Labour laws in Argentina include:
- general laws;
- statutes for specific activities;
- collective bargaining agreements (CBAs) for different activities, trades or companies; and
- individual agreements and employer practices.
The Labour Contract Act (Act No. 20,744, as amended) (LCA) regulates all aspects of the employment relationship, such as hiring the employee; the economic, organisational and disciplinary rights of the employer; working conditions; labour registrations; holidays and leave; and mandatory severance. There are also other important labour laws that govern union associations (Act No. 23,551), working hours (Act No. 11,544), illness and labour-related accidents (Acts Nos. 24,557, 26,773 and 27,348, as amended) and immigration issues (Act No. 25,871).
There are also special statutes regulating certain industries, positions and regimes, including the construction industry (Act No. 22,250), travelling sales employees (Act No. 14,546), persons in charge of rental houses (Act No. 12,981), journalists and administrative employees of media companies (Act No. 12,908), the regime applicable to private household workers (Act No. 26,844) and the agrarian regime (Act No. 26,727). Labour rules are enacted by the Federal Congress.
In principle, a CBA should apply to the personnel and geographical area corresponding to the labour representation of the union that executed the CBA. However, the Ministry of Labour may extend the application of a CBA to a larger geographical area. In order to be enforceable, a CBA should be ratified by the Ministry of Labour, which determines whether it is in accordance with applicable law.
Through CBAs, the parties may establish labour conditions applicable to all the employees of the industry or of the company within the respective geographical area, not limited to the members of the union. CBAs or individual agreements cannot set forth terms less favourable for the employees than those established by the LCA or other relevant labour laws.
Individual agreements or employer practices may grant employees more rights than those set forth by the relevant labour laws or CBAs. Employees may not waive or forfeit rights established by labour laws. In case of doubt regarding the existence of a labour relationship, the law favours the employee.
Labour disputes are conducted pursuant to the laws and codes of procedure of each jurisdiction (the city of Buenos Aires and the provinces). In some jurisdictions, including Buenos Aires, a mandatory conciliatory process must be completed before the initiation of a labour lawsuit.
If a conciliatory agreement is reached by the parties and approved by the respective Settlement Service Authority after determining whether it is in accordance with law, the agreement is deemed to be res judicata.
Most jurisdictions have courts of first instance (of one individual judge), courts of appeals (three-judge courts) and provincial supreme courts. Decisions taken by the courts of first instance may be appealed before the courts of appeals. There are also provinces – including Buenos Aires, which is the most important in the country – that have three-judge courts of original jurisdiction. In limited cases, decisions can be challenged before the provincial supreme courts. The National Supreme Court has final jurisdiction, although it is limited to specific cases and extraordinary appeals.
Labour claims may be raised in the jurisdiction where the employment relationship was performed or where the domicile of the employee is established. The employee can choose the jurisdiction in which to initiate the lawsuit.
II YEAR IN REVIEW
On 18 November 2017, the government sent a market-friendly draft bill to Congress known as the Labour Reform, which seeks to reduce labour claims and costs. Among other things, the bill:
- allows employers to regularise non-registered or unduly registered employment relationships. If passed, debts such as omitted social security contributions would be eliminated or reduced significantly, the employer would be exempt from payment of the aggravated compensation – payable by the employer to the employee – set forth by the Employment Act (Act No. 24,013) applicable in non-registered or unduly registered employment relationships, criminal actions for evasion of social security contributions would be ineffective and the employer would be removed from the public registry of labour sanctions;
- introduces reforms with respect to the individual labour regime, such as autonomous professionals, joint and several liability in the case of outsourcing, modifications to the employment relationship, certificate of services, licences, items that should be taken into consideration for the calculation of labour severance and interest rates;
- modifies the collective labour regime forbidding the granting of non-remunerative payments through CBAs;
- considers the possibility of setting funds for the payment of labour severance; and
- replaces the system for trainees (e.g., apprenticeships, internships).
Owing to the 2019 presidential elections and the lack of necessary congressional support, the government decided not to force the bill's enactment during 2018 despite the Labour Reform being one of its key policies.
