Impact of recent legislative developments on employment and human resources

February 2025 | EXPERT BRIEFING | LABOUR & EMPLOYMENT

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On 8 July 2024, the ‘Law of Foundations and Starting Points for the Freedom of Argentinians’ No. 27,742 was published in the Official Gazette and came into effect on 9 July 2024. Likewise, on 26 September 2024, regulatory decree No. 847/2024 on the regulation of sections 82 to 98 of Title V on Labor Modernization of the Law of Foundations was published in the Official Gazette and came into effect on the same day.

The law introduces important amendments to labour and social security matters, which are contained in two of its titles: (i) Title IV ‘Promotion of Registered Employment’ and (ii) Title V ‘Labor Modernization’. The market had been demanding these innovations for a long time.

Promotion of registered employment

The law provides a special regime under which employers may regularise ongoing labour relationships initiated prior to enforcement of the law. This regime will apply to both registered and unregistered labour relationships, and even to debts disputed in administrative or judicial proceedings.

The effects of the regularisation will depend on the subsequent regulation and could include removal of criminal actions, cancellation of Public Registry of Employers with Labor Sanctions (REPSAL), remission of social security debt (capital and interest) and regularisation plans for a term of up to five years.

Registration of employment relationships

Chapter I, Title V of the law modifies the definition of ‘registered employment’, providing that an employment relationship or contract will be duly registered if any of the intervening people, either human beings or legal entities, register an employee in the forms and under the conditions established by the regulation. This should guarantee an agile and immediate mechanism to register employment relationships by electronic means.

This amendment aims to clarify the interpretation that an employment relationship will be duly registered when an employer complies with the formal registration, regardless of the beneficiary.

Employment presumptions

The law limits the presumption of the existence of an employment relationship contained in section 23 of the Labor Contract Law (LCL), providing that an employment relationship will not be presumed in the case of contracts for works or professional services if professionals issue invoices corresponding to these types of contracts.

In addition, the law expressly provides that the provisions of the LCL will not be applicable to this type of contract for works, services, agency and all those regulated by the Civil and Commercial Code of the Nation (see amendments to section 2 of the LCL).

Labor intermediation

The law amends section 29 of the LCL and limits the liability of companies that hire third parties for the provision of personnel. Although companies using these services will continue to be jointly and severally liable for labour and social security obligations, this would be specifically limited to the period in which services are rendered and eliminates the possibility of a claim alleging the existence of an unregistered direct labour relationship with the company utilising or benefitting from the services.

Independent contractors and intermediaries

The law provides that employees hired by subcontractors or intermediaries may request from the main company (the company using the services) payment of amounts owed to them by their employer for remuneration, severance or other rights, and for social security debts.

The main company, on the other hand, will be entitled to withhold, without prior notice, amounts owed by the subcontracting company for social security matters, depositing such amounts to administrative agencies. The new Argentine tax authority, the Customs Control and Collection Agency (ARCA), must establish simplified mechanisms to make this withholding effective.

Extension of the probation period

The probation period for indefinite-term employment contracts is extended to six months and collective bargaining agreements may extend it: (i) up to eight months when the company has between six and up to 100 employees; and (ii) up to 12 months in companies with up to five employees.

Amendments to maternity leave

The law introduces modifications regarding maternity leave, conservation and protection of employment, incorporating people capable of gestation as beneficiaries. Additionally, it establishes the possibility of reducing the days of pre-birth leave to a minimum of 10 days, to enjoy the remaining 80 days after delivery.

Due cause

The law expressly lists as serious labour infringements and fair cause for termination of the labour relationship: (i) participation in illegal acts, such as affecting the freedom to work of people who do not adhere to certain measures by means of acts, facts, intimidations or threats; (ii) impeding or obstructing totally or partially the entrance or exit of people or things to the establishment; or (iii) causing damage to people or things owned by the company or third parties located in the establishment (facilities, merchandise, supplies, raw materials, tools, etc.), or improperly withholding them.

Active participation in blockades or taking over establishments may also constitute serious labour infringement as a fair cause for termination of the employment contract. The employer must demand the employee cease the conduct before terminating for just cause.

Termination upon a discriminatory cause

The law defines dismissal due to a discriminatory act, such as “dismissal due to race or ethnic origin, religion, nationality, ideology, political or trade union opinion, sex or gender, sexual orientation, economic position, physical characteristics or disability”.

In these cases, termination will have extinctive effects intended to avoid reinstatement in the job, but the payment of a special aggravated indemnity will apply, ranging between 50 and 100 percent of the compensation for length of services. In addition, an employee who invokes this cause will have to prove discrimination.

Severance fund

The law incorporates the ‘severance fund’, providing for the possibility of replacing, through collective bargaining, the compensation for length of services by a severance fund according to additional parameters to be implemented by the National Executive or by a private financing system to be paid by the employer. The private financing system will be applicable both to dismissal without just cause (section 245 of the LCL) and to cover the amounts agreed by the parties under a mutual labour termination agreement (section 241 of the LCL).

Implementing a severance fund will depend on agreements that may be reached between the parties representing workers and employers in collective bargaining; therefore, as of the date of this report, it is not yet available.

Independent or self-employed workers and their collaborators

The law creates ‘independent workers’ and ‘collaborators’. An independent service provider that may have up to three collaborators – independent service providers – carrying out a productive undertaking with typical characteristics of an employment relationship (technical, legal or economic) are absent.

The relationship with independent workers will be autonomous and have a simplified regime of contributions in accordance with conditions and requirements established by the regulations for independent workers and their collaborators contributing to the pension system, the social security system, national health insurance services and the occupational risk system.

The law expressly forbids fragmentation or dividing establishments for misuse.

Repeal of fines and aggravating circumstances

The law repeals all fines for misclassification and unregistered employment provided in laws 24,013, 25,013, 25,323 and 25,345. Those fines previously doubled and even tripled the amounts employees claimed in court.

Benefits for companies

In general, the amendments introduced by the law on labour matters aim to reduce litigation and labour costs. In this regard, although the law is recent and still pending analysis and interpretation both by scholars and case law, it will have a significant impact on companies.

The law eliminates the possibility of third-party or outsourced employees claiming they should have been registered by a contracting company. In this way, and by derogating labour fines for improper registration which materially increased the amounts of severance for termination, the law should reduce labour costs and litigation.

By repealing fines for misclassification and exponentially reducing the amount that employees may claim in court, the law seeks to discourage litigation and reduce labour costs. It cannot rule out the possibility that, in the future, employees may try other alternatives to seek compensation for hypothetical damages since they may allege misclassification of contracts to consider themselves constructively dismissed. However, even in such cases, the financial exposure for the company, as well as the chances of a successful claim, would be drastically reduced.

The presumed existence of an employment contract does not apply to contractors who provide professional services. The party invoking the existence of an unregistered labour relationship will have the procedural burden of proving that a relationship of subordination and dependency existed.

The law grants full effects to the dismissal ordered by the employer even when it could be qualified as discriminatory and limits the right of the dismissed employee to claim an aggravating severance, to between 50 and 100 percent of severance for dismissal without cause.

Enrique M. Stile is a partner and Fernando Ezequiel Romano is a member at Marval O’Farrell. Mr Stile can be contacted on +54 (11) 4310 0134 or by email: ems@marval.com. Mr Romano can be contacted on +54 (11) 4310 0100 ext. 61136 or by email: fro@marval.com.

Enrique M. Stile and Fernando Ezequiel Romano

Marval O’Farrell