Chile: Chilean Labour Reform Now In Force

Last Updated: 13 April 2017
Article by Cody Mcfarlane

This month the new Labour Reform (Law No. 20.940) has went into force and a series of modifications to the Labor Code have been introduced which break down as follows:

  1. The Labour Code incorporated has norms of protection to avoid discrimination acts at the work place. In this regard, article 2 is amended, increasing the list of behaviors considered as acts of discrimination in labour matters.
  2. Employees may request an exceptional work shift to the Labour Office (Dirección del Trabajo). This is the system used in all mine site were workers develop their work 24/7 nonstop. The reform reduces this resolutions from 4 to 3 years.
  3. There is now a possibility of a 4×3 work shift (work 4 and rest 3) for those companies where more than 30% of the workers are part of a union.
  4. Some of the rules to incorporate a trade union organization have been modified. It is relevant to point out that the quorum of workers required to incorporate a union will be 8 in middle size companies, which are those with less than 50 workers, representing at least 50% of the work force.
  5. The rules on the election of inter-company trade union delegates are modified, as the number of delegates can be chosen according to the number of union members in the companies and the jurisdictions.
  6. The number of delegates is abolished in companies in which there are no trade union organizations.
  7. There are new norms that set out the obligation to have women among the unions directors.
  8. The different conducts that can be considered as anti-union practices have been broadened. There are now new behaviors that can be classified as anti-union practices.
  9. Book IV of the Labor Code, relating to collective bargaining, has been replaced on the following issues:

    • The right to negotiate has been extended for workers that are trainees.
    • Agreements on common working conditions have been created.
    • Mediation and arbitration have new regulations.
    • Replacement of striking workers has been strictly limited.
    • There is new regulation regarding the negotiation of casual workers, transients, intermediate unions and federations and confederations of workers.
  1. Several actions of the employer have been incorporated and are now considered as "unfair practices" in collective bargaining and will be sanctioned.
  2. The Fund for Trade Union Training and Collaborative Labor Relations has been created, which will be administered by the Ministry of Labor and Social Welfare. This fund has as its financial purpose pursuant to its projects, programs and actions related to union formation, promotion of social dialogue and development of labor relations between employers and workers.
  3. The Superior Labor Council, which has a tripartite and consultative nature, has been created. Its mission is to collaborate in the formulation of proposals and recommendations of public policies to strengthen and promote social dialogue and a culture of just, modern and collaborative labor relations.
  4. Law 19,886, which regulates the Administrative Contracts for the Supply and Provision of Services to the Estate, is amended granting a better score or qualification to companies that maintain collective agreements with the trade union organizations.

The Labour Reform has basically focused on collective bargaining. Currently, around a 9% of the work force in Chile belong to a union, so to most workers the labour reform will not have a major impact.

Among the new norms, the ones that will probably have the most effect, is the limitation to replace workers during strike. This could leave companies at a disadvantage during long strikes.

To illustrate the above, recently Minera Escondida, the biggest mine site of Chile, was on hold for 44 days due to the strike of their workers. The strike only ended because the union invoked a rarely used legal provision that allows them to extend their old contract. The legal provision, Article 369, allows workers to revert to their previous contract for 18 months, after which both sides must try to reach a new agreement. The company is legally obligated to comply.

This means that the next negotiations will fall under the new labour laws. The new law offers the minimum benefits in a previous contract as the negotiating floor which will strengthen the hand of the union.

Unfortunately, the labour reform does not seem to focus on the economical problems that a hard negotiation may produce and instead incorporates new regulations that could possibly increase labour disputes. Our recommendation is to be proactive and create a strategy for all labour and union matters. This is particularly important for mid-size companies, who may not have the financial strength to weather a long strike.

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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