On 6 April 2018, the government enacted Resolution 168/2018 of the Ministry of Labour, which allows employers, with the consent of the employee, to pay employees' salaries using mobile communication devices or other electronic media (e.g., a digital wallet). This mode of payment must not incur any cost for the employee.
On 1 October 2018, the Anti-Corruption Office approved Resolution 27/2018, which requires that companies abide by the guidelines set forth in the Criminal Liability Act (Act No. 27,401) regarding the liability of legal entities for crimes against the public administration, and bribery. Resolution 27/2018 sets forth the guidelines for 'integrity' programmes that prevent, detect and correct irregularities and unlawful acts as established by the Criminal Liability Act. Although integrity programmes are not mandatory, they can be advantageous as any company that self-reports an irregularity or unlawful act and reimburses the benefits obtained from the irregularity or unlawful act, may be exempted from criminal liability or potential criminal sanctions may be reduced. Even though this is not an employment law regulation, it is important that the Criminal Liability Act and Resolution 27/2018 be understood because integrity programmes would generally be handled by HR departments with the assistance of labour law attorneys.
On 12 November 2018, Decree No. 1043/2018 was enacted, establishing a non-remunerative payment for private-sector employees of 5,000 pesos. This Decree intends to preserve the purchase power of salaries due to inflation. In December 2018, 50 per cent of the non-remunerative payment was paid in addition to the monthly salary and the remaining 50 per cent will be paid with the monthly salary in February 2019. Employees of the public sector, the agrarian regime and the special regime of particular houses are excluded from Decree No. 1043/2018. Employees who perform services in fewer working hours than the legal requirement will be entitled to a proportional part of the non-remunerative payment.
Signing parties of CBAs may adapt the terms and amount of the non-remunerative payment for companies or sectors that are in a critical situation or experiencing a decline in productivity. In addition, signing parties of CBAs in which salary increases were agreed may offset the increases with the non-remunerative payment. For employees not covered by a CBA, employers may offset the non-remunerative payment against unilateral salary increases (as of January 2018). Where the non-remunerative payment is added, compensated or absorbed, it will become remunerative in nature. Likewise, 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, the employee and the 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, he or she may be subject to fines. Employees of the construction industry are excluded from this procedure.
The important and noticeable growth of work through digital platforms has attracted the attention of labour attorneys, who are analysing the impact of this new method of working in light of the current labour legislation, and are suggesting ways to make this form of business compatible with individuals' labour rights.
An important concern of employers during 2018 was the high number of labour lawsuits. Special attention was given to the significant amounts of money claimed based on illnesses and labour-related accidents, and on the non-registration or undue registration of labour relations.
There were also many union conflicts in 2018. Most of the unions and employers have agreed on the increase and revision of salaries through collective agreements.
III SIGNIFICANT CASES
On 4 July 2018, in Guala Closures Argentina SA v. Sabino Sebastián in re exclusion of union protection, the Supreme Court of the Province of Buenos Aires (SCPBA) accepted the claim raised by Mr Sabino, a union representative, against a court ruling that his union protection had been lifted. The SCPBA modified its traditional doctrine whereby a decision concerning lifting the union labour protection does not extend to the merits of the employer's decision, which should be dealt with in a later litigation. In revisiting the doctrine, the SCPBA followed the criteria established by the National Supreme Court In re Fate SAICI, and reasoned that lifting the union protection and evaluating the merits of the employer's decision in the same lawsuit and at the same time expedites the legal process, avoids duplicative legal actions and grants legal certainty.
In August 2018, the Supreme Court of Justice of the province of Mendoza issued a decision in Government of the Province of Mendoza v. Alcaraz Felipa in re exclusion of union protection, accepting the request of the province's government to lift the union protection of an employee who had reached retirement age. In relevant part, Section 252 of the LCA enables the employer to request employees who have reached retirement age to initiate the retirement process, but Section 52 of Act No. 23,551 on Trade Union Associations provides that working conditions of employees with union protection cannot be modified unless a court decision lifts the protection. The court held that it is reasonable to lift the union protection and to forbid the renewal of the union term of office from the time the employer notifies the employee that he or she should initiate the retirement process. The court reasoned that to hold otherwise would allow the employee with union protection to extend his or her employment contract indefinitely, which is contrary to the legal provisions that establish the conclusion of the employment contract in the case of retirement.
