#CostaRica 🇨🇷 #BDS_Article: U.S. Ruling on the Validity of Non-Compete Agreements Could Affect Their Enforcement in Costa Rica
Since 2003, the legality of post-employment non-compete agreements has been under scrutiny in Costa...
If you are starting a business, legal labor advice may not be at the top of your priority list or included in your initial budget. This is understandable if you are thinking, “My employees will never sue me,” or “It’s highly unlikely that the CCSS or MTSS will ever come knocking.” However, it is important to remember that the decisions you make or fail to make today may have long-term consequences, potentially surfacing in situations you face in the next ten years or more.
These early risks—often underestimated—start with something as fundamental as failing to register employees for social security or not using employment contracts, even though they are required in most cases.
A common “middle ground” that companies opt for regarding contractual regulation is the use of generic contract “templates.” On this matter, it is worth sharing some of the unfortunate experiences we’ve come across, which could help you make more informed decisions.
One of the most frequent issues arises when companies decide to review their employment contracts—only after being served their first lawsuit or undergoing their first inspection by the Ministry of Labor or the Costa Rican Social Security Administration (CCSS). It should be noted that, under Article 23 of the Labor Code, most employment contracts must be in writing and clearly outline the essential elements of the employment relationship: work hours, salary, place of work, hierarchy (job functions), and vested rights.
Failing to clearly regulate these aspects is like flipping a coin, where any doubts regarding such conditions will almost always favor the employee. For instance, consider how ambiguity in describing work hours could lead to disputes regarding “overtime,” or how the absence of specific duties could result in an employee later claiming wage discrepancies for having performed tasks beyond the scope of their role. This is particularly common with unskilled laborers who are assigned more complex duties, such as handling petty cash, managing complex processes, or using technological systems requiring specific training or skills—prompting a reasonable expectation for higher compensation than for unskilled work.
Another frequent issue is that, when reviewing contracts, we often notice similarities to those used by other companies in completely different industries, with different benefits and significant omissions of clauses that should have been specifically tailored for that business.
It would be naive to deny that you can easily find contract templates, policies, and even tips on handling disciplinary cases online. However, blindly clicking on the first search result or using the same contract your closest friend used for their company could lead you into serious trouble. Consider your most sensitive information and whether you have chosen to protect it with a generic clause that lacks specificity. Does it make sense to safeguard your critical information with a “boilerplate” clause that could later hinder your ability to defend it or seek compensation in the event of a breach?
If, by now, we have not convinced you of the need for a tailored employment contract that fits your company’s specific needs, here are two more reasons. Let’s go back to that contract you downloaded from the internet or “localized” from a model someone gave you. Do these reflect your employees’ current conditions? Have there been changes over time? If the answer is yes, and your original contract was inadequate, poorly drafted, or contained inaccuracies, you may be setting yourself up for a snowball effect of legal contingencies that could soon become unmanageable.
Employment contracts should not only be an accurate snapshot of the current relationship but must also anticipate future changes or transformations. Lacking a legally sound document to account for this reality could later prevent you from proving both the original agreement and any subsequent modifications.
Finally, bear in mind that not all legal regulations are found in the Labor Code. Some changes in labor law come through court rulings or regulations that we cannot plead ignorance of. Your contract “template” or documentation should not overlook these realities. This is why implementing documents without the customization that comes from tailored legal advice may be insufficient.
Remember, if you face an inspection or lawsuit tomorrow, the contract template will not be held accountable—your company will. Therefore, it’s best to seek legal advice that provides up-to-date information and offers the customized guidance you need.
Cristhian Monge Arce
Partner at BDS Asesores
