Recently, the Supreme Court enacted an important ruling (Rol
47.874-2016) in regards to the dismissal letter that is given to
employees informing the cause of their termination.
Companies often overlook the dismissal letter and its
importance. In many cases, the letters are drafted by managers and
not lawyers. They often lack the legal ground to properly sustain
and explain the cause of dismissal in the case the matter goes to
We have seen in many cases that the cause of dismissal is
wrongly applied to the specific case at hand and they tend to
indicate only in a broad general manner the cause of termination.
In other occasions, although a valid legal cause, it is hard to
prove the legal cause in court, leaving lawyers with an up hill
battle if the employee decides to take the case to court.
In order to legally dismiss an employee, the employer must
comply with several basic steps, which we summarize as follows:
The termination of the work contract
may only be realized pursuant to some of the legal causes that the
Chilean labour Code provides (e.g. serious breach of contract,
"business need" duly qualified, non-attendance, death,
etc.). In Chile, there is no termination at will.
The employer must provide a
written letter stating the cause of dismissal. A
copy must be handed to the employee and another sent to the Labour
Office (Dirección del Trabajo). This has to be done the
moment the employee is removed from the work place and no later
then 3 days.
A " Finiquito" or a
termination release agreement must be drafted according to legal
standards, providing all the severance compensations that the
employee has the right to. This document indicates the amount of
severance the employee is entitled to receive.
All social security contributions
must be duly paid. Otherwise, the termination may be annulled or
voided by a labour judge.
All severance must be duly paid no
later than 10 days counted from the date of removal. The employee
can agree to having severance payments made in instalments,
otherwise, the severance must be paid in a lump sum within the 10
In Chile, taking legal action is more common that one would
think, as employees are often incentivised to do so. For example,
severance may be increased by anywhere from 50% to a 100% if the
dismissal is ruled wrongfully imposed. In addition, from a legal
perspective, employees do not have the evidence burden (onus
probandi) and the Court takes their statements as lawful and
binding. This is further amplified by the fact that employees tend
to win over 90% of employment lawsuits (termination wrongly
In the case of the dismissal letter, it is a crucial piece of
evidence in court proceedings and on many occasions is done
incorrectly or without thought.
The Supreme Court has confirmed in its recent ruling the
importance of providing the employee with the dismissal letter and
that the company is legally tied to the cause that is stated in the
letter, not being able change the cause once the matter goes to
trial. In addition, it is also binding regarding the facts
surrounding the dismissal.
The ruling has pointed out three issues that we would like to
The letter must indicate a legal
cause of dismissal;
The letter must indicate the facts
for terminating the work contract. This cannot be explained in a
general broad manner but specifically on the terms the dismissal is
based on; and
The employer may not change the legal
cause for dismissal or other facts pertaining to the case other
than the ones informed through the letter of dismissal to the
In conclusion, a badly written letter may leave labour lawyers
in a very bad position to sustain and defend the employers'
decision to terminate the work contract.
We highly recommend keeping in mind the importance of the
dismissal letter, ensuring the all of the legal requirements and
steps to terminate an employees work contract are followed with
care. In this regard, small honest mistakes may lead to
significantly higher costs for the company.
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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The Board of Directors of the Social Security Institute of the Republic of Guatemala approved the Agreement Number 1390, which was published in the Official Newspaper on January 2nd, 2017; and came into force since January 10, 2017.
There is still debate about which law must be enforced to the expatriate employee, that is, the one that was transferred from multinational company to work in our country and vice versa.
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