Venezuela’s new labor law referred to as the Organic Law of Labor and Workers (“LOTTT”), became effective May 7, 2013.  LOTTT establishes several critical labor reforms relevant to wage and hour requirements, maternity leave and pension requirements. All employers who are doing business in Venezuela or who are considering doing business in Venezuela should familiarize themselves with the specific provisions of LOTTT and review their current policies and practices to ensure compliance with the new requirements.

Some of the key reforms established by LOTTT are as follows:

• Pursuant to LOTTT, mothers are now entitled to six (6) weeks pre-natal leave and twenty (20) weeks post-natal leave for a total of twenty-six (26) weeks of leave. Under the law, fathers are also entitled to two (2) weeks of paternal leave. This provision of LOTTT also applies to parents’ leave rights in cases where there is an adoption of a child under three (3) years of age. Additionally, employers are required to provide nursing mothers with two (2) thirty (30) minute breaks per day if the appropriate facilities are available on site and two (2) breaks of one and a half (1½) hours per day if on site facilities are unavailable.
• Pursuant to LOTTT, overtime work will only be permitted if the work was authorized in advance by the employer or, in cases of emergencies, via subsequent notification. The law does provide an exception whereby the Ministry of Labor can modify the overtime limitations for certain employees providing essential services where overtime is required on a regular basis based upon the nature of the specific position. Additionally, the time within which the Ministry of Labor can rule on the request for authorization to work overtime is now reduced to forty-eight (48) hours and a non-response by the Ministry of Labor will be considered authorization of the application, subject to revocation by a subsequent administrative ruling.
• The workday is now limited to eight (8) hours and the workweek is limited to forty (40) hours reduced from the former limit of forty-four (44) hours.  Additionally, pursuant to LOTTT, work must be performed over a five (5) day period and provide for two (2) mandatory consecutive days of rest per work week, which must include a Sunday.
• The workday, in the case of a night shift, is limited to seven (7) hours per day and thirty-five (35) hours per week.  Additionally, work performed during a night shift must be compensated with a rate of pay of 30% more than the rate of pay paid to employees working the day shift.
• All employees are entitled to a meal and rest period every five (5) hours worked.
• Wage and hour restrictions applicable to the workday and workweek may be modified in limited circumstances pursuant to Article 175 of the LOTT if approved by the Venezuelan Ministry of Labor and if there is a private agreement between the employee and employer. However, even in those limited circumstances, the workday may not exceed eleven (11) hours, the employee still must receive two (2) consecutive days off every week and the total number of hours worked during an eight (8) week period cannot exceed an average of forty (40) hours per week.
• All employees in Venezuela now have the right to a pension after retirement. Notably, this provision includes providing pensions for stay at home mothers.

The Venezuelan government will be inspecting workplaces to ensure compliance with the new requirements established by LOTTT. Failure to comply with the provisions of LOTTT after June 15, 2013 will result in penalties to the employer.

Going global in Chile gives employers the opportunity to hire some of the leading professionals and creative talent in Latin American.  The official population of Chile is just under 16,000,000, of which over 51% is female.  Chilean economic policy is based on the free market principle, and Chile has a wide range of small, medium, and large private companies that have a great production, marketing, and investment capability.  Major industries include mining (copper), wine, tourism, chemical (oil, rubber and plastic), agriculture (salmon and forestry) financial services, and tobacco.  The Chilean Labor Code (“CLC”) governs labor and employment law. 

Types of Workers in Chile

 Two broad categories of workers are recognized in Chile - dependent workers  and independent workers.  The distinction between the two are analogous to employees (dependent workers) and independent contractors (independent workers) under U.S. employment laws.  The CLC regulates employment of dependent workers (e.g. employment contracts), but does not regulate or cover independent workers.  We will focus on dependent workers, however, please keep in mind that employment contracts of independent workers generally involve performance of technical or professional services with the absence of supervision and generally involves payment of a fee rather than a wage or salary. 

Chilean Employment Agreements Under the CLC

Article 9 of the CLC expressly states that an employment agreement can be formed orally or in writing.  If in written form, the agreement must be signed within 15 days after the employee starts to render his or her services to the employer or within five (5) days if the employee is hired for a specific task that will take less than thirty (30) days.  It is ideal and best business practice to have employment agreements in writing because in the absence of a written agreement, Chilean courts defer to an employee’s understanding of the terms and conditions of employment.  Therefore, a written employment agreement should at the very least state and provide the following information:
 
  • the date and place of the agreement
  • the complete identification of the parties, including employee’s nationality and date of birth,
  • the nature of the job,
  • the place of employment,
  • the work shift
  • the salary or monetary compensation,
  • the form and date of payment of salary or monetary compensation, and
  • any other terms and conditions of the employment agreement.
    (See Article 10 of the CLC)

Hiring and Employee Termination Rules and Restrictions

In Chile, employers must be mindful that companies with more than 25 employees must have a labor force that is at least 85% Chilean, however, specialized and technical employees who cannot be replaced by local employees are not considered as part of this legal requirement.

