a fraudulent manner, communicates industrial secrets of his or her employer may be condemned to imprisonment and be subject to fines.

The referred rule of the Criminal Code is the principal protection for employers, as Chilean law does not include a general confidentiality provision for employment relationships. As a result, in order to terminate an employment contract for breach of confidentiality, such obligation should be expressly included in the respective labour agreement release.

Also, it is important to bear in mind that Chilean labour law allows exit searches, under certain rules. Labour Code article 154(5), establishes that the obligations and prohibitions of the employees, including the employee control measures, must be included in a handbook known as ‘Internal Rules of Order, Hygiene and Safety’. In this regard, the Labour Code states that any control measure adopted by the employer, including exit searches, must be of a general nature, impersonal and preventive, and the employee’s dignity must always be respected.

Data protection

Rules and obligations

Is there any legislation protecting employee privacy or personnel data? If so, what are an employer’s obligations under the legislation?

The most important legislation on this matter is Law No. 19,628, regarding the Protection of Private Life or Protection of Personal Information, as well as the Labour Code.

Article 4 of Law No. 19,628 states that the processing of personal data may only take place when determined by law or if the owner of the data gives written consent. However, there are exceptions to this provision: such authorisation is not required when private entities process the personal data for their own exclusive use or that of their agents and affiliates, and it is for their benefit.

In labour regulation, article 154-bis of the Labour Code sets forth the employer’s obligation not to reveal the information and private data related to its employees to which it has access because of its employment relationship.

Law No. 21,096, which provides the protection of personal data as a constitutional right, came into force on 16 June 2018. Article 19(4) of the Chilean Constitution now guarantees the respect and protection of the private life and honour of the employee and his or her family, as well as the protection of his or her personal data.

With this modification, the right to the protection of personal data is now covered by a tutela claim, which is a procedure that protects certain employee rights in the case of wrongful dismissal. This specific procedure seeks to safeguard fundamental or human rights for employees.

Business transfers

Employee protections

Is there any legislation to protect employees in the event of a business transfer?

Article 4(2) of the Labour Code establishes that total and partial modifications to the ownership, possession or mere tenancy of the company will not affect the rights and obligations of the employees, arising from their individual employment contracts or their collective bargain contracts, which shall remain effective under the new management or employer. The new entity or transferee assumes all the labour and social security obligations undertaken by the previous employer.

Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

The employer cannot dismiss an employee for any reason, but on the contrary, he or she must substantiate the decision. According to article 161 of the Labour Code, labour agreements may be terminated by the employer on the grounds of ‘company needs’, such as those resulting from rationalisation or modernisation, low production, changes in market conditions or in the economy, or any other reasonable business reason.

Only in the case of employees that have the power to represent their employer, such as managers, assistant managers, agents or attorneys-at-law who have been granted general powers of management, may the employment contract be terminated without invoking any cause.

Notice

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

If the employment relationship ended on the grounds of company needs as stipulated in article 161 of the Labour Code, the employer must send a written communication to the employee informing him or her of the termination of the labour contract, one month in advance, unless the employer agrees to pay the employee a compensation equivalent to 30 days of work, which is referred to as compensation in lieu of notice. It is important to mention that according to article 172 of the Labour Code (final paragraph), this compensation has a legal cap: the amount of the remuneration for this purpose may not exceed 90 inflation-indexed units (UFs).

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

The employer may dismiss an employee without notice or compensation in lieu of notice, if he or she invokes one of the circumstances set forth in article 160 of the Labour Code, which include gross misbehaviour or dishonesty, as well as other material breaches of the contract as follows:

