Practice Area Articles
January 16, 2023
Enrique M. Stile and Javiera Martínez Correa
Back to International Employment Law
KEY DEVELOPMENTS FOR 2023
Retention in the context of high inflation
The economic crisis and high inflation factors make it increasingly difficult for companies to stay competitive and retain their talent. Accordingly, in an inflationary context such as Argentina’s, with exchange restrictions in force, many companies have begun to pay salaries partially or totally in U.S. dollars, which constitutes a great incentive by ensuring the value of wages in the face of devaluation.
Other companies have even gone a step further and adopted payment mechanisms that involve technology not yet regulated (at least in Argentina), such as cryptocurrencies.
This also causes an impact on labour conflicts, as many claims are being brought directly in U.S. dollars and labour judges have to decide how to rule in a country in which there is no free access to foreign currency.
Recently, a labour judge authorized the purchase of USD for a labour credit. The mother of two minors whose father had died in a labor accident requested authorization to purchase USD with the money received as the settlement reached through a stock market operation. The Labor Court allowed it. This was an interesting ruling since it allows for a new means of protection from the depreciation of the local currency that is different from the traditional time deposit.
Challenges for local entities due to global positions
There is also a trend in Argentina caused by digitisation of services, a gradual replacement of human work by artificial work, and a higher valorisation of specialised and qualified jobs. This causes local companies to face the challenge of the competition. Locally, it is common to see the development of start-ups with attractive incentives for young talents. Also, the pandemics and telecommuting have caused companies to compete with multinational companies. In Argentina, more and more employees are hired by foreign companies to provide services from home. Multinational companies are also increasingly starting to hire local teams to manage the business worldwide because it is easy to access a cheap and talented labour force. Therefore, companies must get creative to manage to recruit and retain personnel while remaining competitive.
Trends on diversity & inclusion
There have been relevant legislative and case law changes regarding women in the workplace. After the Argentine Congress ratified ILO Convention 190 on the Elimination of Violence and Harassment in the World of Work (“Convention 190”), Argentina has recently taken measures towards strengthening the protection of female employees specifically in the workplace. In that context, in March 2022, the Argentine Executive issued a Decree which ordered employers with 100 or more workers in their premises to provide nurseries and day care centers for children of their personnel who are between 45 days and 3 years old. Employers may outsource the nurseries and day care center services or provide them together with other employers. Through syndicate negotiations this requirement may be fulfilled by a non-remunerative payment.
This shows that Argentina’s regulation has moved forward to comply with the 190 ILO Convention and legislate about women in the workplace. However, companies have been struggling to keep their policies and practices updated and in accordance with the new regulations.
KEY DEVELOPMENTS FOR 2022
Implementation of the Teleworking Law and its Regulation
The Teleworking Law and its Regulation entered into force in April 2021. It regulates labor contracts in which employees work partially or totally outside the employer's premises on a regular basis, except for those who work in clients' offices. The Law regulates several aspects applicable to this modality, such as the right to digital disconnection, the right to a working schedule that is compatible with care tasks, reversibility, compensation of expenses, provision of work tools, and transnational services, among others.
The greatest impact of these measures is the need to provide employees with working tools and to compensate them for higher expenses arising from remote work. While many companies have already defined and applied measures to implement the Teleworking Law, some have yet to do so. For companies implementing a mixed on-site / remote work schedule, the Teleworking Law applies proportionally.
Employers that choose a remote or hybrid work schedule must execute written agreements that reflect these changes to the law. In any case, it is important for companies to continue monitoring the vision and opinions of the enforcement authority and, eventually, what the judges resolve in disputes in this regard.
Removal of double severance provision and ban on dismissals
In December 2021, the Administration established a schedule to progressively end double severance and did not extend the ban on dismissals. As of 13 December 2019, severance applicable in the case of termination without cause (or constructive dismissal) was duplicated, with a cap of ARS 500,000 (equivalent to approximately EUR 4,200) at the time of writing. During the COVID-19 pandemic, dismissals had been prohibited since 13 March 2020. Neither the prohibition nor the duplication were applicable to employees hired after 13 December 2019.
