Grounds for Termination
Employers can terminate employment at any time without justified cause, subject to payment of severance compensation provided by labor laws. Employees on a trial period, i.e. during the first three months of employment, are not entitled to severance compensation, exception made to prior notice (15 days). Termination of employment with justified cause does not entail payment of severance compensation.
The employer can dismiss an employee with justified cause in the event of failure of the employee to fulfil his obligations which, by their gravity, do not consent to the continuation of the relationship. Labor laws do not list specific breaches that justify dismissal and should be analyzed on a case by case basis. The employer has the burden of proving the cause of dismissal. The employee can also challenge any dismissal with justified cause decided by employer, in which case a Labor Court will decide if the employer had a justified cause for dismissal. Labor Courts are very restrictive at the time of evaluating if the cause dismissal meets the legal standards in order to be considered justified. Labor Courts usually analyze if employee has prior disciplinary sanctions also provided by labor laws, the employee´s seniority and hierarchy.
An employee can also resign, in which case, no severance compensation is payable. Lastly, employment can terminate due to the fact that the employee retires at the time he/she is granted the governmental pension plan. No severance compensation is payable in that case.
The company has to go through a mandatory conciliation procedure before the Ministry of Labor prior to dismiss a certain minimum number of employees provided in Law 24,013, as described above:
- When the company has less than 400 employees and the company will dismiss more than a 15% of the total payroll;
- When the company has between 400 and 1,000 employees and the company will dismiss more than a 10% of the total payroll;
- When the company has more than 1,000 employees and the company will dismiss more than a 5% of the total payroll.
Employer can terminate employment at any time without justified cause, subject to payment of severance compensation provided by labor laws.
Union delegates are protected and therefore, cannot be dismissed during their term and one year afterwards. In case of dismissal of pregnant or married employees or sick employees, among other cases, additional severance compensation is payable.
Employers have to serve notice of termination in written and through a notary public or certified letter of all dismissals. Resignation has to be made in written and the employee has to send a telegram from the official postal company (Correo Argentino).
Is severance pay required?
In case of termination of employment without justified cause, the employer must pay the employee mandatory severance compensation provided by law within 4 days after serving notice of termination, as follows:
Seniority compensation: equivalent to the best monthly salary for each year of employment or period exceeding 3 months, taking as a basis the best monthly, regular and ordinary salary, accrued during the last working year. Such basis has a maximum ceiling amount provided by the applicable bargaining agreement (3 times the average of all wages provided by such collective bargaining agreement) and a minimum cap amount (one employee’s gross monthly salary). The Supreme Court ruled that said ceiling must not imply a reduction of more than 33% of the best monthly salary basis.
Compensation in lieu of notice: The employer must give a prior written notice to the employee in the event of a termination of employment with no justified cause. Such prior notice must be given by the employer: (i) 15 days in advance, if the labor contract is under the trial period; (ii) 1 month in advance, if the employee has served for up to 5 years; and (iii) 2 months in advance, if employee has served for more than 5 years. If the employer does not give such prior notice, it must pay this severance compensation in lieu of notice, equal to 15 days salary, one or two monthly salaries, depending each case. It is custom that employers opt to pay this compensation instead of giving prior notice.
Pending days till the end of the month: If the dismissal does not take place in the last day of the month, the employer must pay a compensation equal to the proportional salary for the pending days to complete the entire month in which the dismissal took place.
Compensation for unused vacations: The employee is entitled to compensation equal to the vacation pay in proportion to the days effectively worked of the year in which the dismissal took place.
Statutory Annual Bonus: The employee is entitled to the proportional amount of this 13th salary.
The severance compensation is reduced by one‑half if the labor relationship ends as a result of the employee’s death. Additional severance (equal to 13 monthly salaries) must be paid in case of termination without justified cause of a pregnant employee (during pregnancy and up to 7.5 months after giving birth) or an employee that has been married (and is fired within 3 months prior to the marriage or 6 months after the marriage). If the employee is dismissed during her or his paid sick leave, the employee is entitled to claim the months remaining to complete the paid leave provided by law plus moral damages. The employee may claim payment of certain labor fines provided in his/her favor that may significantly increase the severance payable, in the event he/she proves his labor relationship or salary was not duly registered.
Is a Separation Agreement required or considered best practice?
No separation agreement is required. The advantages of a separation agreement should be analyzed on a case by case basis, depending on the amount to be paid to the employee and the employer´s exposure. In certain occasions, it is best practice to attend to the Ministry of Labor after termination of employment to sign a settlement agreement to be approved by such authority, which is the only binding agreement (res judicata) and valid waiver according to local labor laws. Any other agreement will not preclude the employee to collect any amount and file a claim (even if a waiver provision is included), in which case, any amounts paid in connection with the agreement, may be offset in against eventual amounts awarded by a court.
Remedies for employee seeking to challenge wrongful termination
The employee can challenge dismissal with justified cause by claiming payment of severance compensation for dismissal without justified cause plus a fine in his favor equal to 50% of that severance compensation (plus interest and legal fees), in which case a Labor Court will decide if the employer had a justified cause for dismissal. The employer has the burden of proving the cause of dismissal.
The employee can also claim payment of severance differences alleging that the severance compensation was not properly calculated, as well as certain fines provided in his/her favor for improper registration of salary or entry date, in which case a Labor Court will decide if the employer correctly paid salaries and severance compensation as well as properly registered the employee´s labor relationship and salary. The employee must go through a mandatory conciliation procedure prior to filing a court claim. Parties must attend hearings before a conciliation appointed by the Ministry of Labor to explore a settlement.
Argentine criminal laws provide reduction of penalties for whistleblowers in respect to crimes against the public administration (corruption and fraud against public administration), customs criminal offenses, economic and financial crimes, drug trafficking, terrorism, human trafficking and money laundering, among others. These laws also provide a reduction of penalties to be imposed on companies for crimes committed by their employees or officers, provided that the company has set forth a compliance policy that includes, among others, the company´s protection to whistleblowers against retaliation.