Argentina, Costa Rica Offer Different Labor Protection Approaches for Pandemic – With Different Results

December 18, 2020

With global governments struggling to balance employee protections with employer finances, Argentina and Costa Rica provide a contrast in approaches.  Argentina extended its strict layoff ban into next year, worsening an already devastated economy.  Costa Rica ‘s more flexible and executable plan, in contrast, has its economy in a much better position. 
 
Argentina Extends Employee Termination Ban - Again.  No major Latin American country has maintained an employee termination ban as long as Argentina. Decree No. 329/2020, which has been in force since March, prohibits dismissals and suspensions of employees without just cause or lack of work reduction or force majeure. 
 
Violating this rule can lead to legal consequences. In April, the Argentine Labor Court favored the employee in the case of Espinoza, José Alfredo vs. TM S.A. s/ Autosatisfactivas where the employer terminated the worker for “poor performance”.  The court concluded the dismissal was without good cause and therefore breached the prohibition of dismissals provided by Decree 329/2020. The Court further demanded the reinstatement of the employee to his job. 
 
As a result, the inflexibility of this policy could potentially jeopardize investment and result in more global companies leaving the country
 
In Costa Rica, two regulations were approved in March responding to Covid-19's labor impact. Temporary Suspension of the Employment Contract allows employers to suspend employee’s contract and payment. Reduction of Working Hours permits employers to deduct payment correlated with reduced hours.
 
The Ministry of Labor allows the suspension of the employment contracts, including payment of wages and social security contributions. The Employer can also choose to terminate the workers by paying the severance. Additionally, Reduction of Working Hours rule permits employers to decrease working hours and wages if income reduction is inevitable. If wages are reduced by 20%, normal working hours should be reduced by 50%.  If wages are reduced by 60%, normal working hours should be reduced by 75%. All procedures must be managed digitally to ensure a quick and safe procedure. 
 
Combined with the National Employment Program that grants a temporary employment subsidy to entirely or partially unemployed workers, Costa Rica has provided specific and flexible solutions for employers, while protecting its workers. 
 
Outlook:  Changes of public policies on labor and employment can significantly affect how global companies operate in the country. HR Policy Global strives to provide updates and analysis of those developments, to help companies making accurate assessment of labor environment where they operate.