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Law for modification of labor contracts

The President Carlos Alvarado signed into law a bill from Congress which was approved this last Saturday March 21.  This action is one of the many measures the current administration is taking to mitigate the impact the crisis created by the virus COVID 19.

This new law, allows employers to modify current labor contracts with the intention to reduce the amount of time an employee is currently devoting to work. Under the current labor code, it is not possible to make such modifications.

Under this measure, it will be possible for employers to reduce the current schedule for employees down to a 25% of actual levels, which means that if an employee is currently working 40 hours a week, it will be possible to reduce the schedule to 10 hours a week. This will allow businesses to reduce the costs of payroll and avoid to completely lay off the employee. The intention of the government is to avoid massive lay offs and keep people employed as much as possible, even if it means for a fraction of the current levels of employment.

According to the bill, employers must have suffered a reduction of 20% of their revenue to qualify for this privilege. The bill was presented to the floor of Congress this past Thursday by the Ministry of Labor Geannina Dinarte and was just approved by Congress this Saturday. The law must be published by La Gaceta to become official. Once the law is published we will be able to provide more details on how this will be implemented and who it will benefit.

 

 

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