CrossBorder Employment and Global Mobility Issues in Europe and Latin America A Closer Look at Inter

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Cross-Border Employment and Global Mobility
Issues in Europe and Latin AmericaA Closer Look
at International AssignmentABA 2006 Spring
MeetingApril 4-8, Waldorf Astoria NY, NY
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Rules governing labor relationships

• Argentine Constitution
• Labor Laws
• Collective bargaining agreements
• Agreements between the parties
• Customs in the workplace

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Argentine Constitution

• Section 14 of the Argentine Constitution
  warranties to all Argentine inhabitants
  (residents) the right to work and to develop any
  licit industry.
• Section 14 bis of the Argentine Constitution
  fixes all minimum rights that must be guaranteed
  to all workers, such as
• - Decent and equal conditions of employment
• - Limited working day
• - Paid rests and vacations
• - Fair remuneration
• - Minimum salary
• - Equal remuneration for equal task

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Labor Contract Law (LCL)

• Employment contract An employment contract shall
  exist whenever an individual accepts the
  obligation to carry out acts, execute works or
  supply services for the benefit of another and in
  the employment of the latter for either a
  specific or unspecified period of time, in
  exchange for the payment of a remuneration.
• The LCL is based on certain principles, such as
• - Principle of territoriality.
• - Principle of public order.
• - No waiver of labor rights principle.
• - Principle of interpretation most favorable to
  employee.
• - Principle of conservation of contract.
• - Principle of existence of labor relationship

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Principle of territoriality

• According to Section 3 of the LCL, any employment
  contract meant to be performed in the territory
  of the Republic of Argentina shall be governed by
  the LCL, regardless of its place of execution or
  the choice of law made by the parties.
• The principle of territoriality applies to labor,
  social security and tax issues.

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Principles of public order and no waiver of labor
rights

• Section 7 of the LCL provides that the employer
  must comply with all the provisions of the LCL
  and any other applicable labor regulation. The
  employer can establish better terms than those
  provided by law for the employee, but under no
  circumstances worst terms can be agreed upon.
• According to section 12 of the LCL, all
  agreements between the parties suppressing or
  reducing the rights foreseen in the LCL, the
  professional statutes or the collective
  agreements, shall be considered null and void.

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Remuneration and benefits

• According to Section 103 of the LCL, remuneration
  is understood as the compensation received by the
  employee under a labor agreement in consideration
  for its services.
• All remunerations corresponding to an employment
  contract performed in Argentina must be
  registered in Argentina.
• As regards to remunerations, employers labor
  documentation mainly consists of a remuneration
  and wages book (Section 52 of the LCL).
• Registration of remunerations in such book must
  be made regardless of
• Place of payment.
• Location of actual beneficiary of the services.
• Nature as in cash or in kind payment.

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Remuneration and benefits (contd)

• Remunerations may be paid either in cash or in
  kind.
• Remunerations in kind are limited to 20 of the
  employees gross payment.
• Remunerations may be paid upon a monthly, daily
  or hourly basis.
• The rates of overtime pay are 150 to 200 of the
  base rate.
• Employees are entitled to annual paid holidays,
  which vary from 14 to 35 calendar days each year
  depending on length of service.

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Remuneration and benefits (contd)

• Other remuneration and benefits
• Mandatory semi-annual bonus which is paid in two
  installments, in June and December, which
  installments are equivalent to 50 of the monthly
  wage.
• Performance or otherwise discretionary bonuses
  paid upon an annual, semi-annual or quarterly
  basis ()
• Stock option or purchase plans ()
• Company cars ()
• Cellular phones ()
• Golden parachutes ()
• () Not mandatory

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Remuneration and benefits (contd)

• According to certain court precedents
• Performance or otherwise discretionary bonuses
  shall be considered part of the compensation
  package (i.e. may be claimed by the employee and
  shall be subject to social security payments)
  once granted on a regular basis.
• Financial benefits obtained under stock option or
  purchase plans are part of the employees
  remuneration.
• Company cars and cellular phones paid by the
  employer may be considered remuneration if they
  are used for employees personal purposes.

