Sources of regulation
As is the case in most Latin American countries, the 1925
Constitution of Chile regulates and protects the freedom to work. Art.
19(16)[1] of the current
version, amended in 1980, alludes to this concept in general terms.
The main legal source of regulation
on termination of employment is the Labour Code (LC), which was completely
recast in January 1994, setting out systematically, and in a single text,
all the laws amending the 1987 Code (Title V of the Act No. 19010 of December
1990 governs termination of employment).
In addition to the LC, the other sources of labour law
are collective agreements at the level of the undertaking or above, case
law and administrative precedents based on legal opinions. Collective agreements
may be formal or informal (sec. 314, LC). Legal opinions may be
issued by the Labour Secretariat, either ex officio or at the request
of the parties, in order to identify the content and scope of labour law.[2]
Although secs. 153-157 of the LC establish the obligation
to prepare work rules in the case of undertakings employing 25 or more
permanent workers, these rules relate mainly to “safety and health” standards,
which, apart from their contravention and respective sanctions, do not
affect termination of employment.
Scope of legislation
Although “labour relations between employers and workers”
are regulated by the LC and its supplementary laws, according to sec.
1 of the LC, it does not apply to “civil servants employed in centralized
or decentralized state administration, the National Congress and Judiciary,
or to workers in state undertakings or institutions or workers employed
in bodies to which they contribute, participate or are represented, provided
that such workers are governed by a special law”, i.e. the Administrative
Statute, Act No. 18834. Thus, the provisions of the LC apply to those aspects
not regulated by these special statutes, such as the area of maternity
protection.
Independent workers are also excluded (sec. 8),
except where the LC refers specifically to them.
Services rendered by persons who work either
directly with the public, or intermittently or sporadically at home, are
not considered as involving employment contracts, and therefore fall outside
the LC (sec. 8). Graduates of institutions of higher education or
professional technical training programmes, for a specified period, are
also excluded while they are fulfilling work-experience requirements.
Home work, which is regarded as a dependent or independent
relationship determined by the parties themselves, is governed by special
legislation (Act No. 19250).
Contracts for apprentices, agricultural
workers, stevedores, seafarers and casual port workers, and workers in
private homes (domestic workers) are covered as special contracts under
Title II of the LC.
Contracts of employment
Pursuant to sec. 7 of the LC, an individual contract
of employment is an agreement by which the employer and the worker enter
into a reciprocal obligation, by which the latter agrees to render services
under the supervision and immediate direction of the former, who agrees
to pay an agreed remuneration for those services.
The LC makes no provision for a probationary period but
nothing prevents such provisions from being established through an individual
or collective agreement.
Within the scope of the general regulation, temporary,
part-time, replacement and other forms of work may be performed, although
there is no special regulation promoting such forms of work.
The LC makes no presumption that the contract of employment
is indefinite when the corresponding period of service is not expressly
specified. In fact, in the absence of a written contract, such stipulations
will be made by the worker (sec. 9).
Fixed-term contracts may be made for a maximum duration
of one year. The continued performance of services after this period transforms
the contract into one of indeterminate duration (sec. 159).
Termination of employment
Termination of contracts of employment, not at the initiative
of the employer, may be effected:
- by
the mutual agreement of the parties;
- through
the resignation of the worker (with at least 30 days’ notice);
- through
the death of the worker;
- upon
expiry of the agreed term of the contract or completion of the service
for which the contract was made;
- by
unforeseen events; and
- by force
majeure.
Dismissal
Chile abolished the concept of desahucio (that is,
dismissal without cause) in 1990 and replaced it by requirements of the
undertaking, establishment or service, resulting from streamlining or modernization
activities, reduced productivity, changes in market or economic conditions
which impose the need to lay off one or more workers, and the worker’s
lack of technical or job skills (sec. 161(1)). Nevertheless, desahucio has
been retained as grounds for the dismissal of domestic staff; persons occupying
positions of trust; and persons representing the employer, such as managers,
assistant managers, agents or other types of representatives, provided
that they have general administrative competence.
The employer may dismiss a worker for misconduct (sec.
160, LC) or on the grounds of failure to meet the requirements of
the undertaking (sec. 161, LC). The contract of employment may
be terminated without entitlement to compensation in the following instances:
- dishonesty, acts of violence, insult or serious immoral behaviour duly proven, and/or sexual harassment; [3]
- dishonesty,
acts of violence, insult or serious immoral behaviour duly proven;
- negotiations
conducted by the worker within the normal functions of the enterprise
and which might have been expressly forbidden, in writing, within the terms
of the contract made with the employer;
- unjustified
absence from work for two consecutive working days, two Mondays within
a period of one month or a total of three days within the same period;
similarly, absence which is unjustified or without advance notice by
a worker responsible for a process, task or machine when such absence entails
disruption in the rest of the service or production process;
- abandonment
of work by the worker, which is defined as: leaving the workplace without
proper notice or valid reason during working hours, and without authorization
from the employer or his or her representative; and unjustified refusal
to perform the assigned task under the agreed terms of the contract of
employment;
- acts,
forgetfulness or carelessness seriously affecting the safety or operation
of the establishment, safety or activity of the workers, or their health;
- deliberate
material damage to the plant, machinery, tools, work implements, goods
or merchandise; or
- serious
breach of the obligations under the contract of employment.