As a result of the new measure, which came into effect from 1 January 2022, the severance duplication will be reduced progressively until its effective elimination as of 1 July 2022. On the other hand, the measure did not extend the prohibition of dismissals which was in force until 31 December 2021. Consequently, the mentioned prohibition has since ceased to apply. Note that this measure maintains the cap of ARS 500,000 on the severance incremental and the universe of covered employees (i.e., those hired before 13 December 2019). The impact of this measure will vary and should be considered on a case-by-case basis.
Introduction of obligation for companies to provide nurseries and day-care centres
The Argentine Supreme Court of Justice ordered the National Executive to set conditions to require companies to provide nurseries and day care centres for their employees’ children. The Court's decision was issued on 21 October 2021. The Court added that day care regulation is a gateway to real equality of opportunity and treatment of women in the workplace. The ruling is in line with international treaties that protection of the family is an essential element of society, the sons and daughters of those who work, and the female employees to whom international treaties aim to assure the right to work and to progress in their jobs without care responsibilities limiting their working prospects.
Although the obligation of employers to provide nurseries and day care centers is already provided for under the Labor Contract Law, its regulation was never issued; thus, actions demanding the service could not be brought before the courts. As a result of this ruling, the Argentine Ministry of Labor, Employment, and Social Security has ninety days to issue the regulation, determine compliance conditions and set a deadline for companies to implement the measure.
It remains for the Labor Ministry to issue a regulation defining the criteria and conditions for companies to provide nurseries and daycare centers. Until then, companies are not required to comply with this duty.
KEY DEVELOPMENTS FOR 2021
Voluntary retirement plans
In March 2020, in an attempt to prevent the spread of Covid-19, the Argentine Executive issued a mandatory isolation order. In parallel, and in order to maintain employment levels, it also banned dismissals without cause and dismissals and suspensions based on reduced workloads and force majeure. The ban was then successively extended throughout 2020 until 25 January 2021. The ban did not apply to employment contracts executed after 29 July 2020.
Notwithstanding the ban, severance payments in cases of dismissals without "just cause" were duplicated on 13 December 2019 and that duplication was further extended, until 25 January 2020. Therefore, employees who were dismissed without just cause before that date were entitled to receive twice the applicable severance under the current legislation. This duplication did not apply to employees hired after 13 December 2019.
As a result of the ban, all employment terminations must either have had a just cause or have been voluntary (i.e., employee resignation or extinction of the employment relationship by mutual agreement). In light of this, many companies opted to grant Voluntary Retirement Plans ("VRP") in order to terminate employment contracts.
Although there is no specific statute in Argentina regulating VRPs, they are open offers made by an employer to its employees, or to a group of employees, to obtain certain special benefits within the frame of the termination of their employment contracts.
Under a VRP, employees accept the offer willingly and the contract is terminated by the mutual agreement of the parties. This kind of termination does not trigger severance obligations for the employer and the termination is grounded on the will of the parties pursuant to section 241 of Argentine Labour Contract Law No. 20,744.
As VPRs are not regulated, there is no minimum amount to be offered by the employee and the terms of the termination are willingly granted by the employer. In Argentina, the market practice is to encourage the employee to accept the offer and to include within the package an amount equal to the mandatory severance payment, plus the duplication of the severance, plus additional benefits (such as medical care extensions).
New legal regime for teleworking
The outbreak of the Covid-19 pandemic has provoked a re-evaluation of the way in which tasks are performed. Due to the mandatory isolation, except in the case of employees who were classified as "essential workers" and/or were exempt from mandatory isolation, all other workers could not perform their tasks at the workplace.
Hence, on 14 August 2020, Law No. 27,555 (the "Law") establishing the Legal Regime for Teleworking Contracts was published in the Official Gazette.
The statute stipulates the minimum legal requirements to regulate homeworking and delegates specific aspects to collective bargaining agreements. It defines the concept of home office work as work performed under an employment relationship from the worker's own home or from a place other than their employer's facilities.
In addition, the Law recognizes rights and duties to those who work under this modality (e.g., right of reversibility, right to digital disconnection, trade union rights, right to privacy) and contains regulations referring to working hours, the provision of work tools and reimbursement of expenses.
The Ministry of Labour, Employment and Social Security (which is the enforcement authority) was tasked with issuing the relevant regulations (but has not done so), mainly to shed more light on certain aspects of the statute that are inconsistent and unclear.
The statute was due to come into force after ninety days as from the end of the mandatory isolation period.
Return to the workplace
The next step after mandatory isolation is mandatory social distancing. The Argentine Executive gradually determined which cities met the conditions to arrive at this new stage.
