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Costa Rica

January 25, 2021

By Raquel Moya Sánchez and Beatriz Cordero Muñoz 

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Costa Rica

KEY DEVELOPMENTS FOR 2020


 

Implementation of telework as a measure to avoid the spread of
COVID-19

On 16 March 2020, the President of the Republic declared a state of emergency in the entire territory of the Republic of Costa Rica due to COVID-19. In light of the situation and as a way to avoid the spread of the virus, the Ministry of Health recommended that employers implement teleworking as much as possible.


 

One month extension to the BMC reduction

In March 2020, the Board of Directors of the Costa Rican Social Security Fund agreed to reduce the Minimum Contribution Base in health insurance and pensions to 25% up to June 2020. On 23 June 2020, the President of the Republic reported that the Board of Directors approved his request to extend the reduction of the Minimum Contribution Base for an additional month, which means that up to 31 July 2020, the Minimum Contribution Base is charged as follows:

  • for employers, the temporary reduction of 75% to the Minimum Contribution base will be maintained; and
  • for independent employees (individual and collective) and those who are voluntarily insured, the Minimum Contribution Base will be reduced by 25% by reference to the value of the Minimum Contribution Base in February 2020.

 

Suspension of employment contracts and reduction of working hours

The Executive Branch, along with the Ministry of Labor, has published new regulations which detail the steps employers should take to request the suspension of employment contracts before the Labor Inspection due to force majeure or other fortuitous event (such as the COVID-19 pandemic). Once the term in which the suspension was authorised has expired, the parties must resume the employment relationship as normal. During the suspension period, the employee must not render their services and the employer must not pay them any salary.

On 23 March 2020, the Legislative Assembly approved Law No. 9832, which authorizes the reduction of working hours by 50% if the company's income falls by 20%, or 75% if the company's income falls by 60%. The employees' salaries may be reduced accordingly, subject to approval from the Labour Inspection. The reduction of working hours is authorized for a set period of time, although companies may apply for an extension to this period if necessary.

 

KEY DEVELOPMENTS FOR 2019


 

Increase in minimum wage for private sector employees

From 1 January 2019, the minimum wage for private sector employees increased by 3%. The increase will also apply to employees who are paid above the minimum wage scale but have an agreement with their employers to receive the minimum salary increase.

 

KEY DEVELOPMENTS FOR 2018


 

Changes to Labour Code

On 25 July, 2017 Costa Rica’s Labour Code underwent its most significant amendment since 1943. Although the amendment’s primary focus is to reform and introduce new labor procedures, there are certain aspect of the day-to-day employment relationship that have experienced considerable variations. These changes include:

  • a prohibition of discrimination in the workplace;
  • the introduction of liability and personal responsibility for representatives that have the authority to make decisions on behalf of the company;
  • equality of wages and benefits;
  • Government sponsored counseling for employees whose compensation is not greater than ¢902,000 colones / $1,500; and
  • the requirement for an employer to file a dismissal letter before the Ministry of Labor if the employee refuses to accept the letter. Whenever an employee is terminated for cause, the reason stated in the termination letter will be the only valid argument for the dismissal.

 

Protection for Vulnerable Workers

A fast-track procedure has been established in order to guarantee special protection to: civil service employees, pregnant or breastfeeding women, employees under the age of 18, union members, victims of sexual harassment and any other individual who has been granted special protection by law.


 

Labour Strikes

For a labor strike to be considered legal, the issues in dispute should be referred for conciliation or alternative dispute resolution.

With thanks to Beatriz Cordero Muñoz and Raquel Moya Sánchez of Sfera Legal for their invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department