Labour relationships in Argentina are governed by the Argentine Constitution, international treaties and conventions and, in most cases, by Labour Contract Law No. 20,744 (LCL).
The Argentine Constitution contains the overriding principles governing labour relationships. The basic principles in the Argentine Constitution include:
- a freedom of employment;
- b the right to work in a dignified and equal manner;
- c the right to earn appropriate wages which cannot fall below a minimum declared by law;
- d the right to be entitled to paid breaks and vacations; and
- e the right to equal remuneration for equal work.
The LCL is the minimum statutory threshold and governs every aspect of labour relationships, such as remuneration, termination, vacations, timetables, leave of absence, etc.
For litigation, issues related to employment contracts and employment contract conflicts are decided by the ordinary justice of each province and of the City of Buenos Aires. In broad terms, there are two main court structures, one involving mainly oral arguments and a second one involving mainly written documents.
The provinces have mainly adopted the oral procedure, and provincial tribunals usually consist of more than one judge (i.e., three members) and of a sole instance or stage. For example, in the Province of Buenos Aires, the tribunals consist of three judges, and appeals may only be filed before the Supreme Court of Justice of the Province of Buenos Aires
When the procedure is mainly written, there are two instances or stages, the first before an individual judge and the second before a three-member tribunal. For example, in the City of Buenos Aires, there are 80 first instance labour courts. There is a bill at Congress that puts forward the establishment of 10 additional labour courts and two additional chambers of the National Court of Appeals (NLCA). Any appeals against the decisions of these labour courts must be filed before the NLCA. The NLCA is divided into 10 chambers, each of which is formed by three judges.
No court has the power to control another, but only to review, in some cases, appealed decisions. In principle, case law does not create binding precedents. Until April 2013, a full-bench judgment, in which all the judges of the NLCA rule, used to be mandatory for all chambers and all labour courts sitting in the City of Buenos Aires. In April 2013, Law No. 26,853 came into force, abrogating sections of the National Civil and Commercial Code of Proceedings that used to state full-bench rulings were mandatory. However, it has been said that this new law is still to become enforceable, and despite its provisions full-bench rulings have moral enforceability.
Appeals against judgments rendered by the NLCA or by the Superior Courts of each province may be filed as extraordinary appeals before the Argentine Supreme Court of Justice (ASCJ). An extraordinary appeal before the ASCJ is an exceptional appeal aimed at preserving the supremacy of the Argentine Constitution, and is only applicable in very specific situations.
In July 2016, following a series of requests from various organisations, the ASCJ requested that the Judicial Council arbitrate a series of urgent measures that aim to address the serious institutional crisis that labour justice is going through.
The required measures are the following:
- a request the labour courts to conduct a report on the statistics of their cases;
- b conduct an audit to ascertain the state of their situation;
- c create 98 labour positions for labour courts by means of a rapid and expeditious exam procedures; and
- d improve and adapt building and infrastructure conditions.
The ASCJ ordered these measures with the purpose of improving the labour justice system.
II YEAR IN REVIEW
Employment law and the power of the unions depend on the political party in office at the time. A pro-union or pro-employee government is different from a market government because it tends to enact laws granting increased powers to the unions, which, in turn, support the governing party, as well as enacting more employee-protective regulations. Argentina has had a pro-employee government for many years.
However, it is worth mentioning that on 22 November 2015, presidential elections took place in Argentina, and after 12 years of continuous ruling of the same party, opposing candidate Mauricio Macri was elected president. The elected president is known to have liberal tendencies compared with the last two presidents.
On 27 March 2016, senators gave a preliminary approval to a law project that would forbid dismissals and suspensions without cause for the term of 180 days from the date that the law is published in the Official Gazette. The project had been thought of as a way of coping with the employment emergency and forbade dismissals or suspensions of workers without cause, in both the public and private sectors. If dismissals still take place, the affected employees will be able to claim reinstatement to their jobs, plus the payment of all salaries until their reincorporation. The reinstatement will be held in an accelerated process.
However, on 23 May 2016, through the Decree 701/2016 and in exercise of the powers set in Section 83 of the Argentine Constitution, the Argentine Executive Power totally vetoed the law project that declared an employment public emergency.
Special consideration must be given to the fact that on 1 August 2015, Law 26.694 came into force, giving way to the new National Civil and Commercial Code (NCCC). This new NCCC has had considerable impact on labour laws since some of them refer either directly or indirectly to civil law, and therefore to its application.
