This country-specific Q&A provides an overview to Employment & Labour Law laws and regulations that may occur in Argentina.
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?
No, except in the case of discrimination and in the case of union representatives (whereby an employee may demand to be reinstated), employers are legally entitled to terminate any employment relationship at any time without any cause, and pay a statutory severance package set forth in the Employment Contract Law (“ECL”). Employers can only terminate employment relationships without having to pay severance when they have just cause to terminate the employee. Employers will have just cause when an employee commits an offense so serious that it is impossible to continue with the employment relationship. The definition of what constitutes a just cause is not clearly defined on the ECL so a case by case analysis must be conducted. However, the courts usually require employers to act with caution and to evidence that they attempted, whenever possible, to preserve the relationship by taking prior measures, such as disciplinary measures, in order to correct the improper behavior.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
In case of massive layoff or reduction in force, employers must pursue a statutory crisis-prevention procedure, before dismissing or suspending a specified number of employees for economic or technical reasons, or because of force majeure. The procedure applies to the planned dismissal or suspension on these grounds of more than:
15% of employees in enterprises with fewer than 400 employees,
10% of employees in enterprises with between 400 and 1,000 employees, and
5% of employees in enterprises with more than 1,000 employees. In case of following this special procedure, employers may be able to reduce the mandatory severance package by proving that there has been a crisis situation beyond the employer’s control, which has been unforeseen and alien to the employer. If the employer wants to reduce the severance package, the procedure would be mandatory. But, in case employer pays the full severance package, the obligation of following the procedure would be debatable. 50% of the legal commentators would said that the procedure is always mandatory, and the other half would said the opposite. The court jurisprudence is also divided on this matter.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
If an employee were to be terminated in the context of a business sale, no additional considerations would apply. In case employees were to be transferred in the context of a total assets transfer, the employees transfer automatically, and no consent would be required. The new employer must acknowledge the terms and conditions of the employment, and becomes liable with the prior employer as regards pre-existing liabilities and debts. On the opposite, if employers transfer only a portion of the assets along with all or a portion of the staff, employees must consent to the transfer in writing. Otherwise the employer would have to pay the severance packages applicable for dismissal without just cause.
What, if any, is the minimum notice period to terminate employment?
Employers have an obligation to give prior notice of termination to employees who are dismissed without just cause, in accordance with the following guidelines:
employees undergoing probation are entitled to 15 days’ advance notice of the termination of their contract,
employees whose seniority ranges from three months to five years must receive the termination notice one month in advance of their dismissal, and
employees whose seniority exceeds five years must receive the termination notice two months in advance of their dismissal.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
If employer does not provide the employee with adequate notice, the employer must pay in lieu of such omitted notice. This will be an amount based on the length of services. For less than 3 months one-half of the monthly salary, between 3 month and 5 year one monthly salary and any time after 5 year two monthly salaries. The salary to be used to calculate this payment is the regular monthly salary, omitting any other non-monthly payment. As a matter of practice, employers do not provide prior notice and make a payment in lieu of notice.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?
Garden leave is not available under argentine law. However, even when employer and employee may agree to garden leave, this agreement would not be fully valid and enforceable under argentine law. Employee may demand to resume services even after providing express consent.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
How, if at all, are collective agreements relevant to the termination of employment?
Argentine labour law has public policy nature, and therefore prevails over any collective or individual agreement. Additionally, the law provides for all termination procedures and issues. In general, CBAs do not have any provision regarding the termination of employment.
Does the employer have to obtain the permission of or inform a third party (eg local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
There is not no reporting obligation, except as informed in 2. above in case of massive redundancy or reduction in force.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
The protection in case of termination based on discrimination is not clearly defined in our law. However, there are two specific protected categories providing additional penalties: pregnant women, and recently married individuals. In such cases, employer has the burden of proving that the termination does not have grounds on the fact of maternity or recent marriage.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
On top of the two specific statutory protected categories, employees who have allegedly been terminated based on discrimination may claim to be reinstated; claim unpaid salary; seek additional compensation for pain and suffering; or claim for a constructive dismissal.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
Argentina law does not provide any distinction between full time, or employees under specific terms. Therefore, all employees are protected under the law.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
There is no specific protection for workers who have made disclosures in the public interest (whistleblowers).
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
When an employer terminates an employee without just cause or an employee successfully claims that he or she has been constructively dismissed, the employee is also entitled to statutory severances as follows:
seniority payment, calculated as one month’s gross salary for each year of service or any fraction thereof in excess of three months,
payment in lieu prior notice as described on 5. above and,
balance of the salary from termination day through the end of the month.
On the opposite, when an employee is dismissed for just cause or resigns, the employer is only required to pay the salary accruals to said terminated employee (e.g., the salary owed on account of the days worked in the month of termination; accrued proportional vacations; and accrued 13th month salary). The employer does not have to pay any severance package.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
Waivers and releases upon termination would only be valid and enforceable if
signed before the Ministry of Labour,
the employee has legal counsel,
whatever is waived and released is clearly identified in the agreement,
the compensation is clearly identified and paid. General releases could be challenged successfully.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
It is an employees’ statutory obligation not to compete or engage in any unfair competition during the course of employment. After employment termination, there is no regulation dealing with non compete agreements. However, non compete agreements can be entered upon termination if the non compete term is for about 12 months, and a reasonable consideration is paid in exchange . It has been accepted that it should be never less of 70% of employee’s monthly salary multiplied by the number of months for which the employee is requested to not compete.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
There is a specific statutory obligation to remain confidential (Law No. 24,766) for life (both during employment and after). The confidential duty extends to all the company’s business secrets, such as technical know-how, customer and supplier lists, prices, etc.
Are employers obliged to provide references to new employers if these are requested?
What, in your opinion, are the most common difficulties faced by employers when terminating employment and how do you consider employers can mitigate these?
The most common debate is around the items which must be factored into salary to be used as basis formula to calculate statutory severance packages. Many employers fail to register benefits or characterize certain items as remunerative which are granted, such as working tolls (for example the use of company car over weekends). Other discussion is around the factoring of non-monthly bonuses, or other employees’ incentives (e.g. commissions, stock options, etc.).
Are any legal changes planned that are likely to impact on the way employers approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?