Every employer has the authority to dismiss any employee at will, as provided in subsection (d) of Article 85 of the Labor Code. However, this authority has limits, including the prohibition against using such power to discriminate against an employee or to apply it to those who, due to a special condition, are protected by what is known as statutory protection status.
Among the most common cases of statutory protectionare pregnant employees or those on maternity leave; breastfeeding employees; union leaders; individuals who file a sexual harassment complaint; employees on paternity leave; and individuals enjoying adoption leave, among others.
The rule is very simple and clear: if the employee enjoys statutory protection status, the employer may only dismiss them if there is just cause for termination without employer liability and, in order to proceed, must obtain prior authorization from the Ministry of Labor.
That said, companies often face reorganization processes in which certain positions disappear, either because they areabsorbed by operations in other countries, because the job profile changes andthe employee holding the position no longer meets the new requirements, orbe cause it becomes necessary to reduce headcount due to the implementation of new technologies that allow job tasks to be performed with a smaller workforce. Likewise, a company may cease operations altogether and no longer require its employees.
As previously stated, statutory protection is governedby a simple and clear rule, which does not contemplate, in any way, theemployer’s ability to terminate the employment agreement with employer’sliability in case of employees affected by a reorganization or businessclosure.
Statutory protection exists to prevent an employerfrom considering, for purposes of dismissal, a special condition of theemployee; in other words, its purpose is to ensure that the employee is not adversely affected due to a special condition that is typically temporary innature.
It could therefore be argued that a termination with employer’s liability—even when all statutory severance payments and labor entitlements are fully paid—would not be discriminatory in the situations described above, since it would not be based on the employee’s protected condition but rather an objective business reason.
Despite this reasoning, both the Ministry of Labor and the Labor Chamber of the Supreme Court (Sala Segunda), through various decisions, have declined to reduce the scope of protection afforded to employees under statutory protection status and have made clear that the only permitted option is termination without employer’s liability, based on the commission of a serious misconduct.
The Ministry itself has acknowledged that it does not have the authority to authorize a dismissal when there is no serious misconduct involved and the termination results from a business closure or restructuring.
Since termination with employer’s liability is not a safe legal avenue in circumstances where employment agreements must beterminated for the reasons described above, the remaining alternative is to pursue termination by mutual agreement. This is not always straightforward, as it requires the employee to accept the terms of the agreement and the compensation amounts included therein.
If we analyze the two most common cases—namely, termination of a pregnant employee or an employee on maternity leave, and termination of a breastfeeding employee—the first point to understand is that,in the former case, Article 94 bis of the Labor Code provides that, in the event of termination, the employer must pay the equivalent of the pre- and postnatal allowances, as well as all salary amounts the employee would have received up to the eighth month of pregnancy, in addition to the statutory termination payments (prior notice and severance) and accrued rights such as vacation and Christmas bonus.
In the case of a breastfeeding employee, however, the law no longer establishes a specific compensation parameter, as the referencein the Labor Code to ten days’ compensation was eliminated in 2022.
As a result, the amount of compensation payable is now open-ended, which has proven challenging. Given that there is no specific statutory timeframe for the enjoyment of breastfeeding leave, some employeesr equest very high amounts in order to agree to a mutual termination.
Any negotiation with employees under statutory protection must be conducted within the framework of a mediation process before an Alternative Dispute Resolution Center to ensure the free will of the parties and legal compliance.
In conclusion, restructuring or business closures involve complex procedures that can prove costly. Therefore, companies must clearly identify protected employees and fully understand the potential impact of such decisions.
Francisco Salas
Co-founding Partner, BDS Asesores
On Friday, April 26, 2024, Act 10454, titled “Law to facilitate the notification processes for the...