The new NCCC includes special treatment for contracts such as licence, agency and franchising. The NCCC goes further by expressly stating that both licence and agency contracts cannot be deemed as labour relationships, despite economic considerations. As for franchising, the NCCC states that a franchisee’s dependants cannot be considered as employees from the franchisor, except in the event of fraud.
Also, the new NCCC expands criteria regarding the concept of ‘damage’ to include, along with loss of profit and actual loss, ‘loss of chances’. The NCCC has broadened the concept of liability, including a wider range of items to be paid. Also, the NCCC has included non-pecuniary rights such as the right to privacy and the right to honour within the scope of liability for compensation.
The NCCC innovations regarding concept of damages has an impact on labour regime whenever the LCL redirects to civil law for compensation.
While the LCL has a fixed tariff system for compensation, civil law compensation for damages depends on the extent of emerging damages, loss of profit and the new loss of chances concept.
Within the scope of labour relationships, this specific action brought up by the new NCCC might cause either application of fines or ceasing of precautionary measures to whoever might be considered as acting ‘with serious disregard to collective incidence rights’ (Section 1714 of the NCCC).
On 25 October 2012, Law No. 26.773 was published in the Official Gazette. This Law does not entirely modify the prior Work Risk Law No. 24,557. However, its innovation lies in the fact that it gives employees options for exclusion in case of labour accident or work-related diseases: the employee can either choose civil compensation or the tariffed system set forth in the work risk system.
After a long series of disagreements concerning jurisdiction, the NCLA majority case law has acknowledged labour court jurisdiction for legal actions for labour accidents and professional diseases grounded on civil law, despite the fact that section 17.2 Law No. 26.773 assigns jurisdiction to civil courts.
On 19 October 2016, in the framework of the first meeting of ‘Dialogue for Production and Employment’, the Executive Power, the General Confederation of Labour (CGT) and the six main business associations agreed to ‘open a negotiation, sector by sector’ to award an extraordinary bonus by New Year to both private and public employees.
The resulting minute of agreement established that the different sectors will negotiate a New Year bonus compensating the 2016 inflation index, which will be non-remunerative and extraordinary, with a reference figure set at the amount of 2,000 pesos per worker. The ministers clarified that the agreement is not mandatory for employers, but simply conveys a political statement on a purely indicative basis, promoting a negotiation between unions and businessmen.
As a consequence of the agreement, the CGT suspended its call for a national strike. As of 2 November 2016, the sectors that have agreed to the payment of this bonus are the oil, banking, toll booths, the Civil and Sports Workers Union, and the private security sectors.
In relation to employees’ salaries, the minimum wage has been modified by the Wage Council, a group comprising workers and employers that periodically reviews wages in relation to the economic situation. The monthly minimum salary was raised from 6,060 pesos to 6,810 pesos as of June 2016, then up to 7,560 pesos as of September 2016, and finally reached 8,060 pesos in January 2017.
The amount of litigation and collective negotiations has continued to increase. The number of collective negotiations in the past year is as follows:2
- a approved collective bargaining agreements: 277; and
- b positions covered under a collective bargaining agreement: 2.291 million.
III SIGNIFICANT CASES
On 15 July 2014, the ASCJ ruled in Negri Fernando Horacio v. National State – Federal Tax Authority (AFIP) stating that income tax withholdings should not be applied on compensations deriving from termination of an employment relationship.
Income tax law states that only seniority compensation is exempt from income tax. However, some cases have moved forward by ruling in favour of expanding the legal exception to other cases (e.g., maternity).
In Negri, the plaintiff had been granted a bonus for his prior termination of employment relationship. He aimed to recollect the amount withheld from his bonus under the concept of ‘income tax’. The ASCJ ruled in his favour, stating that whenever amounts are paid as a direct consequence of termination, income tax should not be applied since there is no periodicity in payment or regularity in the source of income.
Thus, according to this ruling, there is sufficient argument to sustain that compensation for dismissal and bonuses is not subject to income tax withholdings, since there is no periodicity in either payment of source.
On 7 June 2016, the Argentine Supreme Court of Justice established that only authorised organisations of workers are entitled to the constitutional right to strike. Therefore, only these, with or without legal recognition, can exercise legitimate measures of force. Non-unionised groups of workers are excluded from this right. In this ruling, the ASCJ limited the interpretation of the term ‘unions’ to professional associations with union status and to associations registered under the special register of the Labour Ministry. These are the only organisations authorised by the Argentine Constitution to convene and strike.