The LC prohibits dismissal without just cause and subjects
the dismissal of women on the grounds of maternity to prior authorization
of a judge. This protection covers the period from conception up to one
year after post-natal leave, and renders dismissal of a female worker during
this period null and void.
Notice and prior procedural safeguards
Dismissal without cause (desahucio) of persons in
positions of trust, representatives or domestic staff must be carried out
in writing, 30 days in advance, and copied to the relevant labour inspectorate.
Advance notice is not required if the employer pays the worker cash compensation
equivalent to the last monthly remuneration earned.
Written notice of justified dismissal should be delivered
to the worker, personally or by registered letter, to the domicile stated
in the contract. Such notice should state the reasons for dismissal, the
facts on which dismissal is based and the status of social security contributions
(sec. 162, LC), and should be copied to the labour inspectorate.
The letter must be sent within three working days following the removal
of the worker.
If the reason is, as stated in sec. 161 of the LC,
based on the “requirements of the undertaking”, the worker must be given
notice, copied to the relevant inspectorate, at least 30 days in advance,
except if compensation is paid corresponding to the last monthly pay earned.
Furthermore, the notice must precisely indicate the total amount to be
paid in accordance with the provisions of sec. 163.
Failure to comply with the above-mentioned requirements
(sec. 162, LC) will nullify the dismissal, without prejudice to the prescribed
administrative sanctions.
Judicial authorization is required for the dismissal of
persons entitled to trade union immunity or women entitled to maternity
protection.
In the case of dismissals made on the grounds of the requirements
of the undertaking, there is no requirement for prior consultation with
trade unions or for administrative intervention.
Severance pay
In the case of the requirements of the undertaking (sec.
161, LC), compensation is payable (unless an individual or collective
agreement is made with more favourable terms) equivalent to 30 days of
the last monthly remuneration earned, for each year of service worked
and fraction greater than six months. The upper limit is 330 days for
workers with a contract in force for one year or more (sec. 163,
LC).
If a dismissal for misconduct or for the requirements of
the undertaking is declared unjustified, unfair or unlawful, the above-mentioned
compensation is increased by 20 per cent (which may be further increased
by up to 50 per cent in specific cases if there is deemed to be no plausible
reason for dismissal).
There is the possibility for an agreement to be made on
a compensatory indemnity, from the beginning of the seventh year of employment
up to the end of the 11th year of the employment relationship. (For persons
hired after 14 August 1981 the limit of 11 years is set; there is no limit
for persons hired before this date. Under these agreements, a contribution
of 4.11 per cent to 8.33 per cent of the remuneration is deposited in an
insured pension fund (sec. 164, LC).)
Regardless of the cause of the termination of employment,
workers in private homes are entitled to compensation paid by the employer
in an amount equivalent to that which has been previously described (see
above).
Avenues for redress
A worker who feels his or her dismissal is unjustified
or improper may bring a claim before the Labour Court within 60 working
days (secs. 170-171, LC).
If a dismissal for the requirements of the undertaking is declared unjustified, unfair or unlawful by the court (sec.168, LC), the above-mentioned compensation is increased by 30 per cent (sec. 161, LC). If the court rules unjustified termination of employment due to unforeseen circumstances or force majeure (sec. 159, LC), the compensation is increased by 50 per cent. If the grounds for dismissal are for unduly conduct or serious breach of obligations set forth in the contract (sec. 160, LC), the compensation is increased by 80 per cent. Finally, the increase in compensation will be 100 per cent if the court rules that there were no plausible grounds for dismissal (Labour Code, Sec. 168 as amended by Act 19.759 of 5 October 2001).
Act. No. 20.005 of 18 March 2005 contains provisions on sexual harassment to be inserted in the LC. If sexual harassment is confirmed by the internal investigative body of the employer, the perpetrator is to be dismissed without compensation. If the perpetrator is the victim's boss, the victim can resign at will and is entitled to receive the compensation normally paid when a worker resigns plus an additional 80 per cent. In both of the aforementioned scenarios, the victim maintains the right to pursue legal action in the courts and demand additional compensation for moral and psychological damage.
Further Information
[1] Unlike the texts in other countries of
the region, the Constitution does not expressly mention the right to
security of employment or protection against unjustified dismissal.
[2] Legal opinions are binding only upon civil servants. Although not
binding on the judiciary, they are taken into serious consideration. If
there is a discrepancy between an administrative decision and case law
of the court, however, the latter prevails.
[3] Act. No. 20005 of 18 March 2005 adds provisions on sexual harassment to the LC.
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