Resorting to Labor Law to Ensure the Survival of Organizations

“The Executive will include the criterion of job creation into the analysis and design of national policies having a significant impact on employment level and composition”.

Published in El Cronista on February 26, 2019
“In turn, the rate of capacity utilization should rise in a context of economic growth, together with productive investment at the private sector, in particular at those that have a bigger impact on employment directly or indirectly.” “The inclusion of technology is a necessary condition for the growth of the national economy.” “It is a right and a duty for the businessperson recognized, guaranteed and promoted by law, and if it affects working conditions and employment, it should be assessed from the technical, economic and social perspective.” “Collective bargaining committees should negotiate on the following items: a) the inclusion of technology and its effects on industrial relations and employment; b) the establishment of training sessions to promote workers’ multitasking, cross-functional collaboration; c) an adequate proportion among enhanced productivity, increased production and pay rises.”

 This collection of best wishes from numerous impositions by the Executive can be found in the text of the National Employment Act No. 24013 [Ley Nacional de Empleo] (1991) establishing the Crisis Prevention Procedure [Procedimiento Preventivo de Crisis] (Sections 98-105), the Productive Restructuring Procedure [Programa de Reconversión Productiva] (Sections 95-97), the Employment Emergency Program [Programa de Emergencia Ocupacional] (Sections 106-110), and unemployment insurance. The law established penalties to combat work off the books but they have led to so much distortion that they ended up favoring judicial litigation, and utterly failing to fight against clandestine employment.

The Employment Contract Act [Ley de Contrato de Trabajo] provides suspension (Sections 218 – 233) and employment termination (Section 247) for lack or decline of work beyond employer’s control, and in particular paid suspension (Section 223 bis), as approved in 1996 (Minister A. Caro Figueroa).

The wit and search for survival mechanisms have led to use collective bargaining under Act No. 14250 as other means to face difficulties such as the well-known Crisis Collective Agreements [Convenios de Crisis] that change, eliminate or suspend benefits for as long as the crisis lasts. Here we can mention the collective agreement made by UOM [Metal Workers’ Union] in Tierra del Fuego. In addition, development in Vaca Muerta began thanks to a significant change in working conditions, working hours and wages (extra pay for travel time from home to the worksite) that turned it into a productive and competitive activity.

The Voluntary Retirement Program [Programa de Retiro Voluntario] is another instrument designed out of wit and creativity with the aim of reducing the workforce by offering those who agree to retire an attractive package made up of statutory severance pay and additional amounts. The system was built on the retirement offer in exchange of a severance package (statutory severance pay plus additional amounts), usually coupled with a health care plan, outplacement services and employment termination by mutual consent (Section 241 of the Employment Contract Act).

Many of the mechanisms that are used today combine the three statutory acts. For instance, a company may initiate a Productive Restructuring Procedure to suspend a part of its workforce, retrain those who can adapt to new technologies, and offer a Voluntary Retirement Plan to those who cannot adapt.

As to the involvement of the Department of Labor, now Secretary of Labor, it is the competent authority for procedures under the Employment Act, and may alternatively apply the Mandatory Settlement Act No. 14786 [Ley de Conciliación Obligatoria], to open a reasonable space to negotiate. Mediation in a conflict is a central function of the authorities to avoid greater damages, preserve the source of income, and help the parties find common ground.

Companies are building a bridge to get to a destination that is uncertain for the time being at a new stage that seems to be the last, as always. Once and again there is confidence that this model may lead to prosperity, trust and investment. It is in the hands of the Executive to give clear signs that it will work out and implement a plan of action towards the structural reforms that we are all demanding.

By Julian A. de Diego
Director of the postgraduate course on Human Resources at the School of Business at UCA.