ASCJ rulings are not specifically binding for the lower courts. However, it has been sustainably stated that ASCJ rulings are morally binding for lower courts not only for their doctrinal strength but also due to practical reasons: should lower courts rule against the ASCJ’s criteria, parties will file remedies until they reach the ASCJ instance, certain to win their cases. Thus, in order to avoid unnecessary activity and endless remedies, ASCJ rulings are mandatory, though no law specifically enforces it.
IV BASICs OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
The LCL establishes that all labour contracts are in principal for an indefinite period. For indefinite employment relationships, there is no obligation to execute an employment contract in writing. It is advisable, however, to execute a contract in which the parties set forth the obligations of the employer and the employee, and the conditions and terms of the relationship along with acknowledgment of company policies (use of cell phone, email, internet etc.). There are other types of contracts, such as fixed-term contracts, contracts for extraordinary or special service, part-time contracts, and seasonal contracts, which the parties must execute in writing pursuant to the LCL with specific requirements.
An employment contract may be amended in writing at the parties’ discretion. However, the employer is only permitted to unilaterally introduce changes if such changes are reasonable, only affect non-essential labour conditions and do not cause moral or financial damage for the employee. If such damage exists, even with the employee’s consent, further claims are viable under the ‘no waiver of labour rights’ principle.
However, it is possible to amend an employment contract with the employee’s consent and payment of compensation repairing any damage or loss.
ii Probationary periods
All indefinite-term labour contracts begin with a trial period of three months, which allows either party to terminate the relationship during such period without obligation to make any severance payment and with only a 15-day prior notice or payment in lieu thereof. If the labour relationship continues once the trial period has been completed, the trial period will be computed as part of the contractual period for all purposes.
iii Establishing a presence
Argentine labour law and the LCL are applicable to any employee working in Argentina, including individuals from a foreign country. In certain situations expatriate employees may be exempt from social security payments, provided that they prove that they are protected or covered by a social security system in their home country.
All employees who render services in Argentina must be registered in Argentina.
Argentine law requires the existence of an Argentine employer registered as such with the Argentine Tax Authority (AFIP). To obtain such registration with the AFIP, the employer, if it is a foreign company, must establish either a branch or a subsidiary in Argentina and then register such entity with the AFIP, thus obtaining a tax identification number.
Once such registration is complete, the branch or subsidiary shall be entitled to hire employees, who may thus be registered in full compliance with Argentine labour, social security and tax regulations. Pursuant to Argentine labour and social security laws, employers and employees have certain obligations to make social security contributions for family allowances, medical services, pensions and unemployment benefits.
Furthermore, the employer will also be required to withhold amounts for income tax payable by the employee. Withholdings and contributions are amounts calculated as a percentage of the individual employee’s remuneration, which must be deposited in the relevant accounts that the AFIP maintains in most banks in Argentina.
17% or 21%*
24% or 27%
*Depending on activity and annual turnover.
By Resolution No. 28/2016, published in the Official Gazette on 26 February 2016, the Social Security Authority modified the minimum and maximum taxable bases to determine the amount of contributions destined to the Argentine Social Security System, which were determined at 1,724.88 pesos and 56,057.93 pesos respectively, as from the March 2016 pay period.
Employer’s contributions, on the other hand, have no cap, and must therefore be calculated over the whole employee’s remuneration.
iv Independent providers
The employer may maintain relationships with different providers of services, consultants or independent contractors. However, Argentine law has broad criteria to determine whether a labour relationship (registered or unregistered) exists. To determine whether a person is considered an employee of a company, the reality of facts, the nature of the services, the existence of compensation and the manner in which services are rendered must be considered, among other facts, rather than the formal identifications that the parties may give to the relationship. Consequently, a foreign company may validly engage an independent contractor or hire employees through an agency, but if the foreign company is proved to be the actual beneficiary of such employees’ services, the labour relationship could be deemed to be incorrectly registered, thus leading to the labour, social security and tax contingencies.
In addition, an independent contractor performing services for a foreign company may actually be considered to create a permanent establishment and branch of the entity, in which case it could be considered to be performing permanent business in Argentina without proper registration. Performing permanent business in Argentina without proper registration may trigger penalties from the tax authority, debts for unpaid taxes and interest on the unpaid taxes.
