At the beginning of this year 2023 we published a note on the “High Labor costs of Argentina“, giving our opinion on the reasons why different labor regulations issued since the 1990s and several judicial decisions since the beginning of the 21st century have discouraged the creation of registered employment and the arrival of foreign investment.
The Emergency Decree 70/2023 (the “DNU”) published in the Official Gazette on 20 December 2023, and which comes into force on 29 December 2023, seems to have taken into consideration all our references in that article.
However, there are some doubts regarding the application of the amendments that the DNU introduces in various rules of the Labour Contract Law (“LCL”). We will try to clear up these doubts using the question and answer method.
1) Calculation basis Section 245 LCT – Indemnity for length of service – Exclusion of incidence of the Annual Supplementary Salary (“SAC”).
In relation to the severance compensation provided for in Section 245 of the Labor law, the DNU establishes that the basis of calculation shall not include the SAC. The incidence of the SAC also eliminated other items that in a similar way we also calculated the incidence of the SAC, such as: pending holidays, advance notice, integration month dismissal?
Section 81 of the DNU only amends Section 245 of the LCL. In that sense, the non-liquidation of the SAC only covers severance pay for length of service. The intention of the DNU was to homogenize the criterion on the way of settling the severance payment for seniority in order to provide legal certainty on the severance payment cost. This has to do with the criterion applied in the labor courts of the Province of Buenos Aires of including the SAC in the severance payment, and on the other hand, to apply at national level the criterion of the Tulosai Plenary of the national labor courts.
Therefore, the answer is no. It does not eliminate SAC on holidays, notice or integration month dismissal, since the SAC is a purely “salary” concept that is accrued day by day.
2) Section 245 – Severance pay for length of service – Temporary application.
In the event that after the DNU comes into force, a company terminates the employment of personnel without just cause who were hired before the DNU came into force, must it consider the provisions of Section 245 in force at the time of hiring or the article modified by the DNU in question for the settlement of the severance pay?
As the DNU does not establish any condition of temporary applicability to current contracts, while the DNU is in force, the new Section 245 LCL applies even to contracts prior to its entry into force. This is because the right to compensation arises from the fact of termination, so that the rule in force at the time of termination of the contract must be applied.
3) Section 245 – Severance pay for length of service – Variable payments.
In relation to the new calculation basis established in Section 245 of the LCL by the DNU, how is the calculation basis formed in the case of an employee who has received variable remuneration?
The second paragraph of Art. 245 LCL as amended states: “For those workers paid on commission or with variable monthly remunerations, the average of the last SIX (6) months, or of the last year if it is more favorable to the worker, shall apply”. In this sense, the literal interpretation – which is the one that should prevail – is that the calculation basis is calculated by taking the average of the last 6 or 12 remunerations of the year, and then, the best between those two averages. It makes no differentiation between what we could call “basic” and variable. In other words, the total gross salary of the last 6 and the last 12 months must be taken, divided by 6 and 12 respectively, and the better of these two variants must be applied as the basis for calculation.
4) Probationary period – Modification of the period – Entry into force.
With regard to the new probationary period, in the event that a company decides to terminate the employment of personnel who joined prior to the entry into force of the DNU, will the expiry of the probationary period take place after 3 months or after 8 months as established in the DNU?
Beyond the fact that the DNU does not differentiate for its application between contracts in force and contracts subsequent to its entry into force, the right to improper stability after the trial period has elapsed must be considered at the time of hiring, since it is at that time that this right is acquired. Therefore, the new extended probationary period of 8 months can only apply to contracts starting on or after 29 December 2023.
5) Union dues and contributions.
With regard to the union solidarity contribution payable by employees, according to the provisions of the DNU, when a collective bargaining agreement expires, are companies still obliged to act as a withholding agent, unless each employee expresses his or her will to that effect?
Once again, appealing to the wording of paragraph c) of Section 132 LCL modified by art. 73 of the DNU, and within the “spirit” of the same, the employee recovers the individual right to authorize or not the discount in his or her salary for the payment of the union dues, regardless of the validity or expiry of the CCT. Companies would have to stop acting as withholding agents as they could only do so in case of “explicit consent of the employee authorising it”.
In this sense, as the DNU is effective as of 29/12/2023 and it is impossible for all workers in all companies to communicate their affirmative decision for the December quota, we suggest to continue as at present, making the withholding and transfer in favour of the union.
However, we also suggest that, as soon as possible, employers should at least issue a general communication informing all unionised staff that if they do not express their explicit consent, and by virtue of the wording of the new article 132 (c) of the LCT, no more union dues or contributions will be withheld from the salary of January 2024.
6) Derivation of social security contributions – Freedom of contract.
What are the changes introduced by the DNU with regard to the derivation of social security contributions?
According to the DNU, the obligation to remain for a minimum of one (1) year in the trade union social security fund at the beginning of an employment relationship is eliminated. It establishes the freedom of contracting the “health insurance agent”, being able to refer the contributions to a prepaid medicine company. However, the permanent minimum of one (1) year is maintained when changing the “insurance agent”.
7) On the validity of the DNU – Action of the National Congress Does it remain in force even if the National Congress determines the invalidity of the DNU?
According to the provisions of Article 24 of Law 26.122, which regulates the DNU regime, the rejection by both Chambers of the National Congress implies its repeal, “leaving intact the rights acquired during its validity”. In other words, from 29 December 2023 and until both Chambers of the National Congress decide to reject it -if that happens-, the DNU will be in force and all the rights and obligations that were perfected during its validity will be valid.
8) Labour penalties.
Regarding the fine regimes of Laws 24.013, 25.323 and 25.345 that the DNU eliminates, does it affect the claims initiated?
The DNU does not affect consolidated relationships, i.e., in lawsuits already initiated or to be initiated in which the relationship had been extinguished until today, all the fines repealed by the DNU remain in force. None of the fines repealed by the DNU will apply to all relationships that are terminated -for any reason- after 29 December 2023, and while the DNU is in force. However, this does not imply that, if a judge declares the DNU unconstitutional insofar as it repeals laws, these cannot be declared admissible in court.
9) Labour certificates. Is the obligation to issue labour certificates maintained or is the obligation now simply fulfilled by making them available?
The wording of the new Section 80 LCL is seen as “hasty” and without a correct legislative technique, as it is tautologous since it refers to itself, to the obligation that the same article establishes. It would appear to refer to the obligations established by Article 80 in its previous wording, now amended. This article is subject to regulation in terms of the mechanism to be provided by the National Executive Power through “a virtual platform”. However, with the elimination of the fine established in the last paragraph of the amended article, there are no further consequences for non-delivery. It should also be borne in mind that the amended article also does not define which certificates must be delivered. We believe that this article should be amended as soon as possible. Therefore, we consider that the mere making available implies compliance with the obligation, until such time as the “optional mechanism for compliance with delivery through a virtual platform” is defined.
Martin P. Pagano.
Canosa Abogados
