Argentine law governs all labor activities in Argentina, regardless of where the employee was first hired or where the employment contract was entered into or signed, as well as the employee's nationality. Labor matters are subject to a territoriality principle in Argentina and, therefore, any employee who works in Argentina is subject to Argentine labor law.
1. THE LABOUR RELATIONSHIP
Under Argentine law a labour relationship exists when a person provides personal services to another in exchange for remuneration, while in a legal, economical and technically subordinate position. These arrangements need not be in writing to constitute a legally binding agreement between the worker and the employer. An essential requirement for a work contract is that the employee receives payment for rendering services.
A labour contract is distinct from a contract for consultancy services. A consultant differs from a regular employee in a number of ways including the following: the consultant is paid on the basis of work performed; he/she need not comply with orders from the employer; is not subject to a specific work schedule and does not need to be physically present at the employer's place of business.
However, if the employer and the consultant are bound by a consulting agreement but the characteristics of the relationship are one of labour dependency, there is a serious risk that it may be considered by the courts to be a labour relationship with the attendant consequences.
Argentine law governs all labour activities in Argentina, regardless of where the employee was first hired or where the employment contract was entered into or signed.
2. RULES GOVERNING LABOUR RELATIONSHIPS
The Argentine Constitution contains the overriding principles governing labour relationships. The basic principles in the Argentine Constitution include freedom of employment; the right to work in a dignified and equal manner; to earn appropriate wages which cannot fall below a minimum declared by law; to be entitled to paid breaks and vacations; and equal remuneration for equal work.
All of the above rights are regulated by the four basic sources of Argentine labour law which in order of priority are the following:
- Laws governing labour contracts
- Collective bargaining agreements (Convenios colectivos de trabajo or CBA's)
- Agreements between the parties
- Customs in the workplace
In as far as priority is concerned, a stipulation ranking below another may only modify a higher-ranking stipulation to the extent that it enhances the employee's position.
Labour Contract Law, No. 20,744, published in May 1976 (Ley de Contrato de Trabajo, the "LCL") governs the majority of labour relationships in Argentina. However, other employees such as those in the public sector, in domestic service and rural workers have their own specific statutes.
The main issues covered by the LCL include, but are not limited to: remuneration; annual vacations and special leaves of absence; holidays and non-working days; daily and weekly working and resting hours; special provisions for women and children; illness; and termination or transfer of a labour contract.
Collective bargaining agreements tailor the general provisions of the LCL to particular situations such as a specific industry sector or employer. These agreements are negotiated between the relevant union representatives on the one hand and either the management of different industry sectors or a specific company on the other. They typically involve issues such as vacations, bonuses, wage scales, overtime pay, health and safety conditions in the workplace and special paid leave.
Furthermore, the parties may agree to specific individual conditions of employment by means of a written contract or a verbal agreement. Written contracts are frequent among key employees such as senior management, professionals and chief executive officers.
Finally, it must be borne in mind that the customs and habits of a particular region or company may establish work practices which eventually become legally binding between the relevant parties.
2.1 No Waiver Principle
No employee may waive or limit any right to which he/she is entitled under any law, professional statute, collective bargaining agreement or individual labor agreement and if he/she does so, even by mutual consent, such waiver or limitation is not valid or enforceable.
Section 12 of the Labor Contract Law ("LCL"): "It shall be null and void any agreement that implies the waiver or limitation of rights provided by law, professional statutes, collective bargaining agreements or individual labor agreements..." This is known as the "no-waiver of labor rights" principle.
As a consequence of the above, the limitation of rights provided in the new policy may cause the claim of any employee regarding the null of that section.
2.2 Ius Variandi
In acordance tu the Section 2.1, the labour law establish that, the unilateral modification of labor conditions by the employer is known under Argentine Labor Law as "ius variandi" and it is regulated by Section 66 of the Labor Contract Law ("LCL").
According to Section 66, the employer is authorized to introduce all changes related to the form and modality of services of its employees, as long as such changes imply a reasonable exercise of its faculty, and provided they do not modify essential conditions of the employment contract or imply a moral or financial damage for the employee.