V RESTRICTIVE CONVENANTS
An employee has a duty of loyalty to the employer and is barred from engaging in competitive activities during the period employment. Contractual stipulations providing that the employee will not compete after the termination of the labour contract are of doubtful validity, since they may be considered to conflict with the provision in the Constitution that provides that all persons have an unfettered right to work
In the case of key employees, however, it is quite common for them to undertake not to compete with their former employer after termination of their contract in return for monetary compensation from their former employer. In certain cases, this type of agreement has been accepted as valid by the Argentine courts provided that a time limitation and a monetary compensation were provided to the employee.
i Working time
The workday not only includes the time effectively worked but also the time the worker is at the employer’s disposal.
The workday may not exceed eight hours a day or 48 hours a week. A shorter workday may also be established.
A workday may be established in any of the following ways:
- a limiting the workday so that it does not exceed eight hours per day, as long as work duties on Saturdays end at 1pm; or
- b uneven distribution of the 48 hours among the working days of the week, when workdays of one or more days last less than eight hours.
The extra time of the other days may not exceed an hour a day and activity on Saturdays must still end at 1pm.
Night shifts, which are defined as those worked between 9pm and 6am, may not exceed seven hours and employees who work shorter night shifts must collect the same salary as employees who work the longer day shifts.
Directors and managers are excluded from general working time regime. Legal working time limits are not applied to them, along with overtime. However, managers and directors are entitled to a weekly rest.
Time worked in excess of the allowed workday should be paid as overtime with a 50 per cent or 100 per cent surcharge depending on whether the extra hours were worked during the week or on the weekend, respectively. Overtime may not exceed 30 hours a month or 200 hours a year, unless administrative authorisation to exceed such caps was obtained. If the work is performed in teams based on revolving schedules, however, overtime eligibility is measured in three-week periods. As explained above, only directors and managers are exempt from overtime as a result of a recent statutory amendment.
iii Unhealthy work
Unhealthy work takes place in facilities that have been formally established as ‘unhealthy’ by the administrative authority. Upon such declaration, working time in these facilities should not exceed six daily hours or 36 weekly hours, and the employer must pay equal salary as if working time was normal. Working overtime is forbidden for unhealthy work, along with the hiring of women and minors under the age of 18.
Managers and directors are not excluded from this unhealthy work regime.
iv Work in teams – shift work
Shift work is defined as a task that cannot cease and therefore requires continuous work, or as a task that cannot be performed without the presence of a whole team. Within this scenario, employees might work in shifts to ensure continual activity.
Working time in these cases has a different treatment that involves a wider average of 144 hours within 18 working days. Working times may exceed the eight daily or 48 weekly times if, within three weeks, the average working time does not exceed them. In any case, weekly times may never exceed 56 hours.
VII FOREIGN WORKERS
Argentine entities are fully authorised to receive and hire expatriate or otherwise foreign employees at their discretion and with no limitation in number. Every non-Argentine citizen that enters the country to perform a paid legal activity must first obtain a temporary residence work visa. This work visa may be granted for the maximum term of one year, renewable each year. Citizens from Bolivia, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru, Uruguay and Venezuela (Mercosur and associated countries) are exempt from the need to obtain this work visa, since they may directly apply for a two-year residence visa in their capacity as Mercosur citizens and associated states.
A temporary residence work visa may demand approximately two months to process. In principle, the process is composed of two stages; the first one takes place in Argentina (the employee’s attendance is not required) and the second stage requires personal attendance by the employee before the Argentine consulate of his or her home country. The process may, however, be materially simplified and performed entirely in Argentina if the employee is already in the country.
Business visitor visas are called ‘business visas’. Nationals of most countries require a business visitor visa to travel to Argentina on short-term trips for business, investment, market surveys, attendance of meetings or conferences, or contract negotiation, among other examples.
Business visas are issued for specific short-term assignments, with a maximum of 90 days, and may be extended for an additional 90 days. Business visas may be applied for at the Argentine consulate with jurisdiction over the applicant’s home country. Processing time will depend on each consulate. The process may have to be initiated in Argentina if there is an Argentine inviting company.
Local laws do not require a specific recruitment percentage of national employees or a specific duration of their assignment. Furthermore, the Argentine Constitution grants all residents of Argentina, regardless of their nationality, the right to work.
