6 agosto 2020

Ban on Layoffs: Unconstitutional Even in an Emergency. Nota El Cronista

Versión en español

The prohibition on work suspensions and layoffs will continue until September 27, 2020; the ban is imposed on employment termination without fair cause or for financial reasons –lack of work or reductions in operations beyond employers’ control- and for force majeure.

Article by Julián A. de Diego published in El Cronista on August 6, 2020

As a matter of fact, Executive Order No. 624/2020 extended the ban on employment termination for an additional 60-day period, until September 27, 2020.

Remember that work suspension does not entitle workers to collect wages. However, the law stipulates for paid suspension under Section 223 bis (Employment Contract Act) to protect the jobs of inactive workers.

It is worth mentioning that in case of employment termination without cause workers are entitled to double severance pay under Executive Order No. 24/2019 whereas in case of layoffs for financial reasons or force majeure workers do not receive severance pay, only compensation amounting to half a month’s salary for each year of seniority.

The Executive is clearly keeping this ban when the Pandemic is at its worst in Argentina, with the rising risk that this measure deliberately breaches the National Constitution.

Actually, the Argentine legal system establishes a relative job stability scheme whereby workers may be terminated without cause provided they are paid compensation for seniority.

In Central Europe the most advanced countries have implemented an absolute job stability system, whereby workers cannot be terminated without cause, and in the event they are terminated, the Courts rule that termination is null and void and order employers to reinstate workers or pay their wages until they are eligible to access ordinary retirement benefits.

According to tradition, Argentina has always had a relative job stability scheme under labor and employment law. Act No. 11729 included compensation for seniority in the industry in 1933, which was confirmed by the Employment Contract Act in 1974 and has been kept so far. History has it that Norberto Centeno, the author of the bill that later on became the Employment Contract Act, had included the concept of absolute job stability used in Europe and it was Peron in his third term of office in 1974 who rejected it and kept the local tradition. Remember that with this and other objections by Perón, the Employment Contract Act was passed without debate at Congress post mortem, exactly as he had corrected the text section by section.

The Supreme Court of Justice of Argentina ratified the relative job stability scheme based on Article 17 enshrining the right to property, Article 14 ensuring the performance of any lawful industry and Article 14 bis stating that work in its different forms shall be protected by law and providing protection against arbitrary termination.

This provision shows that if workers need to be protected against arbitrary termination, then the constitutional lawmaker admitted that they could be terminated. That is why the Employment Contract Act established compensation for seniority in case of termination without fair cause under Section 245.

Along this line in the matter of De Luca v Banco Francés (1969) the Supreme Court ruled that absolute job stability at the banking sector was unconstitutional. The Supreme Court decision states that Section 6 of Executive Order 20268/46, regulating Act No. 12637 about banking employees, violated the guarantees under Article 17 of the National Constitution because it was disproportionate, unreasonable and contrary to the right to property that an employer who fails to reinstate a terminated employee should pay him/her lifetime wages until retirement. The intrinsic unfairness of this system hurts the freedom to hire and goes beyond any legitimate right to compensation for arbitrary termination by imposing the obligation to retain a worker whom the employer does no longer trust when confidence is the basis of any employment relationship.

In the matter of Vizzoti v AMSA (2004) the Court corrected compensation for termination when the cap turned out to be confiscatory, and in re Madorran v Ad. Nacional de Aduanas (2007), the Court ruled again in favor of absolute job stability for civil servants and relative job stability for workers at the private sector.

Within this framework, in order to protect the performance of any lawful industry, the right to property, the freedom to hire, the right to engage in commerce, the law and public order must be duly observed.

As a matter of fact, substantive law, the Constitution and international treaties set a framework to regulate the conduct of people in society so that they can enjoy rights and freedom fully, with legally protected interests.

 Suspending the exercise of the rights enshrined in the Constitution in its first part is only admissible under special conditions and for a limited period of time. This is the case of a state of siege. Forcing companies to keep workers by paying their wages when the Executive has ordered to stop activities in its attempt to avoid the spread of the virus is clearly arbitrary, and only admissible for a short period of time and amid a major global-scale catastrophe, such as the Covid-19 outbreak.

If those who have formalized the ban now ease the lockdown but keep the ban on layoffs, they are forcing companies to pay wages without generating income and forbidding them to terminate workers; and this is arbitrary, unsustainable over time and unconstitutional.

We have come to extremes, as explained above, and even in times of emergency like the one we are undergoing, we must protect the National Constitution as the source that ensures freedom, fundamental rights and a democratic, republican and federal system.


Por Julián A. de Diego
Por Julián A. de Diego

Fundador y Titular del estudio “de Diego & Asociados”.  Abogado, Doctor en Ciencias Jurídicas.

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