Moreover, the Section 66 sets forth that, upon any violation by the employer to the limitations on the exercise of "ius variandi", the employee shall be entitled to: (i) consider him/herself constructively dismissed, claiming the consequent severance payment, or (ii) to initiate legal actions moving the court for the restore of former labor conditions.
The LCL grants the employer the faculty and power to direct its business, thus granting several faculties sufficient to financially and technically organize the company (sections 64 and 65 of the LCL), also acknowledging the faculty to "introduce all and any changes with respect to the form and manner of performing labor activities" (Section 66, as explained above).
Therefore, the employer is entitled to modify the terms of the employment contract, under the "ius variandi" principle, though subject to certain limitations.
In order for a modification to labor conditions to be valid, Section 66 of the LCL sets forth that the following requirements and limitations must be complied with:
a) Reasonable change: the change has to be reasonable and grounded on functional reasons –i.e., the consequence of a specific need of the company that has to be related to production increase-,
b) Stability of the essential conditions of the labor agreement: the determining elements of the agreement cannot be changed, but only accessory secondary conditions may be affected. The remuneration is considered an essential element not subject to unilateral modification. Argentine scholars consider as possible changes: the place of work, the schedule and the kind of activity as long as the same category is maintained.
c) Employees indemnity: the employee may not be adversely affected, regarding his behalf or his economic situation, from a moral and financial point of view.
If the ius variandi affects any of these requirements, then it is considered as abusive and unfair.
3. TYPES OF LABOR CONTRACTS
Argentine labor law contemplates the following types of labor contracts.
3.1 Labor contract for an indefinite period
The labor contract for an indefinite period is the typical form of labor contract under Argentine law. The general principle is that all labor contracts are considered to be entered into for an indeterminate period, unless the parties agree to a fixed period of duration because of special circumstances.
All indefinite term labor contracts begin with a trial period of 3 months which allows either party to terminate the relationship during such period without just cause, and without the employer having an obligation to make any severance payment. Both employer and employee must provide a 15-day prior notice if they decide to terminate the employment during the trial period.
3.2. Labor contract for a fixed period
The fixed term contract is an exception to the general principle that all labor contracts are for an indefinite period.
A fixed term contract must be in writing, specifying the period of duration, which may not exceed 5 years, the type of work and the reasons justifying the use of this exceptional form of labor contract. In the event that these requirements are not met, the contract will automatically be converted into a contract for an indefinite period.
In all cases, the employer must give prior notice to the employee of the expiration date of the contractual period not less than one month, nor more than two months before the originally agreed expiration date. If the employer fails to give such prior notice, then the contract will be converted into a contract for an indefinite period, unless the parties expressly agree to renew it for a further fixed period.
The dismissal without cause before the expiration of the fixed period would entitle the employee, apart from the regular severance (i.e. that provided for a contract with an indefinite period), to a compensation for the damages suffered due to the inobservance of the period. Case law has established that this compensation is equal to the remuneration that the employee should have perceived up to the expiration of the period.
Moreover, if the contract for a fixed term is executed for a period of more than one year, even the mere expiration of the period will entitle the employee to perceive compensation equal to half of the compensation to which he/she would have been entitled if dismissed without cause in a contract for an indefinite term.
3.3. Labor contract for extraordinary/special services
This type of contract is entered into where extraordinary or special services are to be provided by the employee for the realization of determined works outside the normal activity of the enterprise; or in order to cover a circumstantial increase of work corresponding to extraordinary and transitory needs of the employer; or in order to cover the temporary absence of regular employees.
By way of reference, this hiring modality may not exceed 6 consecutive months or 1 year along a 3-year term, when justified in overloads of work, and may not exceed the duration of the absence of the replaced employee, when used to cover a vacancy.
Given that this contract is also an exception to the general principle that all labor contracts are for an indefinite period, failure to have an extraordinary justification or to comply with its requirements (e.g. maximum hiring duration) shall convert the contract into an indefinite term relationship.
3.4. Seasonal labor contract
Employers may hire workers for activities performed seasonally.
These contracts are considered to be contracts for an indefinite period having periods of activity (the season) and periods of recess. The worker has the right to be taken on at the beginning of each season simply because he/she was employed during the previous season. During the recess period no obligations or rights exist between the parties.