On 29 September 2018, the National Supreme Court issued a decision in Union of Employees of the Painting Industry v. Colorin Industria de Materiales Sintéticos SA in re collection of union contributions, where it held that a union has no right to collect items payable by non-members of the union following the same rules applicable to members. If a union member does not pay the corresponding member fees, the union has an efficient process to collect this debt by having it deducted from the employee's salary. The National Supreme Court decided that unions are not entitled to use this process with respect to employee solidarity contributions, payable by employees that are not members of the union, and employer solidarity contributions, payable by the employer to the unions.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
Written employment contracts are not required by law, with the exception of fixed-term employment contracts and employment agreements of crew members (employees who render services on vessels). Since every aspect of the employment relationship is regulated in detail by the applicable labour laws, there is no need to execute a written employment contract. However, written contracts are implemented by the employer in the case of high-ranking employees or when the parties want to regulate aspects of the employment relationship, such as bonuses, golden parachutes, retention plans, or confidentiality or non-compete clauses. It is understood that as employees usually cover the permanent needs of the employer, labour hiring is on permanent basis. However, fixed-term employment contracts are accepted to meet temporary requirements.
The LCA establishes that an employment contract for a fixed term should include the term of its duration and should also evidence that 'the features of the work or of the activity, reasonably evaluated, justify that type of contract'. If the labour relationship does not have a ground that justifies (as the law requires) a fixed-term contract, it will become an indefinite-term employment contract. Labour courts seldom find the existence of a cause that justifies a fixed-term contract. Court decisions have invalidated fixed-term employment contracts where the fixed-term clause is very broad, without specific reference to the particular temporary circumstances that justify the contract.
In the event of dismissal without cause prior to the expiration of the term of the contract, the employer should pay damages in addition to the severance due as a result of the termination. Generally, case law has determined that the damages should be equivalent to the salary of the agreed term. However, the employee is not entitled to severance pay if the contract was terminated because its term expired and the employee has been employed less than a year. If employed for a year or more, the employee is entitled to half the compensation based on seniority (one monthly salary per year of service or a further monthly salary for any part of a year that exceeds three months (see Section XII.i, 'Compensation based on seniority')). The fixed-term contract should not last more than five years.
There are other non-permanent contracts, such as temporary contracts for the accomplishment of specific goals of the employer related to extraordinary services and when it is not possible to foresee the term of the contract.
The employer can make changes to employment conditions (ius variandi), provided that they do not result in moral or material harm to the employee. The validity of the ius variandi is a matter of fact that is subject to the functional needs of the company and the personal situation of the employee involved. The employee affected by an illegitimate change to working conditions has the right to file a claim for constructive dismissal or to seek restoration of the altered conditions, until a final judgment is issued.
The parties to a labour contract may, by mutual consent, modify with effect in the future, the conditions initially established in the employment contract (objective novation), provided that they maintain the minimum standards guaranteed by the labour laws, the applicable CBA, and the terms and conditions of the individual employment contract. Agreements that only reduce labour conditions without any consideration for the employee are not admissible.
ii Probationary periods
During the first three months, indefinite-term contracts are subject to a probationary period, which means that the employer or the employee may decide to terminate the contract without cause and the employer has no obligation to pay severance. The only obligation is to give notice of termination 15 days in advance. If notice is not given, the other party is entitled to compensation.
iii Establishing a presence
The legal system is based on the principle of 'territorialism' and, thus, it does not contemplate the possibility of applying foreign laws to relationships performed in the country (regardless of whether they were entered into abroad), as well as applying Argentine law in a reverse situation (relationships negotiated in Argentina and performed abroad). Hence, services rendered under an employment contract within Argentina are mandatory subject to domestic regulations, which includes labour and social security laws. Pursuant to such regulations, employees rendering services in Argentina should be registered in the labour books of an Argentine entity. Both employers and employees should pay social security contributions to the Retirement and Pension System, the National Institute of Social Services for Retirees and Pensioners, the Family Allowances System, the National Employment Fund and to healthcare providers. These social security contributions are taken as a percentage of the employee's salary. The employer's contributions amount to 25.5 per cent of the employee's salary and the employee's contributions amount to 17 per cent.