One of the main differences with mandatory isolation is that in the prior phase, the rule was isolation and remote work (as far as possible), and only activities considered as essential or exempted could be performed on site. However, under social distancing, all activities can be performed on site, as long as the following requirements have been met: (1) an operating protocol is in place and approved by the local health authority, which includes all recommendations and instructions of the Argentine health authority; and (2) the use of closed spaces is restricted to 50% of their capacity.
Regarding item (1), it could conservatively be understood that until a specific activity protocol is approved by the relevant authority, on-site activity cannot be resumed. However, there are countless highly specific activities that render the need for a protocol for each unreasonable. In this sense, some of our clients are taking a proactive approach, which consists of submitting to the Work Risk Insurer (ART) and to the relevant local authority a specific protocol with an opinion from an expert in Health and Safety. Although this option does not eliminate all risks, we consider it a viable alternative.
KEY DEVELOPMENTS FOR 2020
Prohibition on dismissals and suspensions
The Argentine Executive has adopted several measures to help mitigate the impact of COVID-19 on the workplace and to maintain current levels of employment. For example, subject to certain exceptions, any dismissals and/or suspensions taking place during the prohibition period (from 31 March 2020) are deemed to not have any effect. One exception relates to suspensions resulting from a reduction in work which is not attributable to the employer or a force majeure event. In that instance, the employer and the employee may agree certain non-remunerative allowances as compensation for suspension, subject to approval by the relevant enforcement authority.
Increase in remote working and mandatory notification and other requirements
The outbreak of the COVID-19 virus has resulted in a re-evaluation of the way in which tasks are performed by employees.
Due to mandatory isolation, employees must continue to work remotely, unless they provide 'essential services' and/or are otherwise exempt. In spite of the widespread use of remote working, employers must still notify the Labour Risk Insurance Company about any employees who are subject to remote working. However, they are not required to comply with other requirements, such as the provision of certain equipment (e.g., fire extinguisher, ergonomic chair, etc.) during the mandatory isolation period.
Several bills have been established to further regulate remote working, which contemplate, amongst other things, additional requirements in terms of regular breaks for employees, providing employees with equipment for internet access and employers being required to cover the cost of the same.
Relaxation of rules relating to unilateral variation of employment terms by employers
As a result of the impact of COVID-19, the rigid limitations on an employer's abilities to unilaterally vary an employee's terms and conditions of employment have been relaxed. For example, the Argentine Labour Ministry has expressly stated that employers may unilaterally vary employment terms in order to guarantee the continuity of certain essential services and in practice, many non-essential workers have been forced to change their place of work in order to provide services remotely and/or to have their working days reduced (which may also result in a corresponding reduction in salary). In addition, if employers suspend employment benefits on the basis that it has become materially impossible to provide them during the pandemic (e.g., gym subsidy, meal vouchers, etc.), it is unlikely that employees would succeed with any request to reinstate these suspended benefits, despite the fact that under normal circumstances these may amount to an acquired right.
KEY DEVELOPMENTS FOR 2019
Amendments to the tax regime
Social Security contributions
Law 27,430 will gradually unify the rate of social security contributions into a single rate of 19.5% which will apply from 1 January 2022. This means that the rate of employer contributions will progressively reduce for certain employees (i.e. for those whose main activity is the rendering of services, leasing and commerce in general) and will increase for employers who do not fall within this definition, until a unified percentage of 19.5% is reached.
The contributions percentages for employers whose main activity is the rendering of services, leasing and commerce in general will be reduced as follows:
- from 01/02/2018 to 31/12/2018: 20.70%;
- from 01/01/2019 to 31/12/2019: 20.40%;
- from 01/01/2020 to 31/12/2020: 20.10%;
- from 01/01/2021 to 31/12/2021: 19.80%; and
- from 01/01/2022: 19.50%.
From 1 January 2019, the non-taxable minimum for employers' contributions has increased to ARS 17,509.20.
Income tax law
The Income Tax Law has also been modified and now establishes that severance payments to be paid to people in management and executive positions who have occupied their position for 12 month prior to the termination of their employment relationship are included within the scope of income tax, as long as such amounts exceed the minimum severance amounts provided by the labor legislation.
