Labor Reform: Bill Submitted to the Argentine Congress

The bill establishes as objectives the implementation of human development, economic progress with social justice, the productivity of the national economy, the generation of employment, and workers’ professional training (according to Section 75, Subsection 19 of the Argentine Constitution). It also pursues the implementation of tripartite social dialogue with representatives of the State, workers and employers and strengthens the instances of dialogue between workers and employers.

Under the first topic dedicated to the regularization of non-registered employment, the labor-registration chapter would modify the current fines scheme of National Employment Law (Ley Nacional de Empleo) No. 24,013. In this sense, for lack of registration or a registry deficiency on the date of income or remuneration, the computation and beneficiary of those fines found in Sections 8, 9 and 10 of said law would change.  As such, instead of being calculated on the remuneration omitted from the records, a fixed amount would be established (50% of the minimum wage, vital and mobile) for each month not registered or deficiently registered. According to the reform, the fines under Law 24,013 would be assessed to the Social Security Bodies (Organismos de Seguridad Social) instead of the affected employee. Completing the new scheme, it is proposed to repeal Section 15 of Law No. 24,013 and Section 1 of Law No. 25,323, which establish duplication in compensation for dismissal. For further information about this issue please see: "Labor Reform: Amnesty and Moratorium"

The bill also proposes various changes to Labor Contract Law (Ley de Contrato de Trabajo, or “LCT”) No. 20,744:

A category called "economically linked autonomous professional workers" would be created, which would be excluded from the scope of the LCT. This category includes those who provide specialized services, carrying out an activity for consideration, in a habitual, personal and direct manner, for a natural or legal person, from which results economically up to 80% of their annual income and/or not more than 22 hours per week of dedication. It has been clarified that such workers will be governed by a special statutory regulation prepared by a tripartite technical commission.

It would limit the scope of non-renouncement in the individual contract, allowing for the execution of agreements that modify the essential elements of the contract but subjecting the validity thereof to the approval by the Enforcement Authority (Autoridad de Aplicación), pursuant to Section 15 of the LCT, and demanding that the worker be assisted by the trade union or that has legal representation.

Regarding labor solidarity by subcontracting, various changes are proposed to Section 30 of the LCT. In this sense, the cedants, contractors or subcontractors must inform the workers’ trade union association representative that act in their fields, each of the hiring of personnel. A term of 30 days to show the recites and records of compliance with labor obligations is established as from the demand of the worker and/or the administrative authority.

Among the relevant novel changes concerning solidarity, it is proposed that cedants, contractors or subcontractors will be exempted from joint and several liability when they comply with the control obligations and accredit it before the competent administrative and/or judicial authorities.

In line with the requirement partially bypassed by the jurisprudence contained in the first paragraph of Section 30, referred to the "normal and specific activity of the establishment" (“actividad normal y específica propia del establecimiento”), the bill proposes to exclude solidarity in cases of jobs or services that are contracted or subcontracted to perform complementary activities of cleaning, security, assembly of facilities or machinery, emergency medical services and hygiene and safety at work, gastronomy and/or information technology, which are carried out in the establishment or operation. Nor would solidarity apply to transport services of persons, to and from the establishment or exploitation.

With regards to the capacity to modify the forms and modalities of work (Ius Variandi), the special preliminary injunction would be eliminated so that the worker may pursue the restoration of the altered working conditions. The bill proposes to refer to the proceeding contemplated by the collective labor agreement, or to the competent judicial proceeding, which would be ordinary or summary at the discretion of the competent judge.

The new wording that would be adopted in Section 80 of the LCT is intended to give certainty concerning the obligations related to the certificates, specifying its content, preparation and access mechanism for the employee through the procedure established by the AFIP. There is the possibility that employers can make a rectification for having determined parameters other than those declared, when a judicial authority requires it.

It would maintain a fine equivalent to 3 times the highest monthly remuneration, applicable if the employer does not generate the certificate according to the procedures provided, nor carry out the rectification ordered by the judicial authority, within 2 working days computed as from the formulated demand by the worker or judicial authority.

Regarding a part-time work contract, the bill modifies the calculation parameter of the maximum permissible hours limit, adding the "weekly" requirement, to measure the regular working hours in the activity.

The bill proposes to extend certain terms and assumptions of special licenses: for the birth of a child, the terms would be extended from 2 to 15 days and includes adoption; for cohabitation, 10 days would be recognized (the same term as for marriage); to carry out the procedures for purposes of adoption, or other measures available to the competent judge, 2 consecutive days and up to 10 days per year would be available; to undergo medically assisted reproduction techniques and procedures, 5 days per year is proposed. Also, it proposes to create a license for particular planned reasons, of up to 30 consecutive days per calendar year, without the benefit of salaries.

It creates a reduced working day for the care of minors that can be used by workers who are in charge of children of up to four years of age, upon previous agreement with the employer. This new figure allows for a temporary reduction in the working day of the dependent for the care of minors, receiving remuneration proportional to the time worked.

The new wording proposed for Section 245 of the LCT is novel for various reasons. For the calculation of compensation for dismissal, it excludes from the salary base, in line with the plenary ruling "Tulosai", the proportional part of the annual supplementary salary, the non-monthly bonus paid subject to performance evaluation, and all compensation and recognition of expenses.

On the other hand, it proposes altering the rule of the best remuneration for workers paid on commission or with variable remunerations, taking the average of the commissions or variable remunerations accrued during the last year.

And finally new Section 245 reflects the doctrine of the Argentine Supreme Court of Justice in the leading case "Vizzoti", by limiting the effect of the "cap" admitting a reduction only up to 33% of the best normal and habitual monthly remuneration received during the last year.

Without prejudice to maintaining the current compensation system, the reform bill also contemplates the creation of a "labor cessation fund", at a conventional level, by activity, to assume the costs of notice and dismissal without cause. It translates into an ambitious goal to substitute and replace the employer in the compliance with the indemnity obligations for dismissal, and includes other types of termination contemplated.

Such sectoral labor cessation fund would be funded mainly by mandatory contributions paid by the employer, tariffs, investments, legacies, subsidies and grants, among other sources.

The bill also seeks to modify Section 276 of the LCT and establish a system to update the labor credits in accordance with the rate set by the Argentine National Bank for the Purchasing Value Units (Unidades de Valor Adquisitivo or UVA) corresponding to its mortgage credit operations, from the date in which they had to be paid until the date of its effective payment.

It would create a "Training Practices System" (“Sistema de Prácticas Formativas”) for students and recent graduates, for a maximum period of 12 months and with a weekly workload of up to 30 hours. Practitioners would receive an incentive allocation proportional to the basic salary of the applicable collective agreement. Maximum quotas will be established by activity through conventional negotiation.

In the framework of the proposed reform to Law of Collective Work Agreements (Ley de Convenciones Colectivas de Trabajo) No. 14,250, the establishment of conventional norms that grant non-remunerative character to concepts, items and /or sums of a salary nature is prohibited. However, this prohibition is not absolute, since the Ministry of Labor, Employment and Social Security may authorize its negotiation exceptionally and subject to the transformation of such items into remuneration within a reasonable period of time.

In sum, the labor reform bill aims to update labor legislation, in line with the modifications approved in other countries. The stated purposes of the authors are, fundamentally, to reduce the labor litigation index and informality, by regularizing the irregular workforce. The debate is now in the hands of the Argentine Congress.