One of the areas that we consistently see foreign companies operating in Chile struggle with is understanding labour laws and how they are applied. In a country like Chile, where courts tend to be pro-worker, it is essential for management teams understand the laws in order to minimise risk.
One such area is overtime...
Generally speaking, the maximum working hours are 45 hours a week from Monday to Friday or Saturday depending on the work schedule. The manner in which these hours are divided is decided by the employer, however, no employee can work more than 12 hours a day, this includes overtime hours. So the maximum "ordinary" hours can be 10 hours a day, and one can agree with the worker additional working hours a day that cannot exceed 2 hours within the same day, bringing the total for each day to a maximum of 12 working hours. In addition, overtime can only be agreed on a temporary basis, which cannot exceed a total of 3 continuous months. Furthermore, the extra hours must be indicated in writing. This extra hours has a surcharge of 50% over the regular work hours.
In line with the above, the Labour Office has ruled that by temporary basis one must understand a "situation or necessity of the company, in other words, circumstances that are not permanent in the production activity of the company and derive solely from occasional events or from the development or factors that are not possible to avoid, involving a greater demand for labour work in a given period". In conclusion, one must understand that it is considered an exceptional situation, not permanent and only due to a justified cause.
Please note that this is the general norm and applicable to most workers subject to work shifts. Exceptionally, article 22 of our labour code regulates employees that do not have a specific work shift, applicable to management and professional positions. In this case, given the type of work and the managerial responsibility, the employee does not have a fix schedule but a flexible one, and no overtime is applicable. If there is a time schedule agreed in the contract, it is understood only as a suggested time schedule. The key issue for this kind of employees is that they should not work "under superior immediate supervision" such as managers and administrators. It is also commonly applied to positions that although not classified as management, do not perform under close supervision, such as lawyers, architects, engineers , etc.
The most common labour arrangement is to agree on a daily 9 hour schedule with one hour for lunch starting at 9:00 until 18:00. This leaves 8 regular working hours per day. The overtime would be a maximum of 2 extra hours completing a total of 10 hours a day. The 2 extra hours must be paid with a 50% surcharge.
If the employer does not abide nor comply with the above, the labour sanctions depend on the size of the company, and start at 1 to 10 UTM for small companies that have from 1 to 49 workers and may raise up to 60 UTM for big companies (more than 200 employees). Please note that 1 UTM is currently equivalent to approx. USD$ 70. The Labour Office may act based on an anonymous claim or through regular audits.
Fines related to work shifts are in fact the most common sanctions imposed by the Chilean Labour office. Though this is an important risk due to non-compliance, the major risk are work accidents during the "illegal" extra hours. Lawsuits related to labour accidents are usually considerable. In this regard, "forcing extra time" outside of the scope of the law is considered a major lack of due diligence of the employer and may mean an even greater liability. Furthermore, from 1997 on, the jurisprudence has accepted criminal responsibility of managers and directors due to labour accidents. As an example, a bus accident gave ground to pursue the matter from a labour stand point which then lead to the criminal liability of managers and directors. This was due to the death of passengers because it was proven that imposing extra time was a common and everyday practice by the employer and a direct cause of the work accident. In cases such as the one quoted, settlements to avoid penal actions have been substantial.
Consequently, it is vital that overtime be correctly regulated between the parties and indicated in writing.
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.