#MeToo movement influence
In light of the #MeToo movement, issues such as sexual harassment in the workplace have become prominent and many companies are implementing policies, training, hotline reporting tools and other mechanisms to address such issues.
Impact of inflation on employee salary levels
As the levels of inflation in Argentina have been increasing, the Executive passed Decree No. 1043/2018, which established a payment of a non-remunerative one-off lump sum of ARS 5,000 to all employees in the private sector. The lump sum is paid in two instalments in December 2018 and February 2019. Such payment may be offset by any other payments made by the company since 1 January 2018 (such as salary increase, bonuses, etc.).
Decree 1043/2018 has also established a temporary provision in force until 31 March 2019, to notify the Ministry of Production and Labour of any planned dismissal of any permanent employee at least 10 business days prior to the dismissal. After receiving the notice, the Ministry of Production and Labor may hold a hearing to hear the reasons for the proposed termination. Failure to comply with such obligation to inform may result in a fine ranging between 30% and 200% of the minimum wage for each affected employee, in addition to other compensation or remedies available to the employee or from a collective standpoint if a Collective Bargaining Agreement is applicable.
KEY DEVELOPMENTS FOR 2018
Amendments to Labour Risk Regime
On January 23, 2017 Decree No. 54/2017 was published, introducing modifications to the Labor Risk Regime aimed at reducing litigation regarding work related accidents or disease. A series of recent Supreme Court rulings have been issued which have held that Courts are not to arbitrarily decide to increase the amount of compensations deriving from work related accidents. Such compensation is stated by law, and the Court has made it clear that Courts are not to arbitrarily increase this amount going forward.
New Interest Rate to Labour credits
By Disposition No. 2658 (November 8, 2017) the National Labor Court of Appeals introduced a lower judicial interest rate applicable to labor credits.
Draft Bill for Amendment to Labour Contract Law and the National Employment Law
In late 2017, a draft bill was submitted to Congress, which seeks to amend the current labor regime and in particular, reduce the burden of litigation. This is expected to come into force in 2018.
The changes include:
- tax evasion of social security obligations will no longer be a crime;
- reduction in fines / severance payments for lack of registration of the employment relationship and/or deficient remuneration / hiring records, with such reduced fines being payable to Social Security systems (instead of to affected employees), thus potentially reducing litigation in this area; and
- new ability for employees to waive rights contained in their labor contracts.
KEY DEVELOPMENTS FOR 2017
A series of amendments to the Labour Contract Law, the National Employment Law, and the Educational Internships Law
The Chamber of Deputies’ Commission of Labour Legislation has passed a series of amendments to the Labour Contract Law, the National Employment Law, and the Educational Internships Law.
The main changes include:
- Labour Contract Law
- Section 15 - transactional, conciliatory, or release agreements.
- Section 55 - the omission of displaying the labour books.
- Section 218 - suspensions decided by the employer.
- Section 241 - judicial approval of the termination of the contract by mutual agreement.
- Section 264 - the non-waiver of labour privileges.
- National Employment Law
- Modifications regarding the inclusion of agricultural, housekeeping, and public sector employees in the unemployment fund.
- Modifications to the amount of unemployment benefit, resulting in one minimum monthly wage.
- Educational Law Internship
- Section 21 of Law No. 26,427 has been modified to promote the inclusion of students with disabilities within the quota of trainees that companies and government agencies must admit.
KEY DEVELOPMENTS FOR 2016
Change of criteria by the Argentine Supreme Court on the right to strike
On 7 June 2016, the Argentine Supreme Court of Justice established that only authorized organizations of workers are entitled to the constitutional right to strike. Therefore, only these organizations (with or without legal recognition) can exercise this right. Non-unionized groups of workers are excluded.
Penalty fee for labour certificates
On 6 July 2016, the Argentine Chamber of the Labour Court of Appeals established that, even when the existence of differences in salaries is accredited, if the labour certificates were duly and timely delivered to the employee, the allocation of the penalty fee as established by Section 45 of Law Number 25,345 does not apply. This is because the differences in salaries were declared at the moment of dictating the definitive ruling. The employer’s obligation is limited to delivering the labour certificates taking into consideration the records of the company’s books.
Stability guarantee – union protection
On 23 February 2016, the Argentine Supreme Court of Justice emphasized that the effective enjoyment of union protection is subject to compliance with the requirement to notify the employer about the employee’s formal application for a union position.