In relation to foreign directors of corporations, they must establish special domicile in Argentina. They may be of any nationality but they are mostly required to be residents. If they were to move to Argentina during their term of office, a special visa would be required.3
VIII GLOBAL POLICIES
The employer may regulate and organise the activity in their company through the creation of internal policies. Though not expressly required, it is advisable for the employer to establish internal rules in writing and have the employees sign them, acknowledging receipt and acceptance of the rules.
One of the main concerns nowadays is the use of internet tools in the workplace. Given that there are no specific regulations in Argentina concerning the use of the internet, social networks, emails and other software devices, it is mostly advisable to issue internal company policies organising the use of these tools, pursuant to the organisational faculty granted to every employer.
Such policy should contain specific guidelines as to use of the internet and social networks, and state whether their access is forbidden or limited. Special focus must be given to disclosing confidential information. Company email accounts should be specified as working tools, and the fact that the employer is entitled to control its content and use should also be specified. It is also advisable to include wording on possible breaches of the policy, specifying that under such circumstances the employer is entitled to apply disciplinary measures.
It is also advisable to translate the rules into Spanish and notify the employee in such language. Despite such freedom being given to the employer, any policy, even in writing, contemplating conditions that are not at least as favourable for the employee as given in Argentine statutes or other local regulations, shall be null and void.
There is no legal obligation to translate the employment contracts or other employment documents into the native language (i.e., Spanish). This includes employment contracts, policies, handbooks or otherwise. Official forms (e.g., social security documentation or salary receipts) must be drafted and completed in Spanish.
Regarding labour documents that do not require translation, it is still highly recommendable to draft them into Spanish or to have English–Spanish versions because only documents in such language are acceptable in the event of a lawsuit. Otherwise, in the event of a dispute, a public translator would be appointed and any mistranslation would be interpreted in favour of the employee.
X EMPLOYEE REPRESENTATION
Unions are widespread in Argentina, and are permitted and regulated by law. Argentine law distinguishes two types of employees: unionised and non-unionised. The former are those covered under a collective bargaining agreement, whereas the latter are not. Being unionised is not mandatory according to Argentine regulations, however, some still argue about fact than some employees are non-unionised, therefore not represented by unions. While application of a collective bargaining agreement to employees is mandatory if their job is covered by such collective bargaining agreement, employees can decide whether to be further affiliated with a union or not.
Collective bargaining agreements adapt the general provisions of the LCL to particular situations, such as a specific industry, sector or employer. These agreements are negotiated between the relevant union representatives and either the management of an industry sector or a specific company. Unions are independent from employers and the government.
The economic resources of unions are made up of contributions or fees paid by their members and economic funding provided by employers due to collective bargaining agreement provisions. The funding imposed on employers is aimed at providing social benefits, such as social assistance, medical care, education and general improvement of the employees’ quality of life.
Representative power is given to unions by the Ministry of Labour. Only if given this power do unions have bargaining faculties in defence of collective labour rights. This power is assigned to the most representative union of each sector. Unions may be organised by activity or profession. As a condition to achieving representative power, unions must be previously registered, and their members must represent at least 20 per cent of the employees of a given activity.4
Pursuant to the Union Association Law, only unions with representative power may represent their members against different organisations, even governmental ones. They may negotiate and sign collective bargaining agreements; exercise industrial action, such as the declaration and promotion of strikes; and create and administrate social service organisations. Furthermore, only workers affiliated to unions with representative power may be elected as personnel representatives.
In November 2008, the ASCJ ruled in a controversial case, State Association Workers v. Ministry of Labor re Union Associations’ Law, stating that the Union Association Law’s exclusion of unions with no representative power affects the workers’ right to demand affiliation, and also limits the representation of those simply registered unions. Therefore, in this case, the court ruled that the workers who are affiliated to simply registered unions (with no representative title granted by the Labour Ministry) can also be elected as personnel representatives, contrary to the statements of the Union Association Law.
This new case law stated by the ASCJ implies that those simply registered unions may now exercise rights previously restricted to unions granted representative power by the Labour Ministry. The ASCJ ruled that workers who wish to be candidates should not be forced to be affiliated to a union enjoying representative power, should they have a preference for some other union organisation that is simply registered.
