On July 25, 2017, Law No. 9343, known as the “Labor Procedure Reform” (LPR), became effective. By amending 348 articles of the Labor Code, the LPR overhauls nearly half of the country’s labor and employment laws, representing the most important and substantial amendment to the Labor Code since its enactment in 1943.
As discussed in our article last year, the most important changes under the reform impact employers on three fronts: (1) individual labor law governing the employer-employee relationship; (2) collective bargaining; and (3) labor procedures. What follows is a summary of these reforms.
Individual Labor Law
The LPR overhauls the anti-discrimination laws by extending the protected classes from four (age, gender, race, and religion) to 14 and creating a “catch-all” provision to prohibit any other form of discrimination. It also considers as new grounds for termination an employee's discrimination against another employee.
The LPR also eliminates the cap on compensation for discrimination, and allows alleged victims to seek relief in court by means of a fast-track process. The fast-track process theoretically would enable the courts to adjudicate claims within one month from the filing date.
Additionally, the LPR introduces changes to the way terminations with just cause are handled by employers. In cases of terminations with just cause, if an employee refuses to sign the dismissal letter, employers are now required to deliver the letter to the Ministry of Labor within 10 days of the termination.
The LPR also heightened the regulations governing the relationship between employers and unions. Significant amendments include:
- Employees who enjoy a protective immunity from termination on the basis of their union membership or leadership now have access to fast-track adjudication in case of termination, a process similar to employees claiming discrimination.
- If the workplace is not unionized or the union lacks the support of at least 50% of the workforce, a strike can still be initiated if 35% of the employees call for a vote in its favor, and the vote is ratified by a simple majority. As this is a lower threshold to support a legal strike, this amendment makes it easier for employees to initiate strikes.
- The conciliation and arbitration procedures, within the context of a collective conflict, are reformulated to allow an expedited handling by the courts.
- Unions or employees may now strike over the interpretation of a law or regulation. Prior to the LPR, only social or economic reasons could support a legal strike.
In brief, it can be said that the new provisions on collective bargaining, unionization, and strikes are aimed at promoting and increasing union membership in the private sector.
The LPR completely reformulates the judicial procedures. The changes include a streamlining and acceleration of the judicial process by shortening the deadlines. As mentioned above, a discrimination claim may now be adjudicated within one month from the date of filing of the claim.
Moreover, procedures will be handled orally, as opposed to in written form. Thus, most motions, oppositions, defenses and similar filings will be adjudicated during a preliminary hearing before a judge. Preliminary hearings, a brand-new creation of the LPR, will also allow judges to determine the admissibility of evidence at trial.
Additionally, the LPR creates the right to free legal assistance for claimants whose income falls below an income threshold. Employees who are pregnant, underage, or claim to be victims of discrimination are entitled to free legal counseling regardless of their income.
The LPR substantially impacts the whole life cycle of an employment relationship, regulating how recruitment, workforce management and termination should be managed. Thus, employers in Costa Rica or those seeking to do business in Costa Rica are well advised to review their employment and business practices to bring them into full compliance with the LPR and avoid claims of discrimination.