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Foreign exchange regulations related to
remunerations

• From a labor point of view, payments outside
  Argentina to Argentine resident employees are not
  permitted.
• Remunerations must be paid in Argentina in
  Argentine Pesos. They may be agreed upon in
  foreign currency, though they have to be paid in
  Argentine Pesos.
• If nevertheless made, from a foreign exchange
  point of view such off-shore payments may only be
  made in foreign currency, provided such foreign
  currency (i) has been held outside Argentina
  since December 2001 or (ii) has been obtained
  abroad without entering Argentina and is not
  subject to repatriation requirements.
• Transactions that infringe foreign exchange
  regulations may be subject to sanction under the
  criminal foreign exchange regime

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Contributions and Withholdings
Social Security

• Mandatory social security contributions and
  withholdings are calculated as a percentage of
  the monthly remuneration of the employee.
  Employees payments are made only on AR4,800 of
  his/her salary, whereas employers payments are
  calculated on the full remuneration.
• Some employees are exempted from social security
  payments in Argentina due to express exemptions
  for certain professions provided for in Argentine
  social security laws or under the terms of
  certain social security agreements executed
  between Argentina and other countries.

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Contributions and Withholdings (contd)
Social Security (contd)

• Employer Employee
• Family allowance and
• unemployment and
• pension funds 17 to 21 10 to 14
• Health care organizations 6
  3

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Contributions and Withholdings (contd)
Collective Bargaining Agreements

• Under certain collective bargaining agreements,
  special contributions must be made to the
  applicable Trade Union.
• These contributions are withheld by the employer
  from the employees remuneration.

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Contributions and Withholdings (contd)
Income Tax

• Applicable to all Argentine resident employees
  with a annual income in excess of AR22,020.
• Ranges from 9 to 35, depending on the
  employees earnings and deductions.
• Although it is a personal obligation of the
  employee, it must be withheld by the employer and
  both are joint and sevarlly liable for its
  payment.

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Termination of indefinite term labor contracts

• An employee may resign at any time and must give
  the employer a fifteen-day prior notice.
• The employer may dismiss an employee with or
  without cause at any time.
• Upon dismissal without cause, prior notice must
  be given 1 or 2 months in advance, depending on
  the employees length of service.
• Such prior notice may be substituted by payment
  equivalent to the period of the omitted prior
  notice.

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Severance payment

• Upon dismissal without cause, severance payment
  must be paid to the dismissed employee.
• Severance payment includes, but is not limited
  to, the compensation for seniority, compensation
  for lack of prior notice and the integration of
  the month of dismissal.
• The compensation for seniority equals one time
  the best monthly, normal and usual salary per
  each of employment or fraction greater than three
  months.
• Such calculation basis may not be in excess of
  three times the average monthly salary provided
  for in the collective bargaining agreement for
  the corresponding category at the time of the
  dismissal (the Cap).
• The Argentine Supreme Court held that whenever
  application of the Cap implies a reduction of the
  calculation basis greater than 33 of the
  employees remuneration, the Cap is
  unconstitutional (in re Vizzotti, Carlos vs.
  AMSA about Dismissal).
• Although such doctrine was binding only for the
  specific case and the Cap is still in full force
  and effect, many lower courts are adopting and
  applying the Supreme Court criteria.

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Non-compete agreements

• An employee has a duty of loyalty towards the
  employer and is barred from engaging in
  competitive activities during the period of his
  employment.
• Key employees are normally required by their
  contracts to work exclusively and upon a full
  time basis for their employers.
• In Argentina, non-compete clauses covering
  post-employment periods are of doubtful
  enforceability due to the constitutional
  principle of freedom to work.
• Non-compete clauses executed in countries other
  than Argentina are in principle unenforceable in
  Argentina.

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Mandatory Insurance

• All workers employed in the private sector are
  protected by the provisions of the Law No. 24,557
  and must be insured by a Work Risk Insurer.
• The Work Risk Insurer must compensate and provide
  medical attention to any employee who suffers a
  labor-related accident or illness.
• In addition, a life insurance policy covering all
  employees must be purchased and afforded by the
  employer. The minimum insured amount is AR6,480
  per employee.

