Overview On Labour Law In Argentina - Part 2

9. TERMINATION OF A LABOR CONTRACT

   The key issues to consider when bringing a labor relationship to an end are the reasons for the termination; the appropriate notice of termination where relevant; and the amount of compensation which may be due.

   Concerning the reasons for termination, there is a variety of situations in which this may occur. Employer and employee may mutually agree to terminate, the employer may dismiss the worker with or without just cause, the employee may resign or retire, outside events may dictate dismissal by the employer, or in the case of a fixed term contract it may simply expire.

   If the contract is expiring or the employer is ending the relationship, the law provides that the employer must give the appropriate prior notice of termination (except where there is just cause for dismissal). The length of prior notice is contingent upon the employee's seniority. The employee must also, in principle, give notice to the employer when terminating the relationship.

   In practice it is very unusual for the employer to actually give the prior notice of termination. Employers in general compensate the employee for salary in lieu of such notice, which is expressly permitted by the LCL.

   Furthermore, once the labor relationship has been ended appropriately, the employer is obliged to pay to the employee any compensation to which he/she may be entitled depending upon the reason for the termination.

   In all cases the employee must receive any outstanding wages, payment for vacation days, and the proportional entitlement to the semi-annual bonus (aguinaldo). Moreover, the employer has an obligation to pay to the employee a severance payment calculated by reference to the period during which the employee has been working for the employer ("the seniority payment"), if the worker was dismissed without just cause, or due to force majeure or economic events causing job destruction, bankruptcy, or incapacity of the worker in which case the severance is lower.

   9.1. Prior notice

   Before terminating a labor relationship, prior written notice must be given to the other party in accordance with the relevant statutory time periods. These statutory notice periods may be extended by mutual agreement between the parties in favor of the employee.

   Even if an employee is retiring or has a fixed term contract which is about to expire, the employer must nevertheless give a reminder of the approaching end date in the form of a prior notice. However, no such notice needs be given by the employer in the following situations: termination with just cause or by mutual agreement.

   If the employer does not give the appropriate prior notice where relevant, it will be obliged to pay the employee salary for the period for which no notice was given ("payment in lieu of notice").

   Employers must give employees the following prior notice:

   15 days during the trial period; one-month's notice if the employee has worked for the employer for less than five years; and two months' notice if the employee has been with the same employer for more than five years. On the other hand, if the employee is the one terminating the labor relationship, he/she is also required to give prior notice of termination, which is of 15 days, regardless of his/her seniority.

   9.2 Integration of the Month of dismissal

   In the event that no prior notice is given by the employer and the dismissal takes place on a day different to the last day of the month, the employee will also collect an amount equal to the salary corresponding to the remaining days of the month of dismissal.

   9.3. Compensation upon termination of the labor relationship

   In all cases when an employee's contract terminates, the employer is obliged to pay to the employee the appropriate amounts for any outstanding pay and vacation entitlement and also the relevant proportion of the semi-annual bonus (aguinaldo o sueldo anual complementario "SAC").

   Furthermore, the employer also has an obligation to make a payment in respect of the seniority ("antigüedad") of the employee in most cases, where the employer decides to terminate an indefinite term contract, except where the employer dismisses the employee with just cause.

   Furthermore, as indicated previously, if the relevant notice is not granted to the employee by the employer, the amount of the employee's salary must be paid in lieu of such notice.

   9.3.1. Seniority calculation

   An indemnity for seniority ("indemnización por antigüedad") must be paid by the employer to the employee when the relationship is terminated in the following ways: dismissal without cause, termination due to force majeure or for economic reasons, bankruptcy3, incapacitation of the worker, expiry of a fixed term work contract (having a duration of more than one year), and in the case of the death of either the employer or employee.

   The amount of the indemnity for seniority varies depending upon the reasons for the termination.

   If the employer terminates the relationship without just cause, it is obliged to pay the employee one-month's salary for each complete year of service performed, or period worked in excess of three months (one-month's salary x number of years worked = seniority payment).

   The basis used for this calculation is the highest normal monthly salary accrued during the previous year, or if the employee has worked less than a year, during his employment. If, however, the monthly salary (calculated as above) is higher than the ceiling figure provided by the relevant CBA applicable to the employee at the time of dismissal, then this latter figure will be the one used for the calculation. However, the Argentine Supreme Court in re "Vizzoti, Carlos v. AMSA S.A. on Dismissal" declared the unconstitutionality of the CAP and stated that the calculation basis could not be lower than 67% of the best remuneration of the dismissed employee.

   In no event, however, may the indemnity for seniority be less than one month's salary.

   In certain circumstances the seniority payment may be reduced by 50%; these cases are dismissals arising as a result of acts of god, dismissals for economic reasons, bankruptcy (not attributable to the employer), and dismissals of incapacitated persons when adequate tasks can not be given and when expiration of a fix term labour contract of more than one year takes place.

   9.3.2. Payment of severance packages

   The above sums must be paid to the employee in a lump sum payment within four days of dismissal. However, the employer and employee may come to a personal agreement regarding the time and manner of payment, which once approved by the Labor Ministry would provide great advantages for both parties.

   9.3.3. Tax considerations

   Amounts received pursuant to severance packages are in general taxable with the exception of compensation paid for seniority, provided it does not exceed the legal limits. Any amounts exceeding the legal limits will be taxable.

   9.4. Termination by Mutual Agreement between the Parties

   A labour contract may be mutually...