Delegates in a company may exercise their powers during renewable two-year terms, and may not be dismissed or disciplined during their time in office and for one year after the termination of such term. In the event of dismissal during such a protected period, the employee should collect wages for the entire term until its expiration plus one more year, in addition to regular severance. Claims for damages and rehiring are becoming more frequent.
However, in April 2017, the ASCJ emphasised that the effective enjoyment of union protection is subject to the compliance of the requirement to notify the employer about the formalisation of the employee’s candidature to a union position.
XI DATA PROTECTION
Argentina has adopted strict criteria in relation to data protection by means of Data Protection Law No. 25,326 (the Data Protection Law) and related regulations. The main purpose of the Data Protection Law is to guarantee the complete protection of personal data contained in files, records, databases or other technical means, either public, or private if meant ‘to supply information’, and the right to good reputation, privacy, and access to information, in accordance with Article 43 of the Argentine Constitution. The Data Protection Law is applicable to legal entities.
According to the Data Protection Law, personal data means any kind of information referring to individuals or legal entities. The transfer of personal data to other countries or to international organisations is forbidden, if such countries or organisations do not grant an adequate level of protection according to the Argentine authorities’ criteria. Pursuant to the Argentine Data Protection System, countries inside the European Union fulfil this requirement but, for instance, the United States does not.
Further regulations have allowed international transfer to unsafe countries or entities when the owner of the data consents to the transfer or when the adequate protection levels arise from ‘contractual clauses’, ‘binding corporate rules’ or ‘self-regulation systems’.
No consent is needed if transferring data from a public registry legally constituted to provide information to the public and open for access to any person who can show a legitimate interest.
Furthermore, sensitive data has been defined as any personal data revealing any of the following:
- a racial or ethnic origin;
- b political affiliation;
- c religious, moral or philosophical convictions;
- d trade union activity; or
- e information related to health or sexual orientation.
Personal data is defined generally as any kind of information related to a person or a company, including labour references, labour history or compensation.
The employer has the right to check and investigate different personal, educational and criminal references of new hires as long as the dignity and privacy of the candidate is not affected and, to minimise risks, the individual’s consent is obtained. Nevertheless, the LCL and the Anti-discrimination Law No. 23,592 forbid any kind of discrimination. Employers must treat all employees and candidates equally, and any act of discrimination including, without limitation, those based on matters of sex or any private life issues, are considered unequal treatment.
The use of social networks has increased rapidly within the past years, and legislation has failed to be as quick. While employers grant their employees working tools such as the internet and company email accounts, these should be used as working tools under the scope of the organisational faculty exercised by the employer, and employees should be informed of the guidelines for the use of company emails and the internet.
Notwithstanding the above, social networks and employment relationships have gone further. Employers might receive knowledge that their employees are using social networks such Facebook or Twitter to make offensive comments, show inappropriate content or even pictures that might jeopardise the company image. Although the employer’s rights cannot go any further than the use of social networks within the scope of working hours, actions condemning such behaviour might be grounded on the employer’s image. In this regard, the employee’s hierarchical position is crucial, given that their image, practices and statements are more likely to be linked to the employer’s image, practices and statements.
However, the employer’s right falls under the employee’s constitutional right to intimacy and privacy. Specific assessment of each case is still required prior to taking any action because, as a general rule, the employer is not entitled to control or influence in any way the worker’s use of social networks outside work.
XII MOBBING, SEXUAL HARASSMENT AND DISCRIMINATION
Mobbing has been defined as the continual and repeated psychological and social mistreatment of an employee, coming from a hierarchical superior by means of insults, offensive treatment and repeated threats of dismissal. This sort of behaviour may involve gestures and words that make victims feel uncomfortable, with the purpose of causing their resignation.
Doctrinaires believe mobbing has the specific intention of causing the victim to resign. They also believe that a single heated discussion is not mobbing, as mobbing involves repeated and sustained ill treatment.
Labour courts have initially rejected claims for damages or moral damages deriving from mobbing conduct, except where there is evidence of an employer’s malicious or fraudulent conduct.
Within the past years, labour courts have ruled in favour of mobbing victims when this sort of behaviour has been evidenced. In some cases, courts condemned passive employers who took no measures to stop the aggressor from mistreating his or her victim. Some courts have ruled for compensation for dismissal without cause, and in some cases additional compensation for moral and psychological damages were included.
