1. Promotion of registered employment

Employers may regularize, within 90 days as of the regulation of the Foundations Law, the labor relations that are not registered or were registered in a deficient or partial manner (lower remuneration or date of entry after the real one).

The regulation of the law will precisely define the effects of this regularization, which in principle would include: (i) the extinction of the criminal action in process and the remission of fines for infractions; (ii) the removal of the employer from the registry with labor sanctions (“REPSAL”); (iii) the remission of debts of withholdings and contributions (except health care regime) in no less than 70% of the total; including those that are in dispute in a court of law.

Workers whose contracts have been regularized within the framework of the law and its regulations, will be entitled to compute, only for the purposes of the payment of the Universal Basic Benefit (“PBU“) and for Unemployment Benefit, up to 60 months of services with contributions, calculated on the amount of the minimum, vital and mobile salary.

2. Labor modernization

Under this heading, the Foundations Law produces a very significant labor reform over the Employment Contract Act (“ECA”) and other labor regulations; the most important guidelines of which are as follows:

2.1. Repeal of fines for irregular registration

The Foundations Law eliminates all provisions of the National Employment Law No. 24,013 which set fines for lack of registration or deficient registration of the employment relationship. Law No. 25,323, which imposed fines for irregular registration (Section 1) and for failure to pay severance payments for dismissal without cause (Section 2) are also repealed by the Foundations Law.

2.2. Elimination of fines for failure to deliver work certificates

Through the repeal of Sections 43 to 48 of Law No. 25,345, the fines related to the failure to deliver the certificates of services and remunerations (Section 80 ECA) and for failure to pay the contributions withheld from the worker (Section 132 bis ECA) are eliminated.

2.3. Registration of the employment contract

There will be a new mechanism for the registration of the employment relationship, to be defined by the regulations, which will be simple and electronic. There will also be a simple mechanism for the issuance of salary slips and a unified contribution will be provided for companies with up to 12 workers.

2.4. Contractors and intermediaries

The law sets out the validity of the registration made by the original employer in relationships with contractors and staffing agencies. In the same sense, due to the amendment of Section 29 of the ECA, it is established that workers hired by third parties to be assigned to companies will be considered direct employees of the company which register the relationship, thus eliminating the risk of irregular registration of workers assigned to companies by third party contractors.

2.5. Deficient Registration

The worker may denounce the lack or partial registration of the employment relationship before the AFIP, through the electronic means that the authority will offer for such purposes. If such deficiency is established by the Court, the Judge will report the AFIP, which will determine the relevant social security debts. The corresponding debt will consider the contributions paid by the independent contractor.

2.6. Scope of application of the ECA

Service and agency contracts (among others) regulated by the National Civil and Commercial Code are excluded from the scope of application of the ECA.

2.7. Presumption of employment contract. Civil contracts

Professional services or trades that foreseen the issuance of official invoices by the provider do not fall under the presumption of the existence of an employment contract when the services are rendered by individuals. This understanding extends its effect to Social Security obligations.

2.8. Trial period

The trial period (Section 92 bis ECA) is of 6 months. This period may be extended by collective agreements to 8 months in companies with 6 to 100 workers, and up to 12 months in companies with a payroll of no more than 5 workers. These provisions will also apply to the national agricultural labor regime.

2.9. Pregnancy protection

The prohibition for pregnant women to work during the 45 days before and after childbirth is maintained, although as a result of the reform the employee is granted the option to reduce the pre-birth leave to 10 days, accumulating the remaining period to the postpartum period.

2.10. Just cause for dismissal

The law amends Section 242 of the ECA, expressly including as causes for dismissal, the following: (i) active participation in blockades or takeovers of the establishment; (ii) when as a result of the participation in strikes, (a) the freedom to work of those who do not participate in the strike is affected; (b) the entry of persons or things to the establishment is obstructed; (c) damage is caused to persons or assets of the company or third parties. Before dismissal because of these non-compliances, the employer must formally request the worker to abandon his attitude. This request is not necessary in the case of damage to persons or things.

2.11. Special compensation for discriminatory dismissal

Judges may increase the severance compensation between 50% and 100% (depending on the seriousness of the discriminatory act) in cases where the employee proves before Court that his/her dismissal was motivated by reasons of ethnicity, race, nationality, sex, gender identity, sexual orientation, religion, ideology or political or union opinion. Despite the discrimination scenario, the employee will not have the right to claim reinstatement.

2.12. Severance fund

Within the framework of a collective bargaining agreement, the parties may replace the current severance payment scheme with a “severance fund “. Its characteristics will be defined by the regulations. On the other hand, employers may choose to contract a private capitalization system (or self-insure) to cover the cost of the severance indemnification provided by the ECA or for the payment of a bonus agreed within the framework of mutual termination agreement.

2.13. Independent worker with collaborators

The Foundations Law incorporates a new category of self-employed workers, providing that an autonomous worker may work with up to 3 self-employed workers to carry out a productive undertaking, under a special regime to be regulated by the National Executive Power. There will be no employment relationship between those parties, unless in the reality of the relationship the notes of subordination that characterize any relationship of dependency are visualized. Anyway, as per the conditions to be defined by regulations, these workers will be included under the Social Security regimen, Health Care, and the Labor Hazards Law.

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For additional information, please contact Federico Basile.