As part of our international series of alerts by guest lawyers, Mercedes Balado Bevilacqua ofMBB Balado Bevilacqua Abogados, looks at Argentina’s unfair dismissal protections.
Argentina is a protective country in terms of labour law, guaranteeing minimum rights to employees which cannot be waived by agreement of the parties. Local labour regulations establish a set of principles that govern the labour relationship.
The most important one is called the protective principle, which aims to protect the employee’s dignity, therefore it balances the inequalities that exist between employers and employees. The protective principle also includes three rules:
a) In dubio pro operario: if there is any doubt about the interpretation or scope of a law or in the appraisal of evidence, the judge must decide in favour of the employee.
b) Application of the employee’s most favourable law: in case there are two or more applicable rules of law to a specific case, the judge must apply the one which is most favourable to the employee.
c) The rule of the most favourable condition: a modification of the employee’s labour conditions must not reduce the employee’s rights.
Other relevant principles are:
- Public order: it sets forth that the employer cannot waive any right established by local labour regulations. Thus, there is a limitation to the parties’ will, reflected by the fact that they are not able to negotiate below the minimum standards determined by law.
- The continuity principle: it determines that employment agreements for an indefinite period of time are the rule and the labour relationship is supposed to last until the employee fulfills the requirements to apply for state retirement benefits. Any person who complies with the requirements becomes entitled as follows: a) men: 65 years of age and 30 years of service and contributing to this social security system and b) women: 60 years old and 30 years of service.
In view of the principles described, this alert will focus on the continuity principle and how the same is applied when terminating labour relationships.
II. The Continuity Principle
This principle establishes that in case of doubt about the continuity or not of the employment relationship it must be ruled in favour of the existence of an employment agreement for an indefinite period of time.
Its main effect is that employment agreements are meant to be for an indefinite period of time. This means that the employment relationship begins and is then only supposed to terminate when the employee complies with the requirements to file for state retirement benefits.
II.a. Exceptions to the Continuity Principle:
II.a.i. Fixed Term Employment Agreements
Fixed term employment agreements are the exception to the rule. They are used for extraordinary reasons that last for a certain period of time. The following requirements apply:
- It must be caused by an extraordinary need of the employer;
- The cause requiring the use of the fixed term agreement must be specified;
- It must be in writing;
- It may not exceed 5 years; and
- Prior notice of no more than 2 months must be granted.
In case of a failure of any of these requirements the employment agreement is converted into one for an indefinite period of time.
The renewal of fixed term agreements carries with it the legal presumption that the employment is then for an indefinite period of time, because it is understood that the extraordinary cause that required the fixed term has become permanent.
II.a.ii. Temporary Employment Agreements:
Temporary employment agreements must be caused by an extraordinary need of the employer’s business, must be in writing and may not exceed 6 months in a one year period, or must specify that the employee hired is temporarily replacing another employee who is under leave of absence. Exceeding time limits or continuing employment when the replaced employee has returned to work, automatically turns the employment agreement into one for an indefinite period of time.
III. Unfair Termination
Due to the protective nature of local labour regulations and the existence of the principles described above, terminations in Argentina in general are due to resignation or for no cause.
The protection for unfair dismissal aims to avoid arbitrary dismissal.
Argentine labour law establishes mandatory statutory severance compensation for damages caused by the employer’s decision to terminate a labour relationship with no cause – unfair termination.
Unfair termination is the dismissal unilaterally decided upon by the employer without cause or where the cause relied upon has not been proven or is not sufficient. Note that for a cause to be sufficient the misconduct committed by the employee should be serious enough to imply the impossibility of the continuation of the employment relationship. Termination with cause is the most serious disciplinary measure that an employer may impose on an employee.
In cases where an employee who is terminated for cause challenges the cause invoked by the employer, the judge based on the principles mentioned in I), above, would decide whether the cause alleged is sufficient to terminate for cause, and for the employer to avoid paying severance compensation.
It can be noted that 90% of terminations for cause are challenged. The judge will decide according to the protective principle and the continuity principle.
Severance compensation for unfair termination includes the following:
- seniority compensation: equal to one month of salary per year of seniority or any fraction greater than three months;
- payment in lieu of prior notice: one or two months of salary depending on whether the employee’s seniority is greater than 5 years;
- remaining days of the month: it includes payment of the days of the month in which termination is notified; and
- semi-annual bonus on prior notice which is based on the mandatory Argentine 13th salary paid in two equal instalments on June 30 and December 31. Under the semi-annual bonus on prior notice concept, the employer must pay an amount equal to the amount due for prior notice divided by 13.
In addition, in certain cases employees who are unfairly terminated may also claim additional compensation if the termination was based on an employer’s discriminatory act against the employee, or the employee alleges that he/she has been the victim of mobbing or moral abuse.
Due to Argentine’s employee friendly labour regulation and its principle of continuity of labour relationships, termination is the exception to the rule. Thus, most of the terminations are considered to be without cause or unfair, which triggers the employer’s obligation to pay severance compensation, which calculation is established by National Employment Law and may not be waived by agreement of the parties.