New labour law modifications in Argentina

April 2024  |  EXPERT BRIEFING  | LABOUR & EMPLOYMENT

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On 21 December 2023, Decree DNU 70/2023 entitled ‘Bases for the Reconstruction of the Argentine Economy’ was published in the Official Gazette of the Argentine Republic. The regulation came into effect on 29 December 2023.

The reform aims to rebuild the national economy through the immediate elimination of state barriers and restrictions that hinder its normal development, while also promoting greater integration into global trade.

Through the decree, a state of public emergency was declared in economic, financial, fiscal, administrative, pension, tariff, health and social matters up to 31 December 2025. The regulation partially or totally repeals a large number of laws.

The labour reform is based on the understanding that private enterprises are the best resource for social support, through employment and the generation of goods and services necessary for society, and for this, changes are required to allow an expansion of labour demand in the country.

Formal registered employment has not grown since 2011. It is a proven fact that the structural measures adopted by Employment Law No. 24,013 and Law No. 25,323 have not been able to reverse this problem. Therefore, Laws No. 14,250, 14,546, 20,744, 23,551, 24,013, 25,345, 25,877, 26,727, 26,844 and 27,555 has been modified and Law No. 25,323 repealed in order to improve and simplify registration processes, provide legal certainty to the employment relationship, extend the probationary period, redefine the validity of conventional salary deductions, authorise collective agreements to explore alternative compensation mechanisms to be borne by employers, and remove obstacles to productive activities.

Impact on labour litigation

One of the main issues in labour matters is the high level of litigation arising from labour relations. To reduce conflict, the decree repeals fines for lack of or deficient registration of labour relations as provided in Employment Law 24,013, which provided for fines that doubled or even tripled severance pay in cases where an employer had failed to or inadequately registered the labour relationship. It completely repeals Law 25,323 which doubled severance pay in the case of no or a deficient registration, and provisioned a 50 percent increase in severance payments when an employer was obliged to pay severance payments to an employee.

Thus, fines are no longer subject to the amount of a worker’s severance pay. The state, through the collection entity, becomes the creditor of an existing debt for amounts not received during the life of the employment relationship. The main purpose of this measure is to reduce litigation in fictitious labour conflicts, where some litigants sought to obtain money that was not rightfully theirs.

Regarding the update to labour credits resulting from court rulings, these cannot exceed the Consumer Price Index plus a pure interest rate of 3 percent per year under any circumstances. The purpose here is to end the impact on labour credits of Act No. 2764 of the National Chamber of Appeals of Labor, which substantially increased the amounts claimed in court.

With regard to dismissal with just cause, three behaviours considered serious labour misconduct have been added: (i) participation in blockades or occupations of premises; (ii) when during a direct action such as a strike, the freedom to work of those who do not participate in the strike is affected and entry of persons or things into the premises is prevented or obstructed; and (iii) damage is caused to company property or third parties.

Also, a limit is placed on the presumed existence of an employment contract, as it will no longer apply when the relationship is formalised through a lease of work or professional or trade services, and receipts or invoices are issued, or payment is made through corresponding banking systems.

The presumption of reckless and malicious conduct in the case of default or unjustified non-payment of severance payments has been removed. “Recklessness occurs when one party knows for certain that they are not right and yet, abusing jurisdiction, initiates a process that will cause harm to the other party” (CN Trab, Sala II, 28/9/90/ DT, 1991-A-70.). The penalty in these circumstances is payment of interest of up to two and a half times the rate charged by official banks for ordinary discount operations of commercial documents.

Additionally, Decree 70/2023 promotes the creation of a virtual platform for issuing employment certificates. Section 80 of the Labor Contract Law 20,744 provides for a fine equivalent to three salaries for failure to deliver employment certificates. Certification simplifies and facilitates employers’ ability to deliver certificates, and avoid a fine.

Promotion and reduction of employment costs

Another of the main problem is the high degree of informality in labour relations. The DNU extends an employee’s probationary period from three to eight months. During this period, either party may terminate the relationship without cause, without the right to compensation upon termination, but with an obligation to provide 15 days’ notice.

It also proposes creating a more agile and expedited mechanism for registering employment contracts. Further, it also streamlines employment contracts, as the parties may agree to modifications to essential conditions and request their approval from the regulatory authority.

Additionally, the decree authorises the issuance of electronic payslips. It broadens payment methods for remuneration, authorising other categories of entities deemed suitable, secure, interoperable and competitive by the authority in charge of the payment system, while eliminating the requirements for a payroll account. Previously, employers were required to open accounts in the worker’s name at authorised banks with ATMs within a radius of no more than two kilometres from the workplace in urban areas and 10 kilometres in non-urban or rural areas.

If a worker is re-employed under the same employer’s orders, any amounts previously paid due to termination may be deducted, based on the Consumer Price Index plus a pure annual interest rate of 3 percent.

Regarding dismissal without just cause, the decree excludes the 13th salary and semi-annual and annual payment items from the wage base. It allows the severance pay system to be replaced with a labour cessation fund, the cost of which is borne by the employee, with a monthly contribution not exceeding 8 percent of their remuneration. Furthermore, it authorises employers to contract a private capitalisation system to cover the cost of dismissal compensation, or a mutually agreed amount.

Regarding discriminatory dismissals, the decree establishes that the burden of proof lies with the party invoking the cause. In the event of a judicial ruling confirming discrimination, a special aggravated indemnity payment will be due, equivalent to 50 to 100 percent of the seniority indemnity. This aggravation cannot be accumulated with any other special regime establishing indemnity increases.

One novelty is the ability of self-employed workers to contract with up to five independent workers to carry out a productive venture, and benefit from a special regime. These relationships will be considered autonomous, meaning there will be no employment relationship between them. Self-employed workers must make individual contributions of a monthly fee covering social security, health insurance and work risk insurance.

Additionally, the decree guarantees that in the event of collective action taken by essential services, the provision may be reduced to no more than 75 percent of the normal service. Concerning transcendental services, coverage of 50 percent of the normal service must be guaranteed in the event of collective action measures. Moreover, it allows for collective bargaining agreements on extensive schemes of overtime, time banking, days off, and so on, if there is a minimum of 12 hours of daily rest between shifts.

The DNU maintains that unions will have the right to convene assemblies and congresses if they do not harm the company’s normal activities or affect third parties. It incorporates as prohibited conduct and serious offences those that affect the freedom of work of individuals who do not adhere to the action measures, cause blockages or takeovers of establishments, impede entry or exit from them, or cause damage to persons or property owned by the company.

Enrique M. Stile is a partner and Fernando E. Romano is an associate at Marval, O’Farrell & Mairal. Mr Stile can be contacted on +54 (11) 4310 0100 ext.1606 or by email: ems@marval.com Mr Romano can be contacted on +54 (11) 4310 0100 ext.61136 or by email: fro@marval.com.

BY

Enrique M. Stile and Fernando E. Romano

Marval, O’Farrell & Mairal