All questions

Discontinuing employment

i Dismissal

The labour system is that of 'improper permanency', meaning that, in principle, the employer may dismiss any number of employees at any time (other than union representatives).

By law, the employer is not obliged to notify the union of prospective dismissals. However, as pointed out in Section II, Decree No. 1043/2018 provides that until 31 March 2019, employers who decide to dismiss, without cause, employees hired under indefinite-term labour contracts should communicate the decision to the Ministry of Labour 10 days in advance. The Ministry may call the employer, employee and union representatives to as many hearings as it considers necessary to discuss the conditions of the labour termination. If the employer does not comply with this obligation, it may be subject to fines. Employees of the construction industry are excluded from this procedure.

Dismissals in Argentina are a delicate issue. If an employer decides to carry out mass dismissals, it may be subject to actions from the relevant authorities (labour and non-labour). If the number of dismissed employees is significant, the labour authority may decide to initiate the 'compulsory conciliatory procedure' applicable to collective conflicts, which may suspend or impede the dismissals. Additionally, some recent precedents issued by the Labour Court of Appeals ordered the reinstatement of employees dismissed without cause and without following the crisis procedure applicable in the case of dismissals for lack of work beyond the employer's control, which authorised payment of reduced severance, on the grounds that the employees were entitled to maintain their respective labour relations.

Dismissal without cause

In case of dismissal without cause, employees are entitled to severance payments, as follows.

Compensation based on seniority

The employee is entitled to receive one monthly salary for every year worked or a further monthly salary for any part of a year that exceeds three months. For instance, if the employee rendered services for three years and four months, he or she will be entitled to compensation equivalent to four monthly salaries. This compensation is not subject to social security contributions, or income tax payments or withholdings. In order to calculate the compensation based on seniority, the basis shall be the best monthly, normal and regular salary received during the last year of service or during the time of rendering the service. This compensation is subject to a cap, depending on the applicable CBA, which cannot be lower than 67 per cent of the monthly salary of the employee.

Compensation for lack of notice of termination

The employee is entitled to receive notice prior to the termination of the labour relationship. In the event that notice is not given, the employee is entitled to receive compensation amounting to: 15 days' salary if the seniority is up to three months; one monthly salary if the seniority is up to five years; and two monthly salaries if the seniority is greater than five years. This compensation is not subject to a cap; however, it must reflect the normal income of the employee and be equivalent to the salary that the employee would have received during the period of the omitted notice. The compensation is not subject to social security contributions or withholdings, but is subject to income tax payable by the employee. In addition, the proportional part of the thirteenth salary must be calculated, which will be added to the compensation (see below).

Payment in full of the dismissal month

In the month of the dismissal, the employee is entitled to receive the full salary regardless of the fact that he or she rendered services for a shorter period. This amount is not subject to a cap, or to social security contributions or withholdings, but is subject to income tax payable by the employee. The amount of the payment depends on the day of termination.

Compensation for unpaid holiday

The employee is entitled to receive compensation for unpaid holiday in an amount equivalent to the holiday that the employee would have been entitled to according to the period of the year worked. This amount is not subject to a cap and is not subject to social security contributions or withholdings, but it is subject to income tax payable by the employee. The amount of the payment depends on the number of days' holiday that the employee is entitled to.

Remuneration (salary and thirteenth salary)

The employee is also entitled to receive remuneration corresponding to the proportional part of the year worked. In this regard, the employee must receive a salary corresponding to the days effectively worked during the month of the dismissal and the proportional part of the thirteenth salary corresponding to the part of the year worked. The amount of the salary depends on the day of termination.

Dismissal for cause

In case of dismissal for cause, the employee is not entitled to mandatory severance. If the employee challenges the dismissal and a court considers that the cause for the dismissal is not significant enough to be deemed a breach of the main obligations of the employment contract, the court may award the employee mandatory severance.

In addition, if based on the employer's rejection of the claim from the employee, the employee is forced to raise a claim against the employer through administrative or judicial means, the court may grant the employee the aggravated compensation set forth by Section 2 of Act No. 25,323, equivalent to 50 per cent of the mandatory severance.

The employer may be obliged to pay higher severance in case of dismissals of women who are pregnant or have recently given birth, women who have just got married or will soon get married, and dismissals during sick leave.

As Argentina has become a controversial jurisdiction in terms of labour relationships, it may be prudent to execute a conciliatory agreement before the labour authority that includes a general release. If the conciliatory agreement is approved by the respective Settlement Service Authority after determining if it is in accordance with applicable law, the agreement is deemed to be res judicata.

ii Redundancies

The law also provides that employers may dismiss employees invoking objective reasons – lack of work beyond the employer's responsibility, force majeure or technological causes – in which case the employer is obliged to pay half the compensation based on seniority (half-monthly salary per year of service or a further monthly salary for any part of a year that exceeds three months) instead of paying the full compensation based on seniority.

The crisis procedure must be followed where dismissals for objective reasons affect more than 15 per cent of the payroll if the company employs fewer than 400 employees, 10 per cent of the payroll if the company employs between 400 and 1,000 employees, and 5 per cent of the payroll if the company employs more than 1,000 employees. The purpose of the crisis procedure, which should be carried out before the labour authority, is to prevent and mitigate the adverse consequences that may affect employment by promoting direct negotiations between the employer and the union. During the crisis procedure, the employer cannot carry out any dismissals, and the employees cannot carry out industrial action.

If the dismissals based on objective reasons affect less than the minimum percentages mentioned, the employer must give notice of the decision to the labour authority 10 days before the dismissals and also give a copy of the notice to the respective union.

Even though contemplated by the law, owing to the reduced redundancy payments, courts have been very sceptical with regard to objective reasons for dismissals.