All questions

Discontinuing employment

i Dismissal

Pursuant to the Bar Against Dismissal Law, no worker can be dismissed without just cause previously authorised by the labour inspector office.

In fact, the Labour Law has been structured to guarantee the source of employment, and prevent a lockout or reduction of personnel. The Ministry of Labour is able to intervene in a company's operations to guarantee its activity whenever there is a risk that: a source of employment will be closed; there will be a reduction of personnel; or there will be changes in labour conditions. Moreover, if an employer illegally closes the company or starts a lockout, and fails to comply with the Ministry of Labour's order to resume operations, the Ministry may take over the company's operations so as to protect the rights of the workers. Failure to resume operations may also result in imprisonment of up to 15 months.

In principle, and except for upper-management employees and those hired for an undefined term with less than one month of services, no worker may be dismissed without there being just cause for doing so.

In order to justifiably dismiss workers covered by the Bar Against Dismissal Law, the employer must obtain authorisation from the competent labour inspector office, through a dismissal qualifying procedure, which must be initiated before the labour inspector in the terms provided in the Labour Law. The dismissal must be based on the reasons for justified dismissal set forth in the Labour Law, which include:

  1. dishonest or immoral behaviour while on the job;
  2. violence, except in legitimate defence;
  3. causing injury to or demonstrating a serious lack of respect towards and consideration of the employer, its representatives or family members;
  4. an intentional or seriously negligent act that affects health and safety at the workplace;
  5. omissions or imprudent acts seriously affecting health and safety at the workplace;
  6. unjustified absence from work for three working days in one month;
  7. material damage intentionally caused by or because of serious neglect to the employer's machinery, work tools and utensils, furniture, raw materials, finished products or those in preparation, or to plantations or other properties;
  8. revealing of employer's secrets of manufacture, fabrication or procedure;
  9. serious violations of the obligations imposed by the labour relationship;
  10. abandonment of work; and
  11. bullying or sexual harassment.

If the worker is unjustifiably dismissed by the employer, he or she has one month to request reinstatement and payment of unpaid salary and labour benefits before the labour inspector office.

The employer's failure to comply with the prior request to dismiss the workers will give the latter the right to request their reinstatement, unpaid salaries and labour benefits. Failure to comply with a reinstatement order may trigger six to 15 months of imprisonment when breaching an order to reinstate a worker protected by the Bar Against Dismissal Law or trade union rights.

ii Redundancies

The general rule under the Labour Law is that no worker can be dismissed without just cause unless he or she is offered an indemnity for dismissal equal to the amount of his or her seniority benefit and he or she accepts it (job stability – see Section I). However, since 2002, workers are protected with a special bar against dismissal that has been extended to 28 December 2020. As long as the special bar against dismissal is in force, employers cannot freely dismiss workers without just cause and without previously obtaining authorisation from the labour inspector office.

When an employer wishes to lay off a substantial number of workers, the matter must be treated as a collective dispute even if the employer cites technical or economic reasons to support the decision. The existence of a collective dispute means that the employer can apply the procedures established for the resolution of disputes that arise between employers and workers. Notice of the employer's request for such a procedure must be provided to the respective labour union, or in the absence of a union, to the workers themselves. If the parties do not reach an agreement through the collective dispute procedure, the matter will be submitted for arbitration.

As with any other collective dispute, workers are protected by the Bar Against Dismissal. Also, a request to reduce personnel will not be allowed while the workers are exercising their rights to organise and negotiate collectively.

In the case of a mass lay-off, the Ministry of Labour is authorised to stop or suspend the action by means of a special resolution in order to uphold the principle of freedom of work. A mass lay-off is one that, within three months (or longer, if circumstances indicate a critical situation), affects a number of workers equal to or greater than the following:

  1. 10 per cent of the workers of a company that employs more than 100 persons;
  2. 20 per cent of the workers of a company that employs more than 50 persons; or
  3. 10 workers of a company that employs fewer than 50 persons.

The Labour Law provides that the study is to be made over three months, or longer if the circumstances so warrant. In fact, as indicated below, the labour inspector must take into account a period of at least six months to conduct his or her study.

A mass dismissal does not take place because of a request made to the labour inspector to authorise it. Rather, it is a declaration made by the Ministry of Labour based on reasons of social interest when it becomes aware of a dismissal that, by virtue of its size, falls within the aforementioned limits provided under Article 95 of the Labour Law.

In fact, the Regulations to the repealed Labour Law regulate the procedure for the suspension of mass lay-offs. It establishes that if the labour inspector of the jurisdiction becomes aware of a mass lay-off either ex officio or through an application by an interested party, he or she will initiate a procedure through a notice ordering the employer to appear for questioning in order to determine: the number of workers added to the payroll over the previous six months; and the number of dismissals during the same period, identifying the workers dismissed.

The procedure stated in the Labour Law is followed and after conclusion of the evidentiary stage, the labour inspector must prepare a report for the Ministry of Labour, which specifies: (1) the number of workers on the employer's payroll; and (2) the number of workers dismissed and the time taken to do so. If a mass lay-off is determined, the Ministry of Labour can order the reinstatement of the ex-workers and payment of lapsed salaries and other corresponding benefits, within 20 days of receipt of the report.

If an employer has to proceed with a mass lay-off to reduce personnel, it could choose to request authorisation from the Ministry of Labour to do so. This must be initiated before the labour inspector office in the respective location and the procedure for the resolution of collective disputes arising between unions and employers must be followed. According to the Regulations to the repealed Labour Law, the employer can request a reduction of personnel based on ongoing economic circumstances or technological advances or modifications. The recommended circumstances for requesting reduction of personnel would be the real existence of economic circumstances that endanger the activities or existence of the company.

The disadvantage of the procedure for the resolution of collective disputes arising between unions and employers is that, for its duration, the workers are protected by the bar against dismissals; the union to which the affected workers belong must be notified, where applicable; and if no agreement is reached between the employer and its workers, the matter may be referred to arbitration.

The labour inspector office can also require any supporting documents and information it deems appropriate, conduct inspections and supervisions, and order expert opinions.

A conciliation board made up of two representatives and one substitute for each delegation is appointed to process the dismissal procedure. The conciliation board's purpose is to achieve unanimous agreement in regard to: the workers that will be affected by the reduction of personnel; the term within which the reduction of personnel will be accomplished; and the indemnities that could correspond to the affected workers. The recommendation of the conciliation board may contain specific agreements on settlements or that the dispute is submitted to arbitration. The conciliation board may agree to one of the following solutions:

  1. amendment of the job conditions contained in the applicable CBA;
  2. collective suspension of work for no more than 60 days, during which time the workers will be exonerated from rendering their services and the employer from paying them for their services, with a view to overcoming the alleged economic crisis; or
  3. the initiation of a recapitalising and reactivation process for the company, with the participation of the workers, under the concept of co-management. To encourage this, the state will help with: (1) obtaining credits under preferential or government-subsidised conditions; (2) renegotiating agreements for payment of debt owed to the national treasury or for social security contributions; or (3) tax or financial preferences or other incentives.

According to the provisions of the Labour Law, the only way to fully and finally terminate the relationship between an employee and his or her employer is through a written settlement agreement containing a detailed report of the events that caused the termination and the employee's rights comprised therein. The settlement executed before the competent authority has the legal effect of res judicata, precluding an employee from bringing any further claim against the employer.