A foreign company may not hire an employee in Argentina unless it does so through a branch or a subsidiary in the country. While the hiring of an independent contractor is admissible, there is always the risk that the relationship will be deemed a de facto labour relationship. Under the LCA, the provision of services by an individual contractor gives rise to the presumption of an existing underlying employment contract, unless there is evidence to the contrary. In order to establish whether there is an employment relationship or an independent contract, the following circumstances should be taken into account, among others: whether the person is involved in a third party's business, or his or her own business; whether the person performs services on an exclusive basis or for different clients; whether the person runs his or her own business organised as a company or as an individual; whether the business has its own address, which is different from the personal address of the owner; whether the business has its own employees; and whether the individual assumes the risks associated with the business.
The rendering of services by an independent contractor in Argentina may establish the existence of a permanent business. The lack of registration of a permanent business may create contingencies in relation to the local tax authorities regarding taxes, interest and penalties.
A company hiring employees must do the following:
- register as an employer with the tax administration;
- register the mandatory labour book with the local labour authority;
- register each employee in the labour registries;
- report the hiring of the respective employee to the tax administration;
- secure an insurance policy from a risk insurance company to cover the risks of illness and labour-related accidents;
- request that the employee chooses a healthcare provider and register him or her with that healthcare provider, and report the registration to the tax administration; and
- request information on the employee's pension system status.
V RESTRICTIVE COVENANTS
Pursuant to the law, employees cannot engage in competing activities with the employer while the employment relationship is in force. Case law establishes that if an employee carries out activities (in his or her own name or on behalf of others) that (1) are similar to the employer's business activities and (2) may potentially affect the interests of the employer, the employee will be in violation of his or her duty not to compete (unless the competing activities have been consented to by the employer). If these duties are violated, the employer will be entitled to terminate the labour relationship with cause and may also bring a claim against the employee to recover losses resulting from the violation. The duties of the employee cease after the termination of the labour relationship.
While post-employment non-compete agreements are neither prohibited nor expressly regulated under Argentine law, the enforceability of such agreements may be questionable in light of the constitutional right to work, as contemplated by Section 14 of the Constitution. Based on case law, in order to be enforceable, a post-employment non-compete agreement should be justified by the position of the employee (e.g., chief financial officer, chief executive officer); be limited to specific activities and territory; have a time limit;2 and be subject to reasonable consideration.
i Working time
Working hours must not exceed eight hours per day and 48 hours per week, and night shifts (9pm to 6am) must not exceed seven hours. Working hours in unhealthy places (e.g., where the employee may be exposed to hazardous substances or a higher risk of injury) should not exceed six hours per day or 36 hours per week. Regarding rotating shifts or teams, the duration of the working hours may be extended beyond eight hours per day or 48 hours per week, but under no circumstances may they exceed a maximum of 144 hours every three weeks. These rules apply uniformly throughout the country.
The distribution of working hours is an exclusive right of the employer and no administrative authorisation is required to establish labour schedules.
Overtime is work rendered in excess of the working hours. Employees who work overtime receive an additional payment of 50 per cent of their salary on weekdays, and double their salary on Saturday afternoons, Sundays and holidays. Case law has determined that services rendered in excess of the working hours agreed upon by the parties, but not beyond the working hours established by law, do not give rise to payment as overtime.3
VII FOREIGN WORKERS
Foreigners are protected by the same local employment laws as nationals.
There is neither an obligation for employers to keep a registry of foreign employees nor a limit on the number of foreigners in the workplace or company.
