This country-specific Q&A provides an overview of Employment & Labour Law laws and regulations applicable in Chile.
What measures have been put in place to protect employees or avoid redundancies during the coronavirus pandemic?
The government has implemented main laws to protect employment: Suspension of the employment agreement with unemployment insurance coverage either by reason of order declared by the Government of Chile or, as an agreement between employee and employer; law on telework to clarify rights under telework; extension state funded maternity leave for up to 2 months.
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, state what reasons are lawful in your jurisdiction?
Yes, the employer needs to invoke a termination reason listed in the law to lawfully terminate the employment. The below lists the instances in which the employer is entitled to dismiss an employee:
a) Termination for cause: Lack of probity in the performance of duties (e.g., sexual harassment, physical aggression, harassment, infliction of injuries, etc.); carrying out activities in the same line of business as the employer; unjustified absence; abandonment of work; conduct affecting the safety or functioning of the business or the safe performance of work by other employees or the health of other employees; wilful act of damage against the facilities, machinery, tools, products or goods of the company; serious breach of the employee’s obligations in the employment agreement.
b) Termination without cause: If the dismissal is due to one of the following causes, the employee will be entitled to compensation: (a) business necessities deriving from circumstances such as the company’s modernisation or rationalisation, decreases in the productivity and changes in the economy market; (b) termination at will, which is only applicable to employees entitled to represent the company with power of attorney, and employees who are within the confidence of the company; and (c) company’s bankruptcy.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned? How many employees need to be affected for the additional considerations to apply?
No, an employer does not have any additional obligations if id dismissing a number of employees at the same time.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
There are no additional considerations. The dismissal cause must be contemplated in the law. There is not a legal dismissal cause related to the sale of the Company.
What, if any, is the minimum notice period to terminate employment? Are there any categories of employee who typically have a contractual notice entitlement in excess of the minimum period?
If the dismissal is due to one of the causes of the point 2.b) above, the notice letter must be given or sent to the employee, with the said copy to the Labour Directorate, at least 30 days before its termination, unless the employer prefers to pay the employee the lieu of notice compensation, that corresponds to the last monthly remuneration paid. There are not special categories of employee who have a contractual notice entitlement in excess of the minimum period.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
Please see response to question No. 5 above.
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 stay at home and not participate in any work?
It is permitted as long as the parties agree on it. The employer may not unilaterally impose it.
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.
The employer must communicate the dismissal to the employee by a letter indicating the ground of termination and the reasons of the dismissal. The dismissal letter must be delivered to the employee personally or by certified letter to the employee’s domicile indicated in the employment contract. A copy to the Labour Inspection must also be sent.
If the employer does not follow any prescribed procedure as described in response to question 8, what are the consequences for the employer?
Employees may file a claim before the Labour Authority and/or Labour Court seeking the declaration of an unlawful dismissal. Fines for the benefit of the state apply. Also, a 50%-increase of the severance per time of service is found.
How, if at all, are collective agreements relevant to the termination of employment?
The employer must observe any additional payments or conditions stipulated in collective agreement related to the termination of the employment relationship.
Does the employer have to obtain the permission of or inform a third party (e.g 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?
No authorisation is needed from third parties to conduct termination, although the employer must inform the dismissal to the Labour Inspection.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
The employee will be entitled to demand before a Labour Court an additional payment, which goes from six to eleven monthly remunerations. If there is a serious discriminatory dismissal, the employee will be entitled to demand these compensation and additional payment, or his reinstatement.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
Please see response to answer No. 12 above.
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?
Yes pregnant employees, employees who are under medical leave, employees who are union directors, and the President of the Health and Safety Committee.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Anti-retaliation protection applies if claim is made at the Labour Inspection or courts. In case of other disclosures in the public interest, no specific anti-retaliation protection applies.
What financial compensation is required under law or custom to terminate the employment relationship? How is such compensation calculated?
The calculation of the compensation is composed by: (a) severance in lieu of prior notice. The company may waive 30 days’ advance notice if it pays to the employee a severance equivalent to one monthly remuneration capped at US3,250; and (b) severance per time of service. If the employment agreement has been in force for more than one year, the company must pay the severance agreed by the parties, or the statutory severance if no agreement exists equivalent to 30 days of remuneration for each year of service and fraction thereof greater than six months. There are two caps for this severance: (i) time of service may not exceed 11 years; and (ii) the monthly remuneration capped at US3,250.Nonetheless, if that employee was hired before August 14th, 1981, this compensation will not have the 11 years cap.
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, including in respect of non-disclosure or confidentiality clauses.
The parties can terminate an employment relationship by mutual agreement, with or without a conventional compensation.
Regards to the non-disclosure or confidentiality clauses, no specific legislation governs these covenants. However, Chilean courts and practice have recognised that non-competition and non-solicitation clauses are not entirely prohibited under Chilean law but may be valid under limited circumstances. The following requirements must be met: (a) employees’ consent since no restriction is legally implied; (b) a legitimate supporting reason to protect the business interest of the former employer (e.g., avoiding facilitation to direct competitors); (c) a limited scope and time of effectiveness is paid to the individual subject to the restriction; and (d) consideration paid to the employee.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
Please see response to answer No. 17 above.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Please see response to answer No. 17 above.
Are employers obliged to provide references to new employers if these are requested? If so, what information must the reference include?
What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?
a) Burden on proof for termination for cause events.
b) Low performance with no serious breach is not permitted reason for termination.
Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?
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