  • any undue conduct of a serious nature, duly evidenced as follows:
    • dishonesty of the employee in the performance of his or her duties;
    • sexual harassment or labour harassment;
    • employment harassment;
    • physical assault by an employee of the employer or any co-worker;
    • insults by the employee to the employer; or
    • immoral conduct of the employee that affects the company for which he or she works;
      • negotiations made by the worker within the company’s business activity that were prohibited in writing in the labour contract by the employer;
      • the employee’s absence from his or her duties without justification for two consecutive days, two Mondays within a month or a total of three days during an equal period of time, as well as unjustified absences or absences without previous notice by a worker in charge of an activity, task or machine whose abandonment or stoppage constitutes a serious disturbance in the advancement of the work;
      • desertion of work on the part of the employee: the employee abruptly and unjustifiably leaves the workplace during working hours without the permission of the employer or whoever represents him or her; or the refusal to work without justifiable cause in the workplace agreed upon in the employment contract;
      • acts, omissions or gross negligence that affect the safety or the operation of the facilities, the safety or the activity of the workers or the health of these;
      • material harm intentionally caused to the facilities, machinery, tools, work accessories, products or goods; and
      • serious non-compliance of the obligations undertaken in the employment contract.
Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

If the labour relationship is terminated based on the company’s needs or on those circumstances in which no cause is required (article 161 of the Labour Code), the employer must pay severance payments.

The general rule in Chile is the payment of severance pay that was contractually agreed upon. If there is no agreement on this matter or if the agreed amount is lower than the legal severance pay, the legal severance must be paid.

The legal severance pay is an amount equal to one month of salary for each year worked, with the following limitations: it may not exceed 11 months; that is, 11 years of rendered services; and the amount of the remuneration for this purpose may not exceed 90 UFs. The first limitation is not applicable in the case of employees hired before 14 August 1981.

The aforementioned rule is applicable in the case of contracts with an indefinite duration.

For the purposes of compensation payment for termination of contract, the employer must consider whatever sum the worker may be receiving on the date of termination of the labour, including social security contributions, bonuses or any items valued in money, excluding benefits the employee may receive occasionally.

Notwithstanding the foregoing, the two limitations that apply to the calculation based on the compensation for years worked may be voluntarily waived by the parties, either in the labour contract or in any other documents, such as in a contract or collective agreement.

Procedure

Are there any procedural requirements for dismissing an employee?

The employer must prepare a termination letter and then deliver it personally or by certified mail sent to the employee’s domicile (the domicile indicated in the employment agreement). The employer must indicate in such notice the grounds invoked and the facts these are founded upon. The employer is also required to enclose with the termination letter the relevant social security contributions receipts.

The communication must be delivered or sent within three working days of the effective termination. A copy of such communication must be sent to the labour inspectorate within the same term.

Prior approval by the government agency is not required by law.

Employee protections

In what circumstances are employees protected from dismissal?

Employees who have immunity from dismissal are employees who enjoy some privileges and may be dismissed only by a court order based on specific enumerated legal grounds. The following employees enjoy immunity from dismissal:

  • female employees who are pregnant are protected under the relevant privileges against dismissal for the length of their pregnancy and for one full year following the expiry of maternity leave (article 174 of the Labour Code). Maternity leave starts six weeks prior to the birth of the child and continues 12 weeks thereafter;
  • male employees if they have taken parental leave according to articles 197-bis and 201 of the Labour Code;
    • labour union members are protected from dismissal under ‘immunity privilege’ in the following cases:
      • employees joining to constitute a union: from 10 days prior to constitution of the union to 30 days after constitution;
      • candidates for a union director position: from the time the election date is set until the election is completed with a maximum period of 15 days;
      • union directors and directors of federations, confederations and workers’ centres: during their term of office and for six months thereafter; and
      • employees involved in collective bargaining: for a period starting 10 days before bargaining and ending 30 days after bargaining;
  • staff delegates: during the term of office and for six months thereafter;
  • one of the employee members of the health and safety parity committee: until the end of his or her duties as the employees’ representative on this committee;
  • any employee whose child, spouse or civil partner dies is protected against dismissal under the relevant privileges for one month after the death;
  • any employee whose wife dies in childbirth or during her maternity leave is entitled to the same privileges applicable to pregnant female employees; and
  • those in military service: employees performing duties in the military, including those who are part of mobilised national reserve forces and employees who have been called for combat duty, are protected against dismissal without cause while performing their military service and for one month thereafter (or for up to four months if they become ill or disabled during military service).
Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

There are no special rules for mass terminations or collective dismissals.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Class or collective actions are not specifically regulated under Chilean labour law. Notwithstanding the above, a group of employees claiming together against the same employer can file any action provided under the labour law to request the same labour entitlements. In addition, a union representing affiliated employees may file labour claims on their behalf against the employer.