3.5. Part-time labor contract
To be classified as a part-time contract, the employee's work hours cannot exceed two thirds of the full-time schedule for the same activity. The remuneration paid by the employer must not be less than the proportional salary of a full-time worker.
Overtime is not permitted for these contracts, except where the employee is providing services in order to avoid danger to other employees.
Under certain interpretation, in the event that the work hours exceed two thirds of the full time, the employer must pay the same remuneration of a full time contract employee in that month.
Social security contributions should be made in proportion to the employee's salary with the exception of the contributions to the health care organization, which must be made taking into consideration the salary of a full time worker of the same category as the one of the part-time employee.
4. SALARY CONSIDERATIONS
Remuneration is the consideration that the worker receives in exchange for providing his or her services under an employment contract. Although the usual form of payment is some form of monetary payment, payments in kind (such as lodging or gifts) may also qualify as a form of remuneration. Remuneration in kind may not exceed 20% of the employee's salary. These will be computed when calculating the relevant social security and union contributions.
4.1. Minimum Wage
As from January 1, 2011 the minimum wage shall be of AR$ 1,840 for workers earning a monthly salary for a full time legal day's work and AR$ 9.20 pesos the hour for daily workers. The only exceptions to this rule are wages paid to apprentices and part time workers, who may be paid less than the minimum wage.
Additionally, CBAs set the minimum wages for the employees governed by their provisions. Minimum wages set forth by the relevant CBAs may not be lower than the general minimum wage mentioned in the previous paragraph.
4.2. Mandatory Semi-annual Bonus or "Aguinaldo"
Argentine law also requires that every semester (in June and December of each year) a bonus be paid to the employee equal to 50% of the highest monthly wage received by the employee during the previous six-month period. This bonus is referred to as the "semi-annual bonus", "thirteenth salary" or "aguinaldo". In the case of medium sized and small companies, the relevant CBA may provide that the "aguinaldo" would be paid in three equal parts.
4.3 Social Benefits
Social benefits are services provided at the employer's expense to the employee in order to improve the employee's quality of life and that of his family. These benefits are not considered to be part of the employee's remuneration and cannot be substituted by monetary payments.
Social benefits are not subject to contributions or salary withholdings, nor are they taken into account in calculating the "aguinaldo", nor in calculating the amount of any indemnity in the case of a labour contract termination.
Under Argentine law the following benefits are considered to be social benefits:
- the provision of company restaurant facilities;
- reimbursement, by the employer against duly accredited receipts, of medical and dental expenses of the worker and the worker's dependants;
- duly accredited reimbursement of the expenses of children's nurseries utilised by the employee's children up to the age of 6, in the case where the employer does not provide such facilities;
- the provision of school materials and smocks at the beginning of the school year for the employee's children;
- reimbursement of the cost of occupational training courses;
- reimbursement of duly accredited funeral expenses for the employee and his dependants.
4.4. Travel Expenses
The reimbursement of an employee's labor-related expenses, provided they are duly accredited with proper receipts, is not considered as remuneration and will not therefore be computed for the purposes of calculating social security, health care and union contributions.
4.5. Labor and social security documentation
Pursuant to the LCL, the employer is required to give its employees salary receipts in two counterparts, one signed by each party, where all payments and deductions made to the employee must be reflected. Specific formalities exist for drafting these receipts.
Additionally, the employer is required to keep record of all payments made to its employees in a special book called the Salary and Wages Book. Such book shall reflect the information contained in the salary receipts briefly described in the preceding paragraph.
Finally, as more fully described in Section 5. below, the employer is required to withhold social security and to pay such withholdings and its own contributions to the Argentine Tax Authority ("AFIP", "Administración Federal de Ingresos Públicos").
Failure by the employer to duly and timely register remunerations in salary receipts, the Salary and Wages Book and/or social security returns, as well as the employee's hire date and all other labor conditions, may create contingencies and exposure to expensive fines payable to the unregistered, or incorrectly registered, employee.