While mobbing has the clear objective of causing the victim’s resignation, sexual harassment has been defined as being portrayed with a clear sexual object. The victim is stalked and threatened with dismissal or other consequences unless she or he consents to be sexually involved with the harasser.
Courts have ruled in favour of victims of proved sexual harassment, ordering payment of compensation along with moral and psychological damages.
For both sexual harassment and mobbing, the employer’s action is crucial. Most courts condemn an employer’s omission to take further action against the aggressor or aggressors. It is advisable to anticipate these claims by means of an HR department that might take on reports of this sort and give them the necessary treatment either by running it through the legal department or manager department.
As for discrimination, Anti-discrimination Law No. 23,592, the LCL and Argentine Constitution forbid any sort of discriminatory conduct. The Anti-discrimination Law precisely states that any conduct of this sort should not be tolerated. In this regard, dismissals considered to be grounded on discriminatory aspects might be revoked and left with no effect.
In Álvarez, Maximiliano & others v. Cencosud SA, the ASCJ ruled in favour of plaintiffs, considering their dismissal to be based on discriminatory reasons, and ordered their immediate reinstatement.
In this regard, the act of producing evidence within discriminatory dismissals has been altered pursuant to ASJC ruling Pellicori, Liliana Silvia v. Attorney Bar Association of the City of Buenos Aires. The court stated that upon claim of discriminatory dismissal, the responsibility of proving discrimination does not lie with the plaintiff. On the other hand, the employer is expected to prove that the dismissal was for a cause other than discrimination, therefore altering the general principle concerning production of evidence.
Employers are expected to give equal treatment to their employees, under identical circumstances. To avoid discriminatory claims, it is advisable not to seclude employees from general treatment.
XIII DISCONTINUING EMPLOYMENT
The employer may terminate an employment relationship with or without cause. If the employer is ending the relationship without cause, the law provides that the employer must give appropriate prior notice of termination. If relevant notice is not granted to the employee by the employer, the proportional amount of the employee’s salary must be paid in lieu of such notice. The length of prior notice is dependent on the employee’s seniority (one month’s notice if the employee worked for the employer for less than five years and two months’ notice if the employee worked for the employer for more than five years).
Furthermore, once notice has been given (i.e., by telegram, certified letter, notarial notification or acknowledgment in writing by the dismissed employee), the employer is obliged to pay to the employee any compensation which he or she may be entitled, such as any outstanding wages, payment for vacation days and proportional entitlement to the ‘13th salary’.
If prior notice is given by the employer and the dismissal takes place on a day different from the last day of the month, the employee will collect, in addition to the prior notice, an amount equal to the salary corresponding to the remaining days of the month of dismissal.
The employer is also obliged to pay compensation for seniority at the rate of one month’s salary for each complete year of service performed, or period worked in excess of three months. The calculation is the best monthly, normal and regular remuneration earned by the employee in the last 12 months of employment. Such calculation basis, however, is subject to a cap published by the Labour Ministry according to each activity. Whenever the difference between such cap and the employee’s monthly salary is material, a different analysis must be used, as the Argentine Supreme Court of Justice has said that whenever the cap is lower than 67 per cent of the employee’s monthly salary the cap is unconstitutional.
According to the full bench decision Tulosai, Alberto Pascual v. Central Bank of the Republic of Argentina on Law 25,561, a proportional semi-annual mandatory bonus and non-monthly performance bonuses shall not be included in the calculation for compensation for seniority pursuant to the first paragraph of Section 245 of the LCL, unless there was fraud, in which case voluntary bonuses may impact the severance calculation.
Severance payment and outstanding wages must be paid within four working days following the termination of the labour relationship. However, the parties may agree otherwise in writing through the execution of a settlement agreement before the Labour Ministry. In Argentina, it is advisable to enter into a settlement and release agreements that, as approved by the Labour Ministry, will have res judicata effect and minimise the risk of future claims, especially considering the different criteria for severance calculation adopted by Argentine courts and the lack of binding precedents.
If the employer is terminating the relationship with just cause, no severance or prior notice needs to be granted to the dismissed employee. However, the employer must take extreme care in advance to verify the seriousness of the infringement by the employee. Without significant evidence, the chances of a court confirming such dismissal are very low, especially considering the highly employee-protective tendencies of Argentine labour courts.
