Labor Guide to Doing Business in Argentina: termination of employment in Argentina. Post-employment restrictive covenants

by 12 Jul 2020Companies, Doing business in Argentina, Labor and Social Security

Under Argentine law, there are different grounds for termination of employment in Argentina.

(i) Termination without cause 

An employer terminating an employment contract without cause must serve the employee with an advanced written notice whose length depends on the following seniority:

a) 15 days, if the employee is under the three-month trial period;

b) 1 month, if the employee has worked for up to 5 years; and

c) 2 months, if the employee has worked for more than 5 years.

Failure to give such prior notice, entitles the employee to compensation in lieu of prior notice equal to 15 days, one monthly salary, or two monthly salaries, depending on each case.

Except if the employee is under trial period, the employer must additionally pay a seniority compensationwhose basis is the best regular monthly salary accrued during the last year of service multiplied for each year of employment, or period exceeding three months. Such a basis has a cap equivalent to three times the average of all wages provided by the applicable collective bargaining agreement. In no case shall the seniority compensation be less than one employee’s gross monthly salary.

When the termination of the employment does not take place on the last day of the month, the employer must also pay the salary equivalent to the remaining days until the end of such month.

Finally, the employee is entitled to compensation for the annual leave not taken (the annual holiday to which the employee would have been entitled according to the period of the year worked until termination), and the proportional amount of the annual extra salary.

There exist special protections for certain cases:

a) Union leaders: cannot be dismissed without cause during their term and one year afterward;

b) Women getting married: if they are laid off within 3 months before the marriage or 6 months afterward, the employer must pay an additional severance compensation equal to 13 monthly salaries;

c) Pregnant women: provided that they are fired seven and a half months prior to delivery or afterword, the employee is entitled to an additional severance compensation equal to 13 monthly salaries;

d) Sick employees: further to the compensations for termination without cause, dismissed sick employees may claim the salary corresponding to the time remaining to complete the paid leave provided by law[1].

(ii) Termination for gross misconduct

The employer may terminate the employment contract based on gross misconduct (just cause), if the employee has incurred in a breach of his/her duties severe enough not to consent to the continuation of the labor relationship.

The employer may terminate the employment contract based on gross misconduct (just cause), if the employee has incurred in a breach of his/her duties severe enough not to consent to the continuation of the labor relationship.

The contract of employment law does not list specific breaches that justify dismissal, and therefore the issue should be analyzed on a case by case basis, evaluating, among other circumstances, the employee´s prior disciplinary records, his / her seniority, and rank, etc.

No compensation is due to the employee in the case of dismissal for just cause.

If the employee judicially challenges the dismissal, and it is found that the alleged cause was false or not sufficiently significant to give grounds for termination, the employer must pay all the severance compensations. In this case, additional compensation will be imposed over the employer equal to 50 percent of the seniority and in lieu of prior notice compensations.

(iii) Other grounds for termination

a) Resignation

Employees may step down at any time, just giving the employers a 15-day prior notice, or paying a 15-day salary compensation.

b) Death of the employer or the employee

The compensation is half the seniority compensation provided for the dismissal without cause.

c) Retirement

When employees are 70 years old and have 30 years of contributions to the social security system, the employer is entitled to request the employee start the paperwork to obtain retirement benefits, delivering his / her working certificates. The employer must then maintain the employee under its payroll until either the employee obtains retirement, or for one year since the employee was served notice (whatever occurs first).

Once the employee obtains his / her retirement benefit, or the one-year term has elapsed, the employer may terminate the employment contract without paying any severance compensation;

d) Lack of work and force majeure

In the case of lack of work beyond the employer’s responsibility, force majeure, or technological causes, the employer may dismiss the employee, paying half the seniority compensation. This ground for termination has been very restrictedly deemed by the Courts.

(iv) Unregistered labor relationships

If the labor relationship is unduly registered (e.g. with a commencing date later than the real one, or a salary inferior to the amount the employee really collects), there are significant additional compensations.

(v) Redundancies

Before executing collective layoffs affecting certain minimum numbers of employees , the employer must undergo a prior crisis prevention procedure, with the labor national or provincial authorities, governed by Law N° 24.013.

(vi) Post-employment restrictive covenants

Post-employment restrictive covenants preventing an ex-employee from competing, soliciting clients, poaching employees, and divulging the company´s confidential data are not expressly regulated under Argentine law.

Any post-employment agreement limiting competitive activities or imposing non-solicitation, either directly or through indirect means (e.g. forming a company with the same former employer´s activities) must be balanced with the constitutionally protected right to work.

In the few existing caselaw on the subject, the validity of non-compete provisions after the termination of employment has been subordinated to the existence of a time and scope (outlining territory and/or activities) limits, and fair consideration. This rule would also apply to customer solicitation.

 

 

Mario E. Castro Sammartino

For additional information on these or any other issues related to doing business in Argentina, please, sign up for our Legal Blog or contact us at any time.

Our publications exclusively express the author´s opinion and do not purport to be legal counsel on any case. Should you need it, you must consult with your trusted lawyer.

[1] See https://cspabogados.com.ar/en/salaries-and-working-conditions-in-argentina/

[2] The crisis prevention procedure must be requested when the redundancy affects: a) More than 15% of the total payroll in companies with less than 400 employees; b) More than 10% in companies with more than 400 and less than 1,000 employees; and c) More than 5% in companies with more than 1,000 employees.

 

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