“The issue of collective suspension of the employment contract takes on special importance in the current reality that our country is experiencing, particularly for companies and workers.”
It is a tool that allows for the stability of employment contracts in times of crisis. In this sense, it offers a valuable alternative for companies facing economic, financial, technical, or other types of difficulties, and that—among other measures—are considering restructuring through staff reduction in order to avoid the risk of shutting down operations due to high operating costs.
In practice, I have observed how some companies, out of lack of knowledge of other legal mechanisms, tend to resort directly to dismissing workers. However, this is neither the only nor the best alternative available to employers facing a crisis. Terminating employees leads to the loss of valuable human talent and increases the company’s short-term debt burden, as it must pay the accumulated labor liabilities. Additionally, in cases where workers are dissatisfied with restructuring measures, the company may eventually face labor lawsuits. Such dismissals also decapitalize the company, increase illiquidity, and prevent the employer from investing limited resources back into business operations—all of which heightens the risk of closure and potential extinction.
The Labor Code includes a little-known mechanism that can be used by any company (micro, small, medium, or large) while it works to improve its economic situation: the collective suspension of the employment contract.
This mechanism maintains the employment relationship between the worker and the company while relieving the employer from having to assume the cost of labor liabilities, which is required in cases of dismissal. It also allows the employer to invest limited resources into the business, thereby helping to overcome the crisis and increase the chances of success with less debt. Consequently, it is highly beneficial for both employers and workers within the current national context.
In labor law, the suspension of an employment contract occurs when its main effects and obligations—service provision by the employee and salary payment by the employer—are temporarily halted (Cabanellas de Torres, G. (2006) Diccionario Jurídico Elemental. Buenos Aires, Argentina: Heliasta). In our legislation, suspension is defined as the temporary interruption of the execution of the employment contract. It may originate from either party and does not terminate the established legal relationship. It may be partial or total with respect to the contract’s fundamental obligations and may be individual or collective depending on the number of workers involved.
Regarding collective suspension, it should be noted that this applies when part or all of the workers of a company or workplace are affected due to one of the following causes not attributable to the employer:
a) Lack of raw materials;
b) Closure of the company or workplace ordered by a competent authority for preventive or corrective hygiene and safety reasons;
c) Temporary closure of the company or workplace for technical or economic reasons;
d) Force majeure or unforeseeable circumstances that directly, immediately, and necessarily result in the suspension of work.
Comisión Bipartita
For any collective suspension, mutual agreement between the employer and the workers should be sought through a bipartite commission. Except in cases of unforeseeable circumstances or force majeure not attributable to the employer and duly verified, all collective suspensions must be previously authorized by the Ministry of Labor through the Departmental Labor Inspectorates. These offices must give a hearing to both the workers and the employer, or their legal representatives, and must issue a decision within six days of the request, determining whether or not there is a justified cause for the suspension.
For the suspension of an employment contract to be legal, it must be processed in accordance with the provisions of MINISTERIAL AGREEMENT No. JCHG-019-12-08, approved on December 10, 2008, and published in La Gaceta, Official Gazette No. 237 on December 12, 2008, concerning the ADMINISTRATIVE ORAL LABOR PROCEDURE. The request must meet the following requirements:
a) Designation of the authority responsible for handling the procedure;
b) Identification of the party submitting the request and their representative;
c) Identification of the person against whom the request is directed and the address where they should be notified;
d) Facts on which the request is based and its legal justification;
e) Specific evidence to be used in the case;
f) Address for notifications in the city where the competent administrative authority resides.
For any collective suspension, mutual agreement between the employer and the workers should be sought through a bipartite commission. Except in cases of unforeseeable circumstances or force majeure not attributable to the employer and duly verified, all collective suspensions must be previously authorized by the Ministry of Labor through the Departmental Labor Inspectorates. These offices must give a hearing to both the workers and the employer, or their legal representatives, and must issue a decision within six days of the request, determining whether or not there is a justified cause for the suspension.
For the suspension of an employment contract to be legal, it must be processed in accordance with the provisions of MINISTERIAL AGREEMENT No. JCHG-019-12-08, approved on December 10, 2008, and published in La Gaceta, Official Gazette No. 237 on December 12, 2008, concerning the ADMINISTRATIVE ORAL LABOR PROCEDURE. The request must meet the following requirements: a) Designation of the authority responsible for handling the procedure; b) Identification of the party submitting the request and their representative; c) Identification of the person against whom the request is directed and the address where they should be notified; d) Facts on which the request is based and its legal justification; e) Specific evidence to be used in the case; f) Address for notifications in the city where the competent administrative authority resides.
When it concerns requests for collective suspension of employment contracts, the following additional requirements must be included: g) Identification of the employees whose contracts are requested to be suspended; h) Their job positions and salaries; i) The period for which the suspension is requested; and j) The minutes of the bipartite commission must be attached to the request.
Only after all the above requirements have been met, and following a single hearing before a Labor Inspector—where the employer’s representative and a representative of the workers are present—the Labor Inspector will proceed to authorize the suspension.
Once the collective suspension is authorized
The employer has the legal obligation to pay workers at least six days of wages (which may be improved under Fundamental Principle III of the Labor Code) for the entire period covered by the authorized suspension. During this time, the obligation to pay wages and, correspondingly, the obligation of the employee to provide services are both suspended. Likewise, this suspension period does not generate labor benefits (except in the case of a pregnant worker who is on pre- or postnatal leave); however, benefits accumulated prior to the suspension remain in effect.
As part of the negotiation with workers and to maintain their relationship with the company, it is recommended that the employer assume the cost of paying the social security contributions (INSS), so that workers continue to enjoy the benefits of the social security system.
In practice, the Ministry of Labor authorizes the suspension for three months in two stages: initially for two months, extendable for one more month, provided that the company can demonstrate that the crisis situation persists. It is also important to note—though somewhat controversial—that during the authorized suspension period, the Ministry of Labor maintains the position that the worker cannot resign from the company, precisely to avoid putting the company at risk by having to assume the cost of labor liabilities.
It is a labor suspension, not a dismissal
It is important to emphasize that since this is a suspension and not a termination of the employment contract, the main obligations that are suspended are the payment of wages (by the employer) and the provision of services (by the worker). However, other obligations remain in force, such as the employer’s duty to maintain due consideration and respect toward workers, refraining from verbal, physical, or passive mistreatment and from any act that could affect their dignity or decorum; and the worker’s duty to behave respectfully toward the employer and coworkers, to maintain proper confidentiality regarding the company’s technical, commercial, and manufacturing secrets, among others.
If these continuing obligations are breached, the employer may request dismissal for just cause against the worker, based on dishonesty, serious misconduct against the life or physical integrity of the employer or coworkers, or injurious or slanderous expressions against the employer that cause discredit or economic harm to the company, among other reasons.
Once the causes that motivated the collective suspension have ceased, or the period authorized by the Departmental Labor Inspector has expired, the inspector will notify the workers of the resumption of work. Employers must provide the inspector with the relevant information requested.
Through the collective suspension of employment contracts in certain non-essential areas of the business, the company benefits by reducing operating costs while achieving greater profitability or capitalization. At the same time, it maintains the employment relationship with workers without assuming the cost of labor liabilities or exposing itself to potential labor claims, among other benefits, which can be further analyzed in detail should you consider implementing this mechanism in your company.
Edwin Yamil Fuertes Zeledón
Consultor Laboral. Máster en Derecho Laboral y Seguridad Social.
8384 9545