Employers have the freedom to hire, as long as benefits, minimum wage, work hours, vacation days, holidays, and bonuses are provided to employees in compliance with the law.  However, a caveat exists to Chile’s freedom to terminate.  Article 159 of the CLC provides that an employer and employee relationship can be terminated by: (1) mutual agreement; (2) the conclusion of particular task agreed upon; (3) force majeure (e.g. an unexpected events, for example, a natural disaster); (4) the employee’s death; (5) the expiration of an agreed upon term or duration of employment; and (6) resignation by the employee.  It is noteworthy to mention that pursuant to Article 161 of the CLC, employers must provide severance pay to employees who are entitled to such pay as required by law.  Generally, for all practical purposes, severance amounts equate to one month salary for each year of service, and the employee should be given at least 30 days advance notice.

In the event, the employer wishes to terminate the employment relationship, employers must justify such dismissals based on the following general permissible reasons under Article 160 of the CLC – if and when the employee engages in (1) immoral conduct; (2) sexual harassment; (3) destruction of the employer’s property; (4) illegal strikes; (5) material breach of the employment contract; (6) desertion of work; (7) unjustified absence from work; or (8) other serious misconduct or misbehavior.  In essence, for all practical purposes, termination of employees in Chile must be ‘with cause.’

Given that the reasons permitting employers to terminate employment relationships are quite broad, we have seen an increase in employment claims in Chile.  Hence, it is ideal to engage in best business practices to prevent potential unnecessary litigation.  Additionally, employers need to be mindful that under Chilean law, the judge rules on the merits of the case and also rules on the payment of attorneys’ fees and costs, along with other damages asserted, which give employers even a greater incentive to implement and engage in best business practices. 

Best Business Practices for Hiring and Firing

Indeed, the spirit of labor and employment relations in Chile aims for optimal relations between employers and their employees.  For best business practice in hiring, it is ideal to have written employment agreements with all dependent workers in compliance with the CLC.  Further, it is best business practice to have a termination documents, or “Finiquito,” which is a document that states the conditions and reasons for termination, provides notice of termination, and provides an itemization of the social benefits and monetary benefits to be received by the employee as part of the termination (e.g. compensation, severance pay, indemnification for unjustified firing without prior notice, payment of proportional vacations, etc.).  Although the Finiquito is not a mandatory document required by law, the Finiquito is the only legally binding way for an employer to prove the termination of employment and the conditions under which the employment was terminated.  If the Finiquito is duly signed by both the employer and employee before a notary republic, it constitutes and operates as irrefutable evidence of the parties’ obligations and serves as both, a preventive measure and strategic affirmative defense, against claims and lawsuits in Chilean Labor Courts. 

Brazilian Basics

As a leading and influential economy in Latin America (and the world), Brazil is an attractive country for employers and employees.  Among Brazil’s positive attributes are its rich and warm culture, amazing sites, trendy fashion, and great food!  Brazil’s vast and vibrant economy sources include natural resources and raw materials, solar energy and other forms of alternative energy, tourism, manufacturing of numerous consumer products, agricultural goods, and environmental science services and technology.  Indeed, Brazil led in the creation of Mercosur, the Free Trade Area of the Americas (FTAA), and he Group of 20 (G-20) coalition that represents developing country interests in the Doha Development Round of the World Trade Organization (WTO) negotiations.  However, companies, including multi-national entities, doing business or planning to do business in Brazil should become knowledgeable about this country’s generally employee-friendly employment and benefits laws.  Here, we discuss the fundamentals of Brazil’s employment laws, and some issues to follow to stay up to date.

Created in 1943, Brazilian labor and employment laws are directed by the Consolidacao das Leis do Trabalho (CLT) in conjunction with the Federal Constitution of 1988.  The CLT consists of over 900 articles and provides legal standards in the following areas:

  • Workplace Safety
  • Working Hours
  • Minimum Wage Requirements
  • Vacation Time
  • Employment Contracts
  • Protection for Women and Children
  • Worker’s Health Regulations
  • Union Organization and Union Fees *

The CLT also established the legal framework for the Brazilian labor courts system and related agencies, and provides for rules and procedures for labor and employment proceedings.  Since 1988, the CLT is interpreted and implemented hand-in-hand with the Federal Constitution of 1988.  The institution of the Federal Constitution of 1998 introduced new labor rights, as well as enhanced certain standards provided in the CLT.  Utilized in conjunction, the CLT and the Federal Constitution of 1988 provide rules and legal standards in the following areas:

