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?

In the private sector, free dismissal applies, so the employer can dismiss a worker without just cause, based on his or her own will, but with the payment of the corresponding labour indemnities (article 85(d) of the Labour Code).

The Labour Code also has a list of grounds for disciplinary dismissal for individual (article 81) and collective (article 369) reasons, in which case no compensation is paid.

There may also be a dismissal for health reasons when it is not possible to relocate the worker within the workplace (article 254), with employer responsibility.

Notice

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

There is a reciprocal obligation between the parties to give the other party notice, once the first three months of the employment relationship have elapsed. The duration of the notice varies according to the length of the employment relationship (article 28 of the Labour Code). If the notice cannot be given in time, monetary compensation can be given. During the notice period, the worker is entitled to take one paid day off per week to find a new position.

The employer can waive the notice given by the worker, without having to compensate him or her for it.

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

The employer should not give notice if the dismissal proceeds without employer responsibility; that is, for a serious fault attributable to the worker. Notice is not required in the case of fixed-term contracts, which conclude by the agreed expiry of the term or on completion of the work, provided that a period of one year has not been exceeded.

Severance pay

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

When the worker is dismissed without just cause in contracts for an indefinite period, he or she must be compensated with notice and severance (articles 28 and 29 of the Labour Code).

Notice is calculated as follows:

  • if the employment relationship is between three and six months, the notice period is one week;
  • if the employment relationship is between six months and one year, the notice period is 15 days; and
  • if it is more than one year, then one month’s notice is required.

 

The severance must be calculated as follows: if the employment relationship is between three and six months, it must be seven days’ pay, and if it is between six months and one year, it must be 14 days’ pay. After one year, the following scale is applied:

  • one full year: 19.5 days per year worked;
  • year two: 20 days per year or a fraction greater than six months;
  • year three: 20.5 days per year or a fraction greater than six months;
  • year four: 21 days per year or a fraction greater than six months;
  • year five: 21.24 days per year or a fraction greater than six months;
  • year six: 21.5 days per year or a fraction greater than six months;
  • years seven to nine: 22 days per year or a fraction greater than six months;
  • year 10: 21.5 days per year or a fraction greater than six months;
  • year 11: 21 days per year or a fraction greater than six months;
  • year 12: 20.5 days per year or a fraction greater than six months; and
  • year 13 and above: 20 days per year or a fraction greater than six months.

 

The term ‘a fraction greater than six months’ means that, if the employee has worked for a period greater than six months during a year, a value equal to the scale that corresponds to his or her seniority must be added to the severance payment. In no case can the compensation be more than the previous eight years of employment, and the maximum seniority that can be recognised for severance pay is eight years. Both the notice and the severance pay are calculated using the average total salary of the previous six-month period worked.

When the worker is dismissed without just cause from a fixed-term contract, he or she must be compensated with a fixed indemnity and compensation (article 31 of the Labour Code).

In fixed-term contracts and for specific occupations, each of the parties may terminate the contract, without just cause, before the advent of the term or the conclusion of the work, paying the other the specific provable damages and losses concerning the duration of the contract resolved, the importance of the role performed and the difficulty that the worker has in procuring an equivalent position of employment, or that the employer has in finding a substitute, all in the judgment of the labour courts.

When the employer exercises the power referred to above in a fixed-term contract situation, he or she must also pay the worker, at the time of the termination of the contract, an amount corresponding to one day’s salary for every seven days of continuous work executed or percentage of that time; this must be at least three days’ salary.

However, if the contract has been stipulated for six months or more, or the execution of the work, owing to its nature or importance, takes six months or longer, the compensation must be at least 22 days’ salary.

Procedure

Are there any procedural requirements for dismissing an employee?

There is no requirement to follow due process before dismissal. Only in the case of workers with special status is it necessary to process and obtain judicial or administrative authorisation before the dismissal (article 540 of the Labour Code).

At the end of the contract, for whatever reason, the employer must provide a certificate indicating the period worked and the work performed, and only if the worker requests will it indicate how the work was done and the cause for termination. If it is a dismissal with just cause, the facts that support it must be detailed (article 35 of the Labour Code), and those are the only ones that may be discussed later in court.

Employee protections

In what circumstances are employees protected from dismissal?

The following employees are protected from dismissal:

  • women who are pregnant or breastfeeding (article 94 of the Labour Code);
  • workers forming a trade union, representatives and union candidates and representatives freely chosen by the workers (article 367 of the Labour Code) and those protected by any other protective provision of the trade union immunity (article 540 of the Labour Code);
  • workers reporting sexual harassment (Law against Sexual Harassment in Employment and Teaching); and
  • workers participating in a collective economic and social conflict, a conciliation, arbitration, strike or procedure, in the case of a failed collective agreement (articles 394 and 620 of the Labour Code).

 

For the aforementioned workers, a due process must be followed before the Ministry of Labour and Social Security to prove the worker’s non-compliance and to obtain approval before the dismissal. For adolescent workers between 15 and 18 years of age (article 91 of the Code on Children and Adolescents), the same procedure is required to dismiss them without employer responsibility. However, if the dismissal is with employer responsibility, the calculation of the indemnities that will be paid must be sent to the Ministry of Labour so that the estimate can be revised.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

There are no requirements or special procedures for the exercise of collective dismissal. The collective labour contract, although regulated in article 49 of the Labour Code, has no practical application.

Class and collective actions

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

The unions can sue the protection of collective interests derived from legal conflicts, as well as represent their workers in conflicts of economic and social interests; they can also file an appeal in a court of cassation in the interest of the legal system against final judgments without having to be parties to the process and can engage in a conciliation and arbitration process to resolve the existing conflict (articles 446, 600, 602, 618 and 635 of the Labour Code).

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?

No law imposes a mandatory retirement age for workers. The Constitutional Chamber of the Supreme Court of Justice has declared unconstitutional any legal norms that did so under the argument that those norms were based on a presumption that at a certain age, someone is ‘useless, incapable and almost useless’ and is an ‘absolutely irrational and unjustified’ measure (Judgment No. 1146-1990, 21 September 1990).

A private-sector worker who has retired because of his or her age can be re-employed in the private or public sector without any limitation. A public sector employee who has retired because of his or her age cannot return to work.