In order to be entitled to hire foreign individuals, the employer should be registered with the National Registry of Foreign Applicants. The requirements for hiring foreign employees depend on whether the individual comes from a country that is a member or associate member of Mercosur (Argentina, Brazil, Paraguay, Uruguay, Venezuela, Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Surinam) or from any other country. Foreign employees from Mercosur countries only need a visa evidencing their nationality. However, foreign employees coming from other countries need to have an employment contract with an Argentine entity and to obtain a work permit granted by the National Immigration Office.
Work permits are granted for 12 months and can be renewed three times until the foreigner is entitled to apply for a permanent visa. Foreigners performing scientific, technical or consulting activities, and executives, technicians and administrative personnel, who have been moved from foreign countries to fill positions in their companies, receiving a fee or salary in Argentina, may also obtain a resident permit for up to three years. Sportsmen, artists and academics may also obtain temporary authorisations to render remunerated services in Argentina. In turn, crew members of international transport, seasonal workers, academics and technicians may obtain transitory permits of 30 days, which can be renewed.
Employers should comply with the same rules as with respect to locals. In the field of social security regulations, the only exception are services rendered by individuals protected by an international reciprocity agreement, who are, in general, exempt from paying social security contributions for up to two years. Professionals, researchers, scientists and technicians temporarily residing in the country, for a maximum of two years, may also be exempt from paying social security contributions.
VIII GLOBAL POLICIES
There are no labour regulations requiring employers to have internal disciplinary rules. Internal rules do not need to be approved by either a governmental authority or a representative body. As every aspect of the employment relationship is regulated in detail by the applicable labour laws, with the exception of large or international companies, the practice of issuing internal policies is still not prevalent.
In most cases, these rules pertain to the issuance of computers, phones, tablets and electronic devices, and the correct use of email accounts and internet browsing. Based on court precedents, employers usually state in their respective policies that these devices are granted exclusively for labour purposes, that the employee cannot have an expectation of privacy regarding their use, and that the employer may control, monitor, audit, intercept and make public all documents and messages stored, sent or received on them.
In spite of the fact that discrimination, sexual harassment and corruption are all issues expressly regulated by statutory provisions, disciplinary rules may also address manners to deal with them. However, internal policies cannot affect rights granted to employees by applicable laws and CBAs.
Even though it is not mandatory, it is highly advisable that such rules be written in Spanish, or at least that a Spanish version of them be made available.
As a version of the rules posted on the company intranet may not constitute reliable evidence, it is also recommended to have a signed copy of them in the personal file of the employee. Otherwise, if the rules are challenged, the employer may be obliged to appoint a computer expert witness, which may generate unnecessary additional expenses (a percentage of the amount claimed in the lawsuit).
As mentioned in Section II, the Anti-Corruption Office has recently approved the guidelines that companies should comply with regarding the Criminal Liability Act. In this context, Resolution 27/2018 of the Anti-Corruption Office provides that companies should have integrity programmes involving a code of ethics or conduct that includes policies and procedures applicable to all directors, administrators and employees, to prevent the commission of the crimes contemplated by the Criminal Liability Act. It also requires internal channels for reporting irregularities, protection policies against reprisals and an internal manager in charge of the issues related to this law. Although it is not mandatory, having an adequate programme in line with the guidelines set forth by the Criminal Liability Act and Resolution 27/2018 will have certain advantages for legal entities in establishing the scope of their liability under the guidelines. As a result, companies interacting with the public sector will have to carefully consider the implementation of such integrity programmes.
Since the official language of Argentina is Spanish, all public documents and records should be in Spanish. This means that any document that may need to be filed with a labour or public authority (e.g., labour and immigration registries), or courts, will necessarily be in Spanish. If it is necessary to file documents in other languages with the labour or public authorities or courts, these documents will have to be translated into Spanish by a public translator. If issued abroad, the signatures of the documents must be certified by a notary public. The documents must then be legalised following the procedure established by the Hague Convention of 1961, or at the Argentine embassy if the country in which the document is granted has not ratified this Convention.
