The Controversial Bonus Mandate Complicates Matters for Businesses and Collective Bargaining. Published on Cronista.com
The Emergency Executive Order No. 438/2023 issued by President Fernández and his cabinet of Ministers could not be more untimely and controversial.
It is estimated that 80% of workers are employed by micro, small and medium-sized national companies, which will have to pay a bonus of ARS 60,000 in two installments of ARS30,000 for August and September salaries provided workers get paid up to ARS 370,000 / ARS 400,000, as provided by this new law.
Most medium-sized companies with more than 150 workers and international corporations will not pay this bonus because their salaries are above the aforementioned caps. Naturally, this bonus shall be granted to registered employees (about 6 million), and not to informal or unreported employees (about 5 million), who are not covered by this rule.
Without analyzing the contradictions voiced by union leaders or the conversation among businesspeople, the truth is that the Executive does not have the authority to mandate raises or payments to the private sector without a law passed by Congress. It could determine, though, the salaries for National State staff, at State-owned or mixed agencies or organizations under its jurisdiction.
Consequently, under our federal system, each province may decide whether to apply this EO or not, and how. That is the reason why several provinces have said they will not apply it.
The bonus mandated by Emergency Executive Order is non-salary in nature, in clear violation of the provisions of the Supreme Court decision in re «Gonzalez v Polimat». Inthis ruling, it was held that the Executive cannot determine the nature of a payment in breach of the provisions of the Employment Contract Act [Ley de Contrato de Trabajo] (May 19, 2010, Supreme Court of Justice. Judges: ELENA I. HIGHTON de NOLASCO – CARLOS S. FAYT – ENRIQUE SANTIAGO PETRACCHI – JUAN CARLOS MAQUEDA – E. RAUL ZAFFARONI – CARMEN M. ARGIBAY). Otherwise, it would be causing damage to workers in relation to leaves of absence, vacation pay, thirteenth salary, or the calculation of severance pay, among other employment benefits.
As a matter of fact, it is worth mentioning that workers get paid in exchange for their work, and therefore the payments they receive are salary in nature (see Section 103 (LCT).
Please remember that the Supreme Court declared the unconstitutionality of three EOs issued by former President Néstor Kirchner establishing similar increases as non-salary bonuses.
This scenario gets even more complicated with the menace that in case of litigation the Courts may find that this bonus is salary in disguise, thus imposing fines for unregistered payment under Acts 24013 and 25323, also establishing double severance pay in case of termination, and salary differences with social security taxes, interests, penalties and surcharges.
Another rather confusing guideline is that this bonus is proportional to the number of working hours, i.e. 8 or 9 hours per day and 48 hours per week. So, for example, if employees work half those hours, they shall receive half the bonus after calculating its proportional amount.
This bonus may not be paid if the applicable collective bargaining agreement provides that it shall be offset.
As per the language of this clause, the enforcement of these provisions is not automatic, apparently.
Strictly speaking, it says that the parties to a collective bargaining agreement may agree to offset this bonus within the framework of salary negotiations. There are two possible types of clause.
There are provisions, which were agreed before the passage of this Emergency Executive Order, establishing raises that may be eventually offset against any future bonus or increase mandated by the Executive, like in this case. In order to dispel any doubts, Resolution MT 1133/2023 was issued (September 4, 2023), indicating that the parties should have an express agreement. Otherwise, offset is not feasible.
Another possibility would be to offset this bonus, in whole or in part, after the EO is issued, with an express clause specifying it. In other words, it is imperative to have an explicit agreement.
Finally, once again this bonus causes the same harmful effects that we have seen before with similar measures, namely:
- Bonuses like this flatten the category pyramid by determining a fixed sum that does not observe the pay scales under the law or collective bargaining agreement.
- Bonuses likethis do not apply to all workers under collective bargaining agreements because their salaries may exceed the caps in the EO. This means that in some cases salary levels overlap.
- Bonuses like this do not apply, either, to exempt employees or workers who are not covered by collective bargaining agreements, thus causing arbitrary and even discriminatory differences.
- This measure causes all kinds of distortion in pay structures, encouraging multiple individual conflicts.
- It is harmful and contrary to free salary negotiations under collective bargaining, where salaries are truly discussed per company, group of companies or business activity.