5. SALARY WITHHOLDINGS AND CONTRIBUTIONS
Pursuant to Argentine labor law, employers and employees have certain obligations to make social security contributions for family allowances, medical services, pensions and unemployment benefits. In addition, pursuant to many collective bargaining agreements, union dues of 1% to 3% of salaries may be withheld from employee salary payments for employees who are covered by those agreements.
The collective bargaining agreements 351/2002, applicable to the employees of the Company, due of 3 % of salaries of employees who are covered by that agreement may be withheld.
Furthermore, the employer will also be required to withhold amounts due in respect of income tax payable by the employee.
Withholdings and contributions are amounts calculated as a percentage of the individual employee's salary, which must be deposited in the relevant accounts that the AFIP maintains in most banks in Argentina.
In as far as withholdings are concerned, these are amounts which would normally be paid by the employee but are withheld from the employee's remuneration by the employer. In the case of contributions, the employer has a direct obligation to pay these and they are calculated by reference to the employee's salary.
The employer must ensure that the above amounts are deposited in a correct and timely fashion in the relevant bank accounts of the AFIP, as otherwise interest and penalties may be due. Any debt that the employer may have with the AFIP is subject to an interest rate between 1.5% and 3% per month and may also be subject to fines which could increase the debt by 200%. The limitation period for any claims by the AFIP for such withholdings or contributions is 10 years.
5.1. Withholding and Contribution Percentages
The percentage amounts for both withholdings and contributions are based upon the employee's gross monthly remuneration and are set out in the following chart:
In the case of employers whose main activity is the rendering of services, leasing and commerce in general, and have annual invoices of more than AR$ 48,000,000, the percentage for employer contributions is 21%. The contribution for other companies, unions, healthcare organizations, and Small and Medium Size Companies (PYMES) is of 17%.
5.2. Salary Caps for Withholdings and Contributions
The mandatory social security withholdings and contributions are calculated as a percentage of the employee's remuneration. In case of employee's contribution the base to calculate them has a cap of 13,879.25 pesos.
Employer's contributions have no cap, and therefore must be calculated over the whole employee's remuneration.
6. ANNUAL VACATIONS AND SPECIAL LEAVES ABSENCE
The employer must grant to employees the appropriate amount of vacation days, as well as special leaves of absence for illness and important personal events in the employee's life. During these absences the employee will receive normal pay1 from the employer, with the exception of maternity leave when the employee will receive social security benefits which however will be equal to the normal salary payments from the employer and will normally be paid by the employer.
6.1. Entitlement to vacation days
In order to qualify for the full vacation entitlement the employee must have been in employment with the employer for a minimum of half the relevant year.
However, if the employee has worked less than half a year he/she is entitled to one day of vacation for every 20 days worked. For these purposes any sick days taken by the employee, or legal absences, are considered days worked for the purposes of vacation entitlement.
The amount of vacation time to which an employee is entitled increases in accordance with the period of employment with the employer, as follows:
Period of Employment
6 months to 5 years
14 calendar days
5 to 10 years
21 calendar days
10 to 20 years
28 calendar days
20 + years
35 calendar days
The calculation is made as of December 31 of each year. The employer fixes the vacation period and must give to each employee at least 45-day prior notice of the dates assigned for vacations.
Employees are entitled to take their vacations, in principle, only between October and April. This rule is, however, not generally adhered to in practice by Argentine employers and employees.
Failure by the employer to give such prior notice within the terms specified above, authorizes the employee to unilaterally exercise his/her right to enjoy annual vacations, provided prior notice is given to the employer and, provided further, that such self-granted vacations finish before May 31 of the relevant year.
If the right to self-granted vacations is not exercised by the employee in due time and manner, the LCL establishes the forfeiture thereof and consequent loss of such vacation days. Case law may, however, adopt a more flexible position on a case-by-case basis. On the other hand, if the employer and employee so agree, up to one-third of any vacation entitlement may be carried forward to the subsequent year
6.2. Special Leaves of Absence
The law provides for leaves of absence in certain specific circumstances. Events which allow special leaves of absence include the sick or work-accident leave, birth of a child, maternity leave, marriage, death of a relative, and high school or university examinations.
At the request of the employee, the annual vacation may be accumulated with such leaves of absence.