No law provides that offer letters, employment contracts, confidentiality agreements, restrictive covenants, proprietary information, assignment agreements, bonus or other incentive compensation plans, employee handbooks or other policies need to be in Spanish. However, it is best practice to have them translated into Spanish or at least to have a version in Spanish available. Otherwise, in case of a claim, the employer may be obliged to require the appointment of a public translator, which may generate significant costs (a percentage of the amount claimed in the lawsuit). There is also always the risk that the employee may claim that he or she did not fully understand the document, creating doubt that may be resolved in favour of the employee.
X EMPLOYEE REPRESENTATION
Union associations have been characterised as those set up on a permanent basis for the defence of the professional interests of employees.
There is a very important distinction between employee associations with union status representation (see below) and merely registered unions without union status representation: by law, only the former have union status representation rights. Employees associations with union status representation are entitled to enter into CBAs and to participate in collective negotiations, to manage their own healthcare providers, to defend and represent the individual and collective rights of the employees, and to monitor the enforcement of labour legislation and social security provisions. Employers should act as withholding agents regarding the fees owed by union members to unions with union representation status. As mentioned above, merely registered employee associations do not have union status representation rights, which means they do not have bargaining and collective union rights.
The Argentine union system is based on the existence of only one employee association with union status representation per occupation or activity. In order to have union status representation, the employee association must be considered the most representative, which means it must be registered with the labour authority, have been operative for at least six months and represent more than 20 per cent of the employees of the activity.
In spite of the above, the National Supreme Court has issued decisions declaring the unconstitutionality of certain provisions of Act No. 23,551 that require representatives and members of union boards to be members of a union with union status representation,4 grant union protection only to these unions,5 and prevent registered unions from representation of collective interests in a judicial action.6 Courts of lower rank must follow the decisions of the National Supreme Court.
According to Act No. 23,551, representatives of the employees in a company – whose term of office shall not exceed two years – should be members of the union with union status representation and be elected for that purpose. A company must have the following number of employee representatives depending on its size: one representative for 10 to 50 employees; two representatives for 51 to 100 employees; and, for over 101 employees, an additional representative for every 100 employees. Employees appointed to elective or representative positions in legally recognised unions or in entities that require union representation, or employees holding public office, and representatives in the company and candidates, are granted union protection. These employees cannot be suspended or dismissed, and their labour conditions cannot be altered without a previous judicial order lifting the union protection by means of an extraordinary summary proceeding. If the employer breaches that union protection, the employee may request his or her reinstatement by means of an extraordinary summary lawsuit, plus the payment of unpaid salary; or to put himself or herself in a situation of constructive dismissal (termination of labour relationship), being entitled to dismissal compensation and an additional amount equivalent to his or her annual salary, plus an additional year. A labour representative may be suspended at the employer's request if he or she endangers the safety of personnel or harms the employer's property.
XI DATA PROTECTION
i Requirements for registration
Pursuant to the Data Protection Act (Act No. 25,326), its complementary regulations and the interpretation of these regulations by the Data Protection Agency, all databases must be registered with the Agency, with the exception of databases maintained for personal rather than business reasons.
Even though not expressly established in the relevant regulations, the Data Protection Agency recommends that employers register the database containing their employees' information with the Agency. In order to register a database, companies must fill out a form, stipulating, among other things, the number of employees and the personal information to be provided. As employers are required by law to collect and store personal as well as sensitive data, no notification or consent is necessary.
In the context of their activities, companies are entitled to disclose who their employees are as well as the necessary information, but must avoid disclosing information that is not necessary or is sensitive. In general terms, Act No. 25,326 establishes that companies should adequately protect information, but it does not specify the manner in which this protection should be granted. In 2018, the Data Protection Agency issued some non-mandatory technical recommendations regarding protection, for example only allowing certain authorised individuals in the company to access the database. In case of a breach, companies who have followed these recommendations are likely to be treated more favourably by the Agency.
ii Cross-border data transfers
No regulation requires the registration of transfer of data.