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Emergency Law

• The Public Emergency and Exchange Regime Law No.
  25,561 amended the labor framework regarding the
  termination of employment.
• Under such law, labor contract terminations
  without just cause are suspended.
• According to amendments to the Emergency Law
  currently in force, any employer who violates
  such suspension and carries out a dismissal
  without cause shall pay 50 of the compensation
  for seniority in addition to regular severance
  payment.
• The suspension of dismissals shall be in full
  force and effect until the unemployment rate is
  lower than 10 (currently at 11.1) or until
  otherwise decided by the Argentine Government.

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Argentine jurisdiction
Section 19 of Law No. 18,345 (Labor Justice
Organization and Procedure) provides that the
competence of Argentine labor courts, including
territorial competence, may not be extended or
otherwise waived by the parties.
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Law No. 25,871 (Migration Law) Immigration
Procedures

• Individuals who wish to enter the Republic of
  Argentina in order to develop a paid legal
  activity must previously obtain a temporary
  residence permit.
• Steps
• (a) application before the Migration Authority to
  obtain an entrance permit (permiso de
  ingreso)
• (b) application before the Argentine Consulate in
  the country of origin to obtain a Visa for a
  renewable 1-year period and
• (c) application before the Registro Nacional de
  las Personas to obtain the Argentine identity
  card (Documento Nacional de Identidad). This
  document is not mandatory but useful.

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Key issues and risks
No provisions may be made to the extent that such
provisions grant benefits lower than the
threshold of the LCL and applicable
law. Benefits granted in prior assignments
should not be eliminated or adversely
modified. Non-compete clauses agreed upon in
foreign countries would in principle be
unenforceable in Argentina.
Agreements between the parties
Risk Written consent or agreement by employee,
even by written means, may be disregarded, if
lower than applicable law.
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Key issues and risks (contd)

All remunerations should be registered in
Argentina, independently of the place of actual
payment, location of actual beneficiary or
otherwise. Certain benefits granted to
employees, such as stock option or purchase
plans, company cars and cellular phones, may be
considered remuneration. If payment is made
abroad, foreign exchange controls must be
complied with.
Remunerations
Risk Remuneration and benefits granted abroad or
in Argentina, but not registered in the labor
documentation, may be considered unregistered
remuneration. Employer may be subject to material
fines.
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Key issues and risks (contd)
Due to the principle of territoriality, Argentine
law would govern the termination of employees as
well as their conditions during the development
of the labor relationship. Upon dismissal
without cause, severance payment plus additional
50 regulated by emergency regulations should be
paid. Under certain circumstances, employees may
consider themselves dismissed (constructive
dismissal).
Terminations
Risk In the event of a conflict, the employee
may consider him/herself dismissed in order to be
terminated in Argentina and benefit from
employee-biased laws. Employee may claim that
his/her length of service should include years of
service in other countries, as well as that
his/her remuneration should comprise benefits not
registered in the labor documentation of the
employer (please refer to previous slide).
Payment of regular bonuses and stock options may
also be, and usually are, claimed upon
termination.
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Key issues and risks (contd)
All labor relationships performed in Argentina
are governed by Argentine law and subject to
Argentine jurisdiction. Argentine law may only
be replaced by the parties by a law more
favorable to the employee. Argentine
jurisdiction may not be waived or extended by the
parties. The employee should not commence to
work in Argentina until a working Visa is
obtained in the country of origin.
Others
Risk Provisions or agreements less beneficial
than applicable law may be disregarded in the
event of a conflict. Employers who employ foreign
individuals who have not obtained their Visa
may be subject to fines by the Migration
Authority and labor and social security
contingencies, as such employees would not be
duly registered. Employees may be expelled from
Argentina.
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Enrique M. Stile Av. Leandro N. Alem
928 (C1001AAR) Buenos Aires - Argentina Tel
(54-11) 4310-0100 / Fax (54-11)
4310-0200 e-mail EMS_at_marval.com.ar