6.3. Compensation during vacation and leaves of absence
While on the leave of absence the employee receives normal salary, in the case of vacation pay, the employee receives a slightly increased salary, approximately 20% as a result of a particular formula provided for in the LCL.
According to this formula, the monthly salary must be divided by 25 and then multiplied by the relevant vacation/leave of absence days.
Furthermore, the salary corresponding to the period of the vacation must be paid before the employee's departure as opposed to the end of the month as would normally be the case.
6.4. Impossibility to substitute vacation days by money
Due to the hygienical purpose of vacation days (i.e., this leave of absence is intended to allow workers to enjoy a minimum rest per annual period), the LCL does not allow the employer to make special payments as compensation for the lack of vacation grants.
The only exception to this rule is that, upon termination of the labor relationship for any reason whatsoever, the employee is entitled to receive an indemnification as compensation for pending vacation days as of the termination date (Section 156 of the LCL).
7. DAILY AND WEEKLY WORKING AND RESTING HOURS
7.1. Work schedules
Argentine labor law regulates the number of hours per day or week an employee can work, part-time salaries, night work and overtime pay.
7.1.1. Working day
The basic working day under Argentine labor law is 8 hours with a maximum of 48 hours per week. Any hour worked between 21:00 hours and 06:00 hours is equal to 1 hour and 8 minutes in order to calculate the number of hours to be included in a basic working day.
If the work has been declared unhealthy by the Ministry of Labor, working hours may not exceed 6 hours per day and 36 hours per week.
As indicated above, the law considers a normal full-time working day to be 8 hours. In the case of an employee who works less than two thirds of the regular working day, he/she shall be considered a part-time employee.
According to some opinions, any hours worked in excess of the normal working day (generally 8 hours) will be payable at overtime rates. Others, on the other hand, are of the opinion that only when the weekly 48-hour limitation is exceeded overtime shall apply and thus these hours shall be paid at normal rate. No unanimous criteria exists in Argentine courts.
7.1.2. Overtime Pay
Hours of work in excess of the basic working schedule are payable at overtime rates equivalent to a 50% (time and a half) surcharge on the normal wage. However, after 13:00 hours on Saturdays, Sundays and holidays, the surcharge is 100% (double time). Night shift workers do not receive overtime pay for night work.
Part time workers cannot work more than two thirds of the normal working schedule and are not allowed to work overtime hours.
Timetables stating the employee's work schedules must be posted in a clearly visible manner for the information of all employees.
7.2. Weekly rest - Minimum daily rests
The weekly rest is aimed at allowing the employee to recover from the effort made during the working week. Argentine law provides that workers shall be entitled, by way of general rule, to a weekly rest between Saturday at 13:00 and Sunday at 24:00. However, if for any exceptional reason they had to work during those days, the employer shall provide a compensatory rest of equal duration during the immediately following week in addition to overtime payment, if applicable.
Furthermore, at least 12 hours must exist between the end of a working day and the beginning of the following one.
8. ILLNESSES OR ACCIDENTS TEMPORARILY AFFECTING THE EMPLOYEE'S ABILITY TO RENDER SERVICES
8.1. Non-labor accidents and illnesses
An employee who is absent from work due to an illness or accident that is not related to work, is entitled to collect normal salary for certain periods of time while away from work.
In order to enjoy these paid leave of absence periods, the employee must duly and timely provide his/her employer with notice of the illness or accident. Timely notice is considered that given on the first day on which the employee should go to work but is prevented from doing so due to the illness or accident. In addition, the employee must be available for the medical examination that his/her employer may reasonably have him/her undergo.
As mentioned above, if the worker complies with his/her notification duty, he/she is entitled to receive normal salary despite the lack of actual services. This paid period is limited and ranges from a maximum of 3 months to a maximum of 12 months. These maximum periods vary according to the employees' years of service and depending on the existence of relatives in charge.
An employee with 5 years of service or less is entitled to a maximum paid leave of absence of 3 months, which is extended to 6 months if that employee has relatives in charge. On the other hand, if an employee has been with his/her employer for more than 5 years, he/she is entitled to a maximum paid period of 6 months, which is extended to 12 months if that employee is in charge of any relatives.