Transfer of personal data (any kind of information, including full name, address, ID number) to countries or international organisations that afford adequate levels of protection does not require notification or consent. The transfer of personal data to other countries or international organisations that do not afford adequate levels of protection is, in principle, prohibited, unless the employee consents to the transfer or the employer and the foreign third party agree, in writing, with terms and conditions for the transfer set forth by the Data Protection Agency. Also, if a company follows the Guidelines for Binding Corporate Rules issued by the Data Protection Agency, the international transfer of personal data to companies of the same economic group in countries that do not afford adequate levels of protection is allowed.
iii Sensitive data
Sensitive data can only be collected when there are reasons of general interest provided by law; however, no person is obliged to provide such information. Sensitive data is, among other things, personal data related to an individual's ethnic or racial origin; political opinions; religious, philosophical or moral beliefs; trade union registrations; sexuality; and health or medical background. This data cannot be transferred, even with the consent of the employee.
iv Background checks
It is not unlawful to conduct background, credit or criminal record checks. However, the prospective employer should carry out these checks discreetly, out of respect for the candidate, and in a non-discriminatory manner. Employers are prohibited from making enquiries about a candidate's religious or political beliefs, union membership, or aspects related to his or her private life.
XII DISCONTINUING EMPLOYMENT
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.7
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.
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.
XIII TRANSFER OF BUSINESS
For a transfer of business, there must be a change of employer, credit and debt related to the activity of the business. This includes the sale, assignment, donation, transfer of goodwill, temporary lease or transfer of the facilities, succession mortis causa and merger of companies.
In case of transfer of the business by any title, all labour obligations of the transferor with its employees at the time of the transfer will pass to the successor or acquirer, even those arising from the transfer. Regarding existing obligations at the time of transfer, the previous employer and the purchaser are jointly and severally liable. Regarding future obligations, the new employer is exclusively liable.
Where there has been a transfer of business, the employment contract will continue with the successor or acquirer, and the employee will keep the seniority acquired with the transferor and the rights derived therefrom. In other words, all the obligations arising from the individual employment contracts in force at the time of the change of owner are transferred to the new owner. The acquirer of a business is also liable for the obligations arising from labour relations terminated prior to the transfer.8 The basis of the law is to protect the employee against possible fraudulent manoeuvres, for example the transfer of the business to an insolvent acquirer.
The sole transfer of the business does not entitle an employee to consider himself or herself dismissed. The employee may put himself or herself in a situation of constructive dismissal only if, as a result of the transfer, he or she suffers significant damage (e.g., because the company has changed its core business, or a change in position or the size of the company results in a reduction of the employer's patrimonial liability).
In case of assignment of an employment contract, without including the business, the express and written acceptance of the employee is required. Once the assignment has been executed, the assignor and the assignee are jointly and severally liable for all the obligations resulting from the assigned relationship. Joint and several liability is limited to the debts accrued at the time of the transfer, not applying to those arising thereafter.
As it is customary in presidential election years, we find it highly unlikely that important draft labour bills will be approved during 2019.
A similar trend with regard to litigation and union conflicts, as seen in 2018, is expected. In line with previous years, unions and employers will continue the negotiation and revision of salaries through collective agreements.
It is also likely, depending on the increase of prices, that the government will issue, in the same manner as in 2018, regulations establishing non-remunerative payments or salary increases for employees in the private sector.
We believe that labour attorneys and labour courts will analyse the legal framework of work through digital platforms.
1 Enrique Alfredo Betemps is a partner at Perez Alati, Grondona, Benites & Arntsen.
2 In LEML v. Nidera SA and other in re nullity claim (Labour Court of Appeals, 2006), a non-compete agreement of 10 years was upheld.
3 D'Aloi v. Selsa SA, plenary decision 226 (Labour Court of Appeals, 2006).
4 Association of Employees of the Public Sector v. Ministry of Labour in re Unions Association Act, 2008.
5 Rossi Adriana María v. National Government – Argentine Navy, 2009.
6 Association of Employees of the Public Sector in re unconstitutionality action, 2013.
7 For example, Gómez Leandro Javier and others v. Pepsico de Argentina SRL in re request of precatory measure, 2017.
8 Baglieri Osvaldo v. Nemec Francisco y Cia, plenary decision 289, Labour Court of Appeals, 1997.