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Chilean law does not allow employers to impose a mandatory retirement age. Notwithstanding the above, according to Law Decree No. 3,500, men can retire at the age of 65, and women at the age of 60.

Dispute resolution

Arbitration

May the parties agree to private arbitration of employment disputes?

In general, it is not possible to agree to private arbitration of employment disputes. The authorities for resolving disputes between employees and employers are the Labour Inspection Board and labour courts. However, parties may agree, during a collective bargaining process, on arbitration of disputes.

Employee waiver of rights

May an employee agree to waive statutory and contractual rights to potential employment claims?

An employee cannot waive statutory employment rights (article 5(2) of the Labour Code).

On the other hand, the employment contract, individual or collective, could be amended by a new agreement executed by both parties. At the termination of the labour contract, the employee may agree to waive some payments owed by the employer, such as remuneration or severance, in the labour agreement release. No economic considerations are required. Nonetheless, social security obligations cannot be waived.

Limitation period

What are the limitation periods for bringing employment claims?

In general, judicial actions regarding labour rights are limited to six months after the date of termination of the employment contract. During the employment contract, employees may claim their rights during the two years following the time the rights were accrued, with the only exception being overtime payment, which may be claimed up to six months after the date the overtime should have been paid. Social security obligations expire five years after the date of the termination.

Update and trends

Key developments of the past year

Are there any emerging trends or hot topics in labour and employment regulation in your jurisdiction? Are there current proposals to change the legislation?

Law No. 21,122, which modifies the Labour Code regarding project-based contracts, came into force on 1 January 2019.

The new Law incorporates a definition of project-based contract, stating that it is an agreement whereby an employee agrees with an employer to execute a specific and determined intellectual or material project, in its beginning and in its term, whose effect is restricted or limited to the duration of the project. The different tasks or stages of the project cannot be subject to two or more continuous contracts, in which case it will be understood that the contract is of an indefinite duration.

Contracts that involve the performance of work or services on a permanent basis, or that do not conclude according to their nature, will be excluded from this definition. Nevertheless, in case of doubt, the Labour Inspectorate will determine the existence of a project-based contract in each specific case; the above notwithstanding the powers of the court to decide, in the case of a claim.

In addition, the new Law details the following most relevant amendments to the Labour Code:

  • annual leave: if an employee is hired by two or more project-based contracts, that exceed one year of service, an annual holiday of 15 business days will be accrued for each year of service. Proportional holiday will also be accrued in the case of termination before a year has been worked;
  • termination notice letter: this should be detailed as is required by law in the case of termination on grounds of ‘company needs’. The notice given by the employer to the employee will mean an irrevocable offer to pay the amounts set forth in the letter as per severance compensation, etc, if it proceeds; and
  • severance compensation: in the event of the termination of a project-based contract in force for one month or more, severance compensation equivalent to two and a half days of remuneration must be paid to the employee for each month, and a fraction greater than 15 days, worked.

Notwithstanding the above, this rule will enter into force progressively, and will be calculated as follows:

  • for the first 18 months following validity of the law (1 January 2019): one day of remuneration per month and a fraction thereof;
  • from the 19th to the 30th month from validity of the law: one and a half days of remuneration per month and a fraction thereof;
  • from the 31st to the 36th month from validity of the law: two days of remuneration per month and a fraction thereof; and
  • from the 36th month onwards: two and a half days of remuneration per month and a fraction thereof.