The LCL establishes that the employer may dismiss an employee for force majeure and economic reasons, in which case the employer may pay employees an amount equal to 50 per cent of the compensation for seniority. An employer may dismiss employees because work cannot be carried out for reasons outside the control of the employer, and which could not be avoided with reasonable care. The employer must prove that it has not been responsible for the job loss and must be able to reasonably justify its actions. The employer must be able to show that the event will have a lasting effect and that it inevitably led to the dismissals. Dismissals must take place in the order of ascending seniority and, regarding employees with similar hire dates, in consideration of dependent relatives.
Under Argentine law, whenever the employer needs to dismiss or suspend employees as a result of force majeure, or economic or technological reasons, and such dismissals or suspensions affect a certain percentage of employees, a special procedure called the Crisis Prevention Procedure (CPP) must be followed before the Labour Ministry. Under the CPP, the parties must try to negotiate solutions to the conflict and try to avoid terminations or suspensions. Under broad interpretation by local authorities, the cap might be considered applicable if a significant number of employees are dismissed, even with full severance.
XIV TRANSFER OF BUSINESS
Transfer of business (TUPE) in Argentina is also ruled by the LCL. In this context, we shall differentiate between the transfer of an establishment and the transfer of individual employment contracts, as the requirements for each case are different.
Pursuant to Section 225 of the LCL, upon transfer, either total or partial, of an establishment, the labour relationships shall continue with the buyer of such business, who shall maintain both the seniority and any and all employees’ vested rights. In that context, the assignment of employment agreements occurs by operation of law upon transfer, and no further action is required to be made to employees.
Therefore, if the business to be transferred can be considered an independent technical productive unit, upon transference of such business a transfer of establishment would occur and, therefore, it would be instrumented by operation of law.
Although no notice or consent is required to or from any third party upon the transfer of an establishment, including employees, in practice it is normal to give employees notice that their labour relationships shall continue with the buyer pursuant to the TUPE, effective as of the transfer date.
Employees may not challenge the transfer, which is automatic. However, employees could consider themselves constructively dismissed if, as a result of the transfer, they suffer material damage that is significant to justify such termination decision. Although Argentine labour law does not contain any formula to assess the materiality of a damage to justify termination, cases that would most certainly justify such decision would be:
- a unilateral modification of labour conditions in the form of a reduction of the employee’s remuneration, in any of its forms;
- b elimination or adverse modification of any benefit that the employee received from former employer, change of position and title; or
- c any other aspect of the labour relationship to which the employee was entitled, as long as it is not replaced by any other (more beneficial) compensation.
For TUPE cases, the LCL also provides that constructive dismissal may be justified if there is a material difference in the seller’s and buyer’s solvency.
As regards eventual severance payment upon transfer, in Argentina no employee would be entitled to claim severance payment upon transfer, unless the employee succeeded in a constructive dismissal claim. Although an employee may state that he or she rejects the transfer and claim severance payment, such a claim would need to be based on any other aspect because the mere existence of the TUPE and consequent change of employer – assuming no adverse effect on his or her labour rights – would be beyond his or her control and it would under no circumstances be subject to his or her consent.
If no assets or liabilities (i.e., technical unit), but only employees, were to be transferred, Section 229 of the LCL would become applicable and, pursuant to this section, the assignment of labour contracts requires the written consent of the relevant employee. The assignee shall keep the previous labour conditions of the employees and the assignor and assignee shall be jointly responsible for all liabilities stemming from the employment relationship.
Therefore, in contrast to a transfer of establishment case, when an individual employment contract is assigned, the employee would be required to participate in the assignment contract and his or her consent is required.
After 2016 took place within a scenario looking forward to more liberal aspects of economy, we believe significant changes will take place in 2017. These changes will come hand-in-hand with the new government’s policy that, among other things, has enacted a freer version of labour relationships after lifting foreign exchange barriers, which has helped employers to pay salaries in foreign currencies, transfer payments and negotiate in foreign currency, etc.
The fact that the Labour Minister has announced his eagerness to reduce the litigious burden on labour courts and suggested modifying labour fines that cause increase in contentious proceedings and labour claims will also have a positive impact on labour relationships by lifting the load of labour claims and their related costs. The fact that the Congress has agreed to discuss the income tax standards in 2017 will also have direct impact on employee salaries. All of these measures are expected to bring a significant decrease in the inflation rate.
All in all, we believe the year to come will involve a more flexible version of labour relationships that will surely favour foreign companies doing business in Argentina.