As everybody knows, the Labor Reform Package of the “Ley Bases” has finally been approved by the Senate. On June 27 and 28 the Law was passed by the Lower House and it will be officially enacted by the Executive through a decree and subsequent publication in the Official Gazette. As stipulated by law, it will become effective the day after its publication in the mentioned Official Gazette. This rule is an updated and shortened version of the original wording of DNU 70/23 and aims to clarify the interpretative criteria on the constitutional validity of the original text of December 2023. We will not focus on the original version but, instead, on the approved version.
Amendments with impact on individual labor relations
Electronic registration of labor relations within a new, simple and efficient system to be defined by law.
The Law provides for a simplification of labor registration, even though details for its implementation are still pending. Current labor registration system will be replaced by a digital and electronic efficient system, allowing to keep labor documentation in electronic format, accepting electronic slips and providing for a special simplification regime for companies with up to twelve employees.
Extension of the probationary period
The trial period has been extended to six months for all labor relations. Those companies with a staff between 6 and 100 workers/employees may extend the trial period to eight months through collective bargaining agreements. In the same way, those companies with up to 5 workers/employees may extend such period up to one year.
The rule sets forth that, in case of illness during the trial period, the labor relation can be terminated once the trial period has elapsed, even if worker is unable to resume work definitely and excluding severance pay. These adjustments promote greater consistency to both parties of the labor relation.
Subcontracting and Joint Liability
Joint liability is quite common in litigation connected to casual labor or subcontracting of service provider companies, among others. The new rules aims to solve intermediation with those companies that supply temporary services such as cleaning and security services and in-house services at the suppliers’ facilities. Thus, it sets forth that the contractor’s employees shall be considered direct employees of those companies that register the labor relationship and not of the user company. However, user companies shall be jointly liable for wage arrears or non-payment of wages, salaries and contributions. So, it is advisable to request contractor’s evidence of fulfillment with such obligations. Additionally, the contractor’s employees are entitled to demand such wage arrears to the user’s company. In this respect, Enforcement Authorities are instructed to generate a registration system for the control of payment of wages and contributions by service provider companies.
Finally, joint indemnifying liability of user companies remains in effect but it only applies to the time period in which service has been actually provided.
Even though the impact of these amendments may seem irrelevant, great progress has been made considering the contingencies faced by different companies in our country.
Presumption of the existence of a labor contract and the principle of production of evidence
Considering the jurisprudential criteria in court regarding evidence and excessive requirements against employers, the “Ley Bases” reaffirms the procedural principle that whoever alleges a fact must prove it. This disarms a jurisprudential theory that, in may cases, requires the negative proof (that a fact did not happen) by someone who had not alleged it, something quite difficult. Additionally, the new rule sets forth that the provision of services payable through commercial invoices does not fall within the scope of section 23 of the Labor Contract Law LCT). So, if an employee has a claim against his/her employer, he/she shall have to produce the distinctive elements of a labor contract in terms of technical, economic and legal relation.
Seniority Indemnity
The original provisions of the Labor Contract Law remain in full force and effect (one-month salary for each year worked or a period exceeding three months). The indemnity limit of three times the average salary of the activity is also kept. Regretfully the Ley Bases has not normatively incorporated the Supreme Court doctrine of the “Vizzoti” Case for a better clarification of compensation ceilings even though its conclusions can be found in jurisprudence. The law has also excluded those items integrating the indemnity basis (as opposed to the DNU that specifically stated that bonuses, prizes and/or other complementary concepts were excluded for the calculation of the seniority indemnity). In my opinion, a negative decision.
The creation of a Severance Fund may be agreed on with unions (no top contribution amount has been defined) that could even be used to cover payments related to mutual termination agreements.
Dismissal for Cause
Dismissal for cause is considered in the DNU when serious offenses make the labor relationship impossible. However, the following cases are considered by the Labor Reform as statutory grounds for immediate dismissal for cause (no severance payable): (a) participation in blockades or takeovers of establishments; (b) when participation in strikes: 1) affects the freedom or the right to work of those who do not stick to the strike, or 2) prevents or obstructs the entry of persons or things to the establishment, or 3) damages persons or things belonging to the company or third parties. For the case of blockades or takeovers, prior notice to termination is required.
