ARTICLE

New Labor Ordinance Law

The Labor Ordinance Law derogated the questioned Law No 25,250 and its regulatory norms and modified issues related to employment, promotion of employment, and collective bargaining agreements, among other things.

March 31, 2004

Finally on March 19, 2004, the previously announced "Labor Ordinance Law" No 25,877, sanctioned by Congress on March 2, 2004 was published in the Official Gazette.

The questioned Law No 25,250 and its regulatory norms are derogated by the new law, and a new text is approved that deals with issues related to employment, promotion of employment, and collective bargaining agreements, among other things.

The items that were most questioned since the approval of Law No 25,250 were: the trial period; the general reduction in employers' social security contributions; lapsing of legal 'ultraactivity[1] ' ; and the preeminence of the lesser domain bargaining agreement over the higher domain bargaining agreement.

The most outstanding items in the Law are the following:

1) Trial Period (article 92 bis of the Employment Contract Law is replaced)

a) The trial period is set at three months for all cases, postponement by collective bargaining being barred.
b) The previous trial period was 3 months with the possibility of extending it to 6 months through collective bargaining and in the case of small businesses (PyMEs) the trial period was 6 months with the possibility of extending the term to 12 months through collective bargaining.

2) Advance Notice (new article 231 of the Employment Contract Law)

a) A 15-day advance notice is established to be given to employees on trial period.
b) The one and two month advance notice periods are maintained depending on whether the employee has worked for a period shorter or longer than 5 years.
c) The advance notice that the employee must give the employer in the event of deciding to leave his/her job is reduced to 15 days.
d) Under the previous law, the employer was not obliged to give an advance notice to employees on trial period, and the employee had to give a one month advance notice in the event of deciding to leave the job.

3) Integration of month of discharge (new article 233 of the Employment Contract Law)

a) When advance notice is given: the period of the advance notice runs as of the day following that on which the notice was served.
b) When advance notice is not given: If the date of the discharge of the employment contract is not the last day of the month, the severance pay in replacement of the advance notice will be completed with an amount equal to the wages for the days missing until the last day of the month during which discharge was produced.
c) There is no integration of the month of discharge when discharge occurs during the trial period.

4) Severance Pay (article 245 of the Employment Contract Law)

a) The differentiated system established by Law No 25,013 is eliminated, thereby leaving a single severance pay system.
b) There is a return to the system of article 245 of the Employment Contract Law, with certain amendments:

i. The "accrued" remuneration will be considered the highest normal and customary monthly remuneration and not the "received" remuneration, as established previously.
ii. In relation to the cap on severance pay for personnel not under collective bargaining, an amendment is introduced whereby employees are referred to as "workers excluded from collective bargaining", whereas the previous system referred to them as "workers not covered by Collective Bargaining".

iii. The minimum period for severance pay is reduced from two months to one month.

5) Promotion of Employment

It is established that companies: (i) employing up to 80 workers; (ii) with an annual turnover not exceeding "the amount established in the regulations" and (iii) producing a net increase in their payroll: shall benefit from a reduction of the employers’ Social Security contributions during 12 months, consisting of 1/3 in relation to each new employee taken on, or 1/2 in the event the employee taken on is a beneficiary of the Head of Household Subsidy ('Jefe y/o Jefa de Hogar').

6) Labor and Worksite Inspections

a) The SIDITYSS (Integral Labor and Social Security Inspection System) is created "directed at control and inspection of compliance with labor and social security provisions all over the country".
b) The SIDITYSS will be integrated by "the National Labor administrative authority and the provincial authorities and those of the Autonomous City of Buenos Aires". The Ministry of Labor will be the authority of application of the SIDITYSS. Agreements will be signed in order to coordinate the efforts. Agreements currently in force will be mainteined until they have been amended.

c) The inspectors will act on their own initiative or by reports filed. They are authorized to enter those work sites subject to inspection (i) without having to give advance notice nor carry a legal search and entry warrant, (ii) to demand information, request documents, etc.; (iii) to close down work sites in the cases foreseen in the law and order the immediate interruption of tasks that imply a grave or imminent risk to health and safety. Moreover, it is established that the union representatives have the right to accompany the inspector during the inspection and to be informed of the results.

7) Social Balance Sheet

The obligation of drafting the company's "Social Balance Sheet" is imposed, when there are more than 300 employees on the payroll, different to the previous system that required same for companies with more than 500 employees on their payroll (article 18, Law No 25,250)

8) Collective Bargaining

a) The collective bargaining agreements of a wider scope may establish forms of coordination between bargaining units of different scopes, the parties adjusting to their different authority of representation. These agreements may determine their own subjects of bargaining and expressly remit the subjects of bargaining to be negotiated in the agreements of a narrower scope.
b) The agreements of a narrower scope, in the event that a bargaining agreement of a wider scope exists, may provide on the following:

i. The subject of bargaining delegated by the bargaining agreement of wider scope;
ii. The subject of bargaining not dealt with in the bargaining agreement of wider scope;
iii. More favorable conditions for the employees.

c) It is established that a bargaining agreement of a later date may modify a collective bargaining agreement of an earlier date provided they have the same scope.
d) Moreover, it is determined that a bargaining agreement of a later date and of a different scope -whether wider or narrower-, may amend the earlier bargaining agreement provided it establishes conditions that are more favorable for the employee.

9) 'Ultraactivity'

It is established that unless the collective bargaining agreement provides to the contrary, once the original deadline thereof has lapsed, the agreement will continue to be in force until a new agreement replaces it. The Ministry of Labor may establish a voluntary mechanism for mediation for renewal of the bargaining agreements in effect on account of 'ultraactivity'.

[1] "Ultraactivity" means that the legal validity of a collective bargaining agreement is maintained even if it has expired and has not been renewed.

This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.