Labor participation in companies’ profits

On September 16, 2010, Dr. Héctor Recalde filed a congressional bill before the Deputies Chamber in order to implement a regime concerning employees participation in companies’ profits (hereinafter the “Project”).

We shall analyze the background of the Project and its main provisions as follows:

The Project regulates the right of the employees to participate in Companies’ profits pursuant to Section 14 bis of the Federal Constitution whereas such section entitles the Congress to enact the corresponding laws in order to secure such right. 

The Project establishes that such participation would be ten percent (10%) of the calculated profits in accordance to the Income Tax Sworn Statements, upon an annual basis. In order to perform such calculation, the company shall be able to deduct the re-investments of profits up to 50%. Compensation between years of losses and years of earnings are forbidden; however, every three consecutive fiscal years with negative results, companies shall be able to distribute only  50% of the positive result.  

The distribution of the total amount to be distributed among the employees will be the following: (i) 50% among all the workers in proportion to the number of days effectively worked by each of them during the year, regardless of their salary; and (ii) the remaining 50% in proportion to the sum of the remunerations accrued by each worker during the relevant fiscal year. The distributed sums are not considered remunerative; that is to say, they will not be taken into account for the calculation of severance or social security purposes. 

The Project sets rights of control to be conducted by the company’s workers, the union association or by the public entity to be created for such matter, The National Labor Council for Profit Participation (hereinafter the “Council”), setting legal fines for such purpose. Such Council will be integrated by four members who will represent the Government, four members representing the General Labor Confederation and four members who will represent the Employers’ Associations. 

 

Section 10 of the Project exempts new companies from its compliance.  New companies are defined as such companies with 2 years of operation; for the companies whose main activity is the production of new goods or services, the term will be of four years. 

The exemption also covers  companies whose annual profits do not exceed the minimum agreed by the Council, the foundations, people or private entities who do not seek to obtain a profit and the co-op cooperatives in connection to their partners. 

According to Section 11 of the Project, the following persons shall not be entitled to participate in profits: “a) The directors, administrators and managers whose annual remuneration exceeded 5 (five) times the average annual salary paid by the company; [and] b) The workers hired by means of Temporary Service Agencies -duly authorized to operate in such capacity- for the purpose of covering the eventual needs of the customer companies, in connection to their profits” (since they already participate in the profits of the Temporary Service Agency). 

5% of the total amount that every company shall distribute among its employees will be given to the Solidarity Fund created by the Project. 

The Solidarity Fund will be used to pay an economic compensation to the unregistered workers who receive the Universal Child Award for the Social Protection pursuant to Decree No.1602/09. In such case, the employee shall receive a one-time compensation equivalent to ten times the amount of the Universal Child Award for the Social Protection plus the amount set by the Decree. 

In such regard, Section 22 of the Project sets forth that: “In order to collect the compensation of the Solidarity Fund, the unregistered worker shall submit a sworn statement with the name, or corporate name and activity of the employer, place of work, and its length of service in the company, and shall have to attest by means of an official procedure, the truthfulness of its statements”.

The compensation applications will be under the scope of the Social Security Administration “ANSES”, and such entity shall have to report to the Federal Tax Authorities “AFIP” about all the payment applications which may be requested in order to verify the facts alleged by the worker and, once the official procedure ends, the ANSES will send the proceedings to the Council in order to judge the reception of such compensation. 

Furthermore, it has been established that unregistered workers will be able to report such situations and, for that purpose, the worker will have a special stability in his or her position and will not be subject to dismissal, suspension or to any modification ofi labor conditions without just cause and with  prior judicial authorization, during the term of one year. In case of breach of such stability, the employee will have the choice of being reinstated in his or her work position or to collect the corresponding severance, plus an extra amount equivalent to all the remunerations accrued within a year. 

Section 31 of the Project sets forth a gradual system concerning its effectiveness, within three annual stages, to be counted as from the date of eventual approval: 

 

a) 1^st year: companies with more than 300 workers or with a certain profit level to be set by the Council; 

b) 2^nd year: companies with more than 100 workers or with a certain profit level to be set by the Council; 

c) 3^rd year: all the companies applicable to the Project.