30 noviembre 2021

The essential need to end the ban on employment termination. Published on

The ban on employment termination and suspension was a severe restriction on the constitutional right to freely hire, work and exercise any lawful industry, by ordering double severance pay first and then forbidding employees’ suspension or termination due to force majeure events or without cause (Section 14 and 14 bis of the National Constitution). This decision was taken with the aim of safeguarding jobs compulsorily in times of an endemic economic crisis and later on in the context of the Covid-19 pandemic. Its repeal some time soon would be a clear sign of a return to the New Normal.

Article by Julián A. de Diego published on on November 30, 2021

Undoubtedly, in terms of labor and employment, there are several concerns for the business sector, and this ban is one of them. Actually, companies have the following top priorities:

1. Union advance on indexed wages, adding additional payments and special contributions, with exchange rate restrictions and price freezing;

2. The high costs of double severance pay and restrictions to suspend or terminate employees, and fines and double payments for non-registered benefits (Acts No. 24013 and 25323);

3. The side effects of labor lawsuits that continue to jeopardize the assets of companies and end up destroying SMEs;

4. The reformulation of payroll taxes, which are the highest in the region, especially the pension system, social health insurance that in many cases fail to provide basic health care coverage, and income tax;

5. The need for new contracts with clear incentives to help businesses lower their costs, such as employers’ contributions reduction or relief, or multilateral subsidies for paying wages (keep government assistance, REPRO and ATPs, among others);

6. The surge in individual and collective conflicts as a result of dissident shop stewards and clashes over workers’ representation and

7. The need to modernize the law to include exponential technologies, telework, remote work, and new ways of hiring through Apps.

Remember that double severance pay was ordered before the pandemic and came into effect on December 15, 2019 as soon as President Alberto Fernandez took office by Emergency Executive Order No. 34/2019, establishing that employment termination was forbidden and in case of termination, employees should be paid twice the statutory severance pay set forth in the Employment Contract Act (Ley de Contrato de Trabajo). This rule is effective until December 31, (EO 39/2021) and now the 100% surcharge is capped at ARS 500,000.

At the same time, it was established that any employee who started working after the effective date of EO, i.e. December 16, 2019, was not affected by the ban or double severance pay.

Then, on March 20, 2020, it was ordered that suspending or firing employees due to force majeure events or without cause was forbidden, as a result of the pandemic, with the exception that those employees who started working after the rule came into effect were not reached by any of these measures. This ban was also extended until December 31, 2021 (EO 413/2021). Therefore, those who started working after April 1, 2020 could be suspended and terminated according to the usual provisions of the Employment Contract Act, and do not get paid double severance pay.

Consequently, it is convenient to dismiss the wrong argument that the aforementioned regulations hamper the hiring of new employees because they are excluded from the ban and do not collect double severance pay.

When the lockdown restrictions were eased and social distancing was encouraged instead, the Executive admitted that the pandemic was coming to an end, and for the time being, a third wave is not expected, unlike Great Britain, the Czech Republic, Hungary, Germany and now Austria, Spain or Italy.

It is then natural to think that if there are no longer reasons for these measures, then they should be lifted. The D-day is New Year’s Day, where the Executive must review and decide on the amendment, effective term extension or partial or total repeal of the aforementioned provisions, with emergency Executive Orders that were ratified by the Senate in recent marathon voting sessions.

The recent announcements and statements by the Minister of Labor Claudio Moroni show the main concern of the Government while holding talks with the business sector, which among other issues calls for a return to the application of the Employment Contract Act, the freedom to hire and suspend or terminate employees, with the simple amounts under the traditional legal system.

Like any other emergency measure, it is kept in place longer than expected, and there is the risk of an indefinite effective term. Therefore, putting an end to the ban or implement a less burdensome transition is a desirable and expected sign. The economy has positive data that require converging reforms aimed at encouraging employment and hiring of new employees, promoting upward mobility.

If the Executive could grasp the great opportunity that an Economic Plan creates, producing general effects across all sectors of the economy, raising hard currency and adding value to our commodities, Argentina would be in a position to return to the path to growth and prosperity.

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