26 mayo 2020

Ban on Layoffs, Reinstatement of Terminated Workers and Companies’ Survival

The ban on employment termination without cause, for lack of work or reduction in operations and force majeure has been dangerously extended for 60 more days, until July 29, in accordance with the Emergency Executive Order No. 487/2020 (Official Gazette of May 19, 2020). This is intended to neutralize risks (Emergency Official Gazette No. 329 of March 31, 2020) and preserve jobs as an exceptional measure.

Article by Julián A. de Diego, published in El Cronista on May 26, 2020
Let me remind you of the strategic plan designed by the Government to justify this very fragile neutralization action:

  1. Job protection: double severance pay plus temporary ban on layoffs due to the Pandemic (for lack of work, reduction in operations or force majeure) or without cause;
  2. Payment of wages and/or non-salary benefits by Companies plus state aid and special subsidies like the Emergency Aid Program and/or forgiveness or deferral of social security obligations;
  3. Paid furlough under Section 223 bis of the Employment Contract Act to protect income and keep employment contracts in place, suspending the employment relationship during the lockdown or business paralysis;
  4. Protection for companies’ latent surviving businesses so they have enough coverage for reactivation in reasonable conditions when they resume activity gradually after the lockdown;
  5. In addition to this wide array of resources for survival it is crucial to add a number of assistance mechanisms to resume business;
  6. The reality and companies -whichever their size- create value and should do their bit at the time of re-emergence considering the impact of new technologies, changes in customers’ habits and the rapid changes brought about by the lockdown.
  7. The pandemic, the lockdown, resistance to adversity and instinct for survival plus resilience are change accelerators and also lead to the application of new forms of implementing and organizing work.

As a matter of fact, the longer the exceptional circumstances to avoid layoffs, the more fragile their sustainability over time.

In fact, our legal system contains the so-called relative job stability where the legal act of an employment termination without case is valid and the damage of termination is repaired by severance payment.

In Argentina a ban has been specifically placed on employment termination without fair cause, for lack of work or reduction in operations through no fault of employers or for force majeure (unpredictable or inevitable events), and the Pandemic fits perfectly well into the direct cause for companies’ total or partial paralysis.

All temporary measures somehow or another will go back to the “new normal”, which will have very little or nothing to do with the pre-Pandemic experience. Furthermore, double severance pay does not apply to employment termination for fair cause, e.g. claiming COVID-19, because double severance pay is imposed on those cases where workers are terminated WITHOUT CAUSE, and this is not the case.

In the meantime, Courts are granting interim relief whereby terminated workers are reinstated during the lockdown in relation to probationary periods, employment contracts for indefinite time, and contracts with temporary employment agencies, thus ensuring income for these protected groups.

Even though these measures are temporary and do not decide on the merits of the matter, they anticipate a trend where Labor Courts sustain the ban provided it relates to COVID-19 and ends when the lockdown is over. Otherwise, it would support a model of absolute job stability that is contrary to the whole legal tradition in the last 50 years.

Article 14 bis (National Constitution) states that work in all its different forms will be protected by law, ensuring that A) workers receive their pay and enjoy job stability, and B) companies can do their business and keep the source of employment as a driving force to create sustainable value.

Nothing and nobody can be safe from the direct, indirect and collateral effects of the Pandemic; we are becoming immune to the crossroads that appear with disease, infection and isolation trying to remain healthy, active, innovative and creative.

It would be appropriate and advisable that with all the sacrifices we are making this process has a happy ending thanks to the preventative measures that are being applied and that have been bearing fruit so far.