  • Minimum Wage
  • 44 hour work week (8 hours a day)
  • Irreducibility of Wages
  • Unemployment Insurance
  • 13th Month Salary (also known as Christmas Bonus)
  • Profit Sharing
  • Overtime Compensation
  • Annual Vacation requirements
  • Maternity and Paternity Leave
  • Prior Notice of Dismissal
  • Retirement Benefits
  • Industrial Accident Insurance
  • Right to Strike
  • Pregnancy and Work Related Injury Leave
  • Executed Work Document (known as the Carteira de Trabalho e Previdencia Social)
  • Compensation of Commissions
  • Premiums (for night-shift, risk of work, transfers)
  • Allowances (for family, education, food vouchers)
  • Daycare Benefits
  
Under Brazilian law, an employer is anyone or any entity that assumes the risk of economic activity, and hires and manages personnel.  An employee is any person providing services to an employer on a regular basis and receives a salary.  Under this broad scope of employer-employee relationship, Brazil recognizes six types of working relationships:

Celetista

This is an employee who has a written and signed Carteira de Trabalho e Previdencia Social (CTPS) with an employer, which then requires proprt recordkeeping of all employment and payroll information, including but not limited to, job position, job description, salary, benefits provided (e.g. health care), contributions (e.g. social security), and taxes paid by the employer.  Based on Brazil’s ‘principle of continuity’ of employment , the general rule is that the CTPS is entered into for an indefinite time period.  An employment for definite period of time is an exception to the rule, and is permitted in limited circumstances (e.g. the nature of the work justifies the foreseeable period of time or if the contract is for the performance of a specific project). 

Trabalhador Cooperado

This is when an employee becomes a cooperative (or partner) of an employer.  Once an employee becomes an cooperative, the employee is no longer governed or managed under a CTPS, but instead follow the cooperative’s own statute or governing laws.  Depending on the employer, some cooperatives may perform work similar to employees but are in reality cooperatives of the employer. 
 
Trainees
 
Trainees are recent graduates entering the professional world, and more often then not, enter into a CTPS with the employer.  As trainees are new to the work force, they are provided training for the position they will eventually hold.

Interns

Interns are students at public and private academic institutions, which include high school, technical school, and higher education, who are hired on a part-time basis.  Interns can only work up to six hours a day and the part-time job position must be related to the major or a substantive course they are taking at their academic institution.  Interns receive paid vacations and transportation benefits/reimbursements under the law, and no other benefits are legally required.

Self-Employment

Self-employment is defined as any person who performs work or provides services to one or more companies without a traditional celetista employment relationship.  This usually includes independent contractors, if one is truly an independent contractor, because a self-employed person does not take directives from anyone, and provides services at his or her own costs and risks without fixed working hours.  A self-employed person is not entitled to benefits, such as paid vacations, 13th month salary, or meal and transportation reimbursements.

Domestic Worker

A domestic worker is a person providing services to a domestic household or individual.  The CLT provides specific rules and regulations for domestic workers, and are entitled to many of the benefits required by law for celetista employees, with some exceptions. 

Under these six types of working relationships, employers must ensure that they comply with the CLT, Federal Constitution of 1988, as well as state and local laws, which can be more stringent and more employee friendly.  Under the federal law, all state and local laws mimic the federal scheme and are permitted to provide more stringent requirements to protect employees and workers.  For example, the federal minimum additional overtime pay is 50% of the regular hourly rate, but it may be higher if established under the state or local laws.  Additionally, employers must be cognizant that collective bargaining agreements can also include a higher overtime compensation.  Another example, the Federal Constitution and its corresponding federal agencies implement a fixed minimum wage every year, but some states and local laws, as well as collective bargaining agreements, may place their own minimum wage on employers so long as the minimum wage is not inferior to the federal minimum wage. 

Best Business Practice in Brazil

Record keeping, especially payroll, is essential in Brazil because if an employee brings a grievance or complaint against an employer, it is the employer’s burden to demonstrate that the employee was properly paid in accordance with the law.  It is noteworthy to mention that payroll records should include holiday pay as required by law, as well as the 13th month salary as required by law.  Any payroll recordkeeping that falls short of the legal requirements compensation can create a huge risk for the employer.  The risk extends to companies who merge with or purchase another company in Brazil who did not employ the Brazilian employees before the acquisition.  Thus, if your company is considering a merger or purchase in Brazil, please ensure that you attain and review all payroll documents to ensure pre-acquisition compliance.

Keeping Up With Brazilian Trends

 Once your company is operating globally in Brazil, please be mindful that employees who receive emails and telephone calls after office hours may be eligible for overtime compensation under recent legislation enacted in January 2012.  Hence, many companies are instituting policies and procedures to ensure that the only emails sent by employees after the end of office hours are those that are both urgent and work-related.  

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* Since 1943, some laws in the CLT relating to employee rights (e.g. employee right to strike) have been amended.