Chile: Law No. 20,940 That Modernizes Labor Relations

Last Updated: 21 September 2016
Article by Oscar Aitken, Francisco Arce and Daniela Silva
Most Read Contributor in Chile, August 2016

On September 8th, 2016, Law No. 20,940 was published. The law is aimed at the "Modernization of Labor Relations" (hereinafter the "Labor Reform" or the "Law"). The aim of the Labor Reform is to develop labor relations that are more modern, fair and balanced between the parties, and promote dialogue and agreement. In general terms, to meet these objectives the Law increases the bargaining power of unions and introduces important amendments in collective bargaining regulations to improve the employees' position vis a vis the employer.

Among the many amendments introduced by the 90 page Law we would like to highlight the following:

  1. Extension of the right to collective bargaining: The Law gives the following classes of employees the right to bargain collectively, all of which were previously subject to be banned from collective bargaining:
    • Employees subject to employment contracts for a specific piece of work or task.
    • Employees subject to internships or apprenticeship contracts. In this case, Small and Micro Companies may be excused from engaging in collective bargaining with them.

    The Law now only allows those employees with powers to represent the employer and who are vested with general managing authority to be excluded from collective bargaining.

  2. Inter-company unions as parties in the collective bargaining procedure: The Law allows inter-company unions to bargain collectively in the corresponding company through the collective bargaining procedure (including the right to strike and union privileges) as long as the referred inter-company union has among its members a minimum number of employees working in the relevant company meeting the quorums required to form a company-union within said company.
  3. Amendments to the union's right to information: The Law increases the scope of the unions' right to information establishing:
    • Right to periodical information (including financial information).
    • Right to specific information for collective bargaining (information regarding remunerations of the employees affiliated to the union, financial information and information concerning investment policies).
    • Right to information regarding payroll data (including the employees not affiliated with the union but excluding the positions served by less than 5 employees).
    • Information requirements generally distinguish between micro, small, middle and large companies.
  4. Amendment of the right to extend the benefits agreed on in a collective contract: Employers will now be required to seek the agreement of the relevant union in order to extend benefits agreed to in a collective instrument to employees who are not affiliated with the union.
  5. Union exclusivity in collective bargaining: Notwithstanding the unconstitutionality declaration made by the Constitutional Court and the removal from the Labor Reform text of various provisions providing for the automatic extension of collective bargained benefits to employees who were not originally covered and by their sole affiliation to the relevant union, the actual text of Law kept however some isolated provisions that still suggest the referred effect of the automatic extension of benefits (to otherwise not covered employees) through affiliation to the corresponding union. These provisions, were relevant, should also be considered as unconstitutional.
  6. Collective bargaining of non-unionized employees: The Constitutional Court declared that giving unions the exclusive right to bargain collectively is unconstitutional, however, the Law does not regulate the manner in which groups of non-unionized employees could bargain collectively. This leaves a significant legal loophole because the existing regulations on this point have now been repealed.
  7. Bargaining "floor": The Law establishes that the employer's reply shall contain a minimum content called the "bargaining floor" according to the following rules:
    • In cases where there is a collective instrument in effect, the minimum shall consist of the identical provisions as contained in the existing collective instrument, excluding adjustments for inflation, agreements over special work conditions, agreed readjustments, and benefits granted solely due to the execution of the collective instrument.
    • In cases where there is no collective instrument in effect, the bargaining floor contents shall be the benefits that had been periodically and regularly granted to the employees represented by the union. The "floor" may be reduced by mutual agreement when justified by the company's economic conditions.
  8. Amendments to the right to strike: The Law forbids replacement of employees on strike, regardless if such replacement is done through hiring new employees (external replacement) or re-allocating internal employees (internal replacement). The infringement of this provision shall be considered a severe anti-union practice. Notwithstanding the above, the employer may make the necessary adjustments in order to permit those employees who are not involved in the collective bargaining to continue to perform their services.
  9. Amendments to minimum services and emergency teams: The Law establishes a new procedure to determine the minimum services to be provided by the union during the strike, and how the emergency teams will be formed. This procedure shall take place before the collective bargaining, and in case there is no agreement, the parties may file a claim before the relevant Labor Authority regional office.
  10. Antiunion practices: The Law establishes a new definitions or hypothesis of antiunion/unfair labor practices and significantly increases the associated fines.
  11. Dismissal of employees with no dismissal privilege in retaliation for their participation in the collective bargaining: In general terms, this regulation is similar to the previous one regarding the dismissal of employees without union dismissal privileges in retaliation for their participation or involvement in union activity.
  12. Effective Date: The Law, in general, shall enter into full force and effect on April 1st, 2017, but some provisions will be applicable immediately. In particular, the provisions related to the minimum services and emergency teams in companies who are scheduled to enter into collective bargaining within the first six months of the Labor Reform's effective date.

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.

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