Wrongful Discharge for Discrimination – Aggravated Damages
Wrongful discharge for discrimination occurs when an employee is fired (with enough evidence) based on the following grounds: race, gender identity, sexual preference, nationality, religion ideology or political/union-related opinion. Any of these cases entitles the discriminated employee to aggravated damages of between 50% and 100%, to be defined by the labor judge, of statutory severance. The law eliminates the remedy of reinstatement and the dismissed employee must prove the invoked discriminatory facts.
Maternity Leave
Pregnant women are entitled to a 90-days’ paid maternity leave and the prohibition to work during the 45 days before and after childbirth remains. However, they can elect to reduce the pre-birth leave to 10 days and the post-birth leave to 80 days. Other conditions of the LCT remain in full force and effect.
Independent Workers – Monotax Payers – Service Providers (excluded from the presumption of labor relation)
The Ley Bases creates a new category of self-employed independent workers who may hire up to three independent collaborators. The Executive Branch shall create a legal framework for this new autonomous category excluding any type of labor relation between them. We recommend our clients to be cautious with this new tool until further implementation details.
Additionally, the provision of services or work tasks payable through invoices and payments evidenced through banking systems are excluded from the presumption of labor relation. In opposition, a labor relation can be proved if the distinctive elements prevail (technical, legal and economic dependence).
Repeal of Fines – Laws 24013, 25323 and Section 80 and 132 bis LCT)
Seeking to reduce labor litigation, fines for lack of or deficient labor registration are repealed. The law has also repealed fines for failure to hand over employment certificates, to pay indemnity compensation on-time and to pay contributions accruing excessive interests, thus increasing the calculation basis for litigation and companies’ contingencies.
The eliminated penalties were complementary to the fiscal authority’s entitlement to request such payment by means of fines, penalties and surcharges, which remains in full force and effect. In this way, court records’ amounts and related costs such as attorneys and court officers’ fees shall be reduced as well as court costs and fees. The fiscal authority shall remain entitled to assess debt and to demand compliance with unpaid social security contributions and others. Whenever a court order for deficient registration is informed, all payments made through any of the social security subsystems (even autonomous) shall serve to compensate such unpaid amounts. Other amendment to law 24013 is the repeal of telegrams to be replaced by an autonomous report system where employees may denounce deficient labor registration.
Amnesty – Regularization of Labor Relations
The Labor Reform devotes a chapter to regularization of labor relations for a 90-days’ term as from its effective date subject to ruling by the enforcement authority. Employers with unregistered or under-registered employment will be able to remediate such situation by adhering to a plan that will forgive, at least, 70% of all unpaid social security contributions. This payment plan also applies to other debts such as any pending tax evasion proceedings.
Finally, the following aspects that had originally been included in the DNU 70/2023, were disregarded in the Labor Reform:
1) Issuance of digital labor certificates
2) Elimination of companies as withholding entities for union dues and contributions as well as elimination of solidarity contributions other than membership dues
3) Payment of wages and salaries through identity registration systems other than the banking system (virtual wallets)
4) Regulation of the judicial interest rate in substantive law
5) Possibility of payment of court judgments in 12 installments for SMEs
6) Approval of changes in working conditions
7) Homologation of agreements pursuant to section 241 LCT before administrative or judicial authorities
8) Elimination of the list with essential activities regarding the right to strike
9) Repeal of commercial travelers’ regime
10) Calculation of the updated amounts paid in case of rehiring of workers
11) Amendment to telework regime (reversibility, transnational contracts)
12) Amendment to working hours’ regime
13) Elimination of items excluded for the calculation of the seniority indemnity (bonuses, complementary concepts, etc.)
As usual, should you have any question, please feel free to contact us and we will be pleased to assist you with a tailored and reliable legal advice.
