Introduction

Certain positions in the private and public sectors require employees to have their employer's trust.

By law, a 'management position' is defined as a position in which an employee:

  • represents his or her employer before third parties or other employees;
  • acts as a substitute for his or her employer;
  • shares his or her employer's administration and management responsibilities; or
  • makes decisions that influence his or her employer's activities and their outcomes.

A 'position of trust' is defined as a position in which an employee:

  • works directly with employees in management positions;
  • has access to his or her employer's industrial, commercial or professional secrets or confidential information; or
  • aids decision making by preparing reports that are submitted to employees in management positions.

Dismissal

As with any employee, the above types of employee can be dismissed for any of the capacity or conduct-related reasons established by law. In such cases, dismissal does not trigger the requirement to pay indemnity.

The Constitutional Court has held on numerous occasions that employees in management positions or positions of trust can be dismissed if the employer loses trust in the employee. In these cases, the employer must pay indemnity, as loss of trust is not a legal basis for dismissal, despite the fact that the court has found it to be a sufficient reason to terminate an employment relationship.

When employees are dismissed due to a loss of trust they are not entitled to reinstatement and can claim only indemnity for unlawful dismissal. However, if the employee previously held a non-management position or a non-position of trust, and his or her contract is terminated because of a loss of trust, the employee has the right to be reinstated in his or her original position. In such cases, the employee will not receive indemnity.

If an employee has held a management position or a position of trust since the employment relationship began and is dismissed due to a loss of trust, the employer must pay indemnity for unlawful dismissal. In such cases, the Constitutional Court accepts loss of trust as a reason for terminating an employment relationship if the employer pays indemnity for unlawful dismissal.

Conflicting decision

However, a recent Supreme Court of Justice decision (Cassation 18450-2015-LIMA) determined that an employee who has held a management position or a position of trust since the employment relationship began is not entitled to indemnity for unlawful dismissal when it occurs due to a loss of trust.

This judgment differs from previous Supreme Court decisions. However, it is not a mandatory precedent and was not issued with the approving vote of all judges. Therefore, it cannot be considered a standard criterion and is unlikely to be maintained in future for the following reasons:

  • Article 27 of the Constitution establishes that the law protects employees against unlawful dismissal. In this sense, the law protects employees against unlawful dismissal by granting indemnity. The general rule does not exclude employees in management positions or positions of trust.
  • Loss of trust is considered a legal cause for dismissal only in the public sector. No indemnity is required, as these kinds of employee can be hired and dismissed freely.
  • The Constitutional Court has repeatedly ruled in favour of indemnity for the unlawful dismissal of employees in management positions or positions of trust.

For further information on this topic please contact Jorge Toyama Miyagusuku or Flavia Zarins Wilding at Miranda & Amado Abogados by telephone (+51 1 610 4747) or email (jtoyama@mafirma.com.pe or fzarins@mafirma.com.pe). The Miranda & Amado Abogados website can be accessed at www.mafirma.pe.

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