Once these periods have elapsed, the employer may cease paying the employee's salary.
However, if the illness or result of the accident continues beyond such periods, there is an additional period (the "Reserve Period") of up to one year. During the Reserve Period, the employer is not required to pay salary but must reserve a right for the employee to return to the previous employment position when recovered.
After the termination of the Reserve Period, either party may terminate the employment relationship without it being necessary to pay any indemnity to the other
Upon recovery from the illness, the employee must immediately return to work and remain available to his/her employer.
If an employee is dismissed without cause during any of the paid leave of absence periods mentioned above, the employer shall pay, in addition to the applicable severance payment for dismissal without cause, the salaries payable for the remaining months of the paid leave of absence period or until medical recovery of the employee.
If, on the other hand, during either of the above periods, the employee returns to work but there is a permanent reduction in the employee's capacity to carry out previous work functions, the employer must assign the employee to a post which he/she can fulfil, without reducing the salary paid by the employer.
If the employer cannot assign the employee to such a post, the contract will be extinguished and the employer will be obliged to pay to the employee 50% of the normal seniority indemnity. If, however, the employer can assign such a post to the employee but does not do so, the contract will be extinguished and in this case, the employer will be obliged to pay the whole of the seniority indemnity to the employee.
Finally, if the illness or accident resulted in a total reduction of working capacity (incapacidad absoluta) of the employee, the employer shall pay a special compensation ("Compensation for Total Reduction of Working Capacity").
The amount of the Compensation for Total Reduction of Working Capacity is equal to the severance payment for dismissal without cause set forth in section 245 of the LCL (as more fully described in Section 7. below).
8.2. Labor-related accident or illness
In 1996, a system was established in Argentina to reduce workplace risks and to indemnify employees who become ill or injured at work. Pursuant to Law No. 24, 557 ("LRT") published on 4 October 1995, all workers employed in the private sector (as well as certain other employees) are generally protected by its provisions
As per the LRL, employers of workers included within the scope of the LRT (i.e., namely all private workers) must either self insure against the obligations imposed by the LRL or must be insured by a Work Risk Insurer (Aseguradora de Riesgos del Trabajo or "ART"). At present, very few companies provide self-insurance for their workers and the vast majority purchase insurance to an ART.
The ART must compensate the injured worker in accordance with the requirements of the LRL, and must also provide medical and pharmaceutical attention, prosthesis and orthopedics, rehabilitation, occupational re-classification, and funeral service benefits, if applicable.
The ART is financed by monthly payments made by the employers of insured persons. These payments are calculated by reference to the employer's payroll and vary according to the statistical level of risks that result from the activity of such particular employer.
Pursuant to the LRL, specific and objective based parameters of calculation are applicable to all workers according to the accident, illness, level of reduction in working capacity and any other circumstance around the accident or illness. Furthermore, the LRL provides that the employer shall not be liable for any of those payments and that the ART is the only party liable to the injured employee.
However, court decisions have upheld that such limitation of liability was unconstitutional in certain cases. Therefore, the employee who suffered an accident or, in case of death, the heirs of the employee, could seek compensation directly from the employer under civil law and, thus, in excess of labor accidents law pre-established amounts.
Such interpretation has been confirmed by the Argentine Supreme Court, which has declared that the release from liability to the employer provided for in Section 39 paragraph 1) of the LRL was unconstitutional2. Therefore, workers who have suffered accidents which are still within the statute of limitations, regardless of whether they have received attendance by the pertinent ART, could claim full indemnification from their employer under civil law.
Finally, one of the objectives of the LRT is the prevention of work accidents and illness. In order to achieve this objective, the law requires that each insured employer must develop a plan for the improvement of hygiene and security conditions at work. The Superintendence of Insurance ("SRT") must approve any such plan, prior to implementation by the employer.
8.3 Other Mandatory Insurance
In addition, employers are required to contract life insurance policies for their employees. The mandatory coverage is A$12,000 per employee.
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1. Except in the case of vacations during which period the employee receives a plus of 20 per cent (please see section 6.2)
2. In re "Aquino, Isacio v. Cargo Servicios Industriales S.A. on Accident Law No. 9,688", dated September 21, 2004
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.