Employment Contract Regulations
Third Art
Employer, Worker, and Self-Employed Definitions
a) Employer: A person or entity utilizing the intellectual or material services of one or more individuals under an employment contract.
b) Worker: Any natural person performing intellectual or material personal services, with low dependence or subordination, under an employment contract.
c) Self-Employed: An individual who, in performing the activity in question, does not depend on any employer or worker under their authority.
Art 9.O: Employment Contract Formalities
The employment contract is consensual and must be in writing within the timeframe specified in the following clause. It should be signed by both parties in two copies, one retained by each party. An employer who fails to formalize the contract in writing within fifteen days of the worker starting (or five days for contracts with a duration of less than thirty days) will be subject to a tax penalty.
If the employee refuses to sign, the employer must send the contract to the respective labor inspectorate to obtain the signature. If the worker persists in their refusal, they may be dismissed without compensation, unless they can prove they were hired under different conditions than those outlined in the written document.
If the employer does not exercise this right within the specified period, the lack of a written contract will result in the terms declared by the worker being presumed as the terms of the contract. The employer must maintain a copy of the contract at the workplace.
Article 10: Employment Contract Stipulations
The employment contract must contain at least the following:
- Place and date of the contract.
- Identification of the parties, including nationality, dates of birth, and income of the worker.
- Nature of the services and the location where they will be provided. The contract may include two or more specific functions, whether alternative or complementary.
- Amount, form, and period of payment of the agreed remuneration.
- Duration and distribution of working hours, unless a shift-work system is in place.
- Term of the contract.
- Other agreements made by the parties.
Additional benefits provided by the employer (housing, utilities, food, etc.) should also be noted. If the hiring requires the worker to relocate, this should be documented. If the services involve the worker’s deployment, the workplace is considered the entire geographical area of the company’s activity.
Article 11: Contract Amendments
Contract amendments must be in writing and signed by both parties. Written records of wage adjustments are necessary, even if resulting from legal adjustments or collective agreements. The worker’s remuneration on the contract must be updated at least annually.
Article 12: Employer’s Right to Alter Services
The employer may alter the nature of services or the work location, provided the tasks are similar and the new location is within the same city, without affecting the worker’s remuneration.
For changes affecting the entire enterprise, the employer may alter working hours by up to sixty minutes with at least thirty days’ notice. The affected employee may appeal to the labor inspectorate within thirty working days.
Section 42: Remuneration Components
Remuneration includes:
- Basic Salary: Fixed, compulsory monetary stipend paid in equal periods, no less than the minimum monthly wage.
- Overtime Bonus: Remuneration for overtime work.
- Commission: Percentage of sales or purchase price, or other operations, made with the worker’s cooperation.
- Profit Sharing: Proportion of profits from a business or company.
- Bonus: Portion of profits paid to the worker.
Article 146: Domestic Workers
Domestic workers are individuals engaged in ongoing service, full or partial, in the home of one or more individuals or a family, performing cleaning and home care. Special rules apply to those working in charitable institutions serving individuals requiring special protection or assistance. These provisions also apply to private home drivers.
Article 147: Probationary Period
The first two weeks of work are considered a probationary period, during which either party may terminate the contract with three days’ notice and payment for time served.
Article 148: Death of Head of Household
Upon the death of the head of household, the contract continues with relatives who lived in the house and continue to reside there, assuming joint responsibility for the contract’s obligations.
Article 149: Working Hours for Domestic Workers
Domestic workers not living with the employer may not exceed 12 working hours daily, including a one-hour break. Live-in workers are not subject to fixed hours but should have at least 12 hours of rest daily. A minimum of 9 hours of uninterrupted rest is required between workdays.
Article 150: Weekly Rest for Domestic Workers
Non-live-in domestic workers’ weekly rest is governed by Article 146. Live-in workers are entitled to a full day of rest each week, divisible into two half-days upon request. They also have the right to rest on public holidays, which can be taken on a different day by written agreement, within ninety days following the holiday.
Article 151: Remuneration for Domestic Workers
Remuneration may include cash, food, and lodging if the worker lives with the employer. The minimum cash wage is 75% of the minimum monthly wage. Part-time workers are entitled to a proportional minimum wage. Food and lodging are not taxable for pension purposes.
Article 152: Illness and Contract Termination
In case of illness, the employer must notify social security and maintain the worker’s position without pay for a period depending on their length of service. Contagious diseases entitle either party to terminate the contract.
Article 159: Contract Termination Cases
The employment contract ends in the following cases:
- Mutual agreement.
- Employee resignation with thirty days’ notice.
- Worker’s death.
- Expiration of the agreed term (maximum one year, except for managers or those with technical diplomas, which can be up to two years).
- Conclusion of the work or service.
- Unforeseeable circumstances or force majeure.
Article 160: Termination Without Compensation
The contract can be terminated without compensation for the following reasons:
- Serious misconduct (lack of probity, sexual harassment, physical or verbal assault, immoral conduct).
- Unauthorized business activities.
- Unexcused absences.
- Abandonment of work.
- Acts affecting safety or health.
- Intentional material damage.
- Serious breach of contract obligations.
Article 161: Termination with Cause
The employer may terminate the contract for company needs (rationalization, modernization, low productivity, market changes). Managers, workers in positions of trust, and domestic workers can be dismissed with thirty days’ notice or equivalent compensation. Workers on sick leave, industrial accident, or occupational disease leave are exempt from this article.
Article 162: Notice of Termination
Written notice of termination must be given to the employee within three working days (six days for force majeure), with a copy to the Labor Inspectorate. For terminations under Article 161, thirty days’ notice or equivalent compensation is required. The employer must inform the worker of their pension contribution status.
Article 163: Years of Service Compensation
For contracts lasting one year or more, terminated under Article 161, compensation is due based on years of service, as agreed upon or as legally stipulated (30 days’ pay per year, up to 330 days). This is compatible with notice compensation. Specific rules apply to domestic workers.
Article 164: Alternative Compensation Agreement
From the seventh year of employment, the parties can agree to replace the statutory compensation with an allowance payable upon termination, funded by employer contributions (at least 4.11% of monthly salary).
Article 165: Administration of Alternative Compensation
The employer deposits the agreed percentage into a special savings account managed by the worker’s pension fund administrator. These funds can be withdrawn upon termination of employment and are subject to specific regulations.
Article 166: Pension System Affiliation
Workers under this alternative compensation scheme are affiliated with a pension fund administrator solely for contribution collection and administration.
Article 167: Agreements for Prior Service Periods
Agreements can cover prior service periods, with the employer depositing a contribution (at least 4.11% of monthly salary) into the special savings account.
Article 168: Employee Appeal of Termination
Employees who believe their termination is unjustified can appeal to the court within sixty working days. The judge may order increased compensation depending on the nature of the dismissal.
Article 169: Termination under Article 161
Termination under Article 161 involves an offer of compensation. The employee can challenge the application of this ground in court.
Article 170: Payment of Compensation
Employees can demand payment of compensation within sixty days if not already paid.
Article 171: Employee-Initiated Termination
If the employer commits certain offenses, the employee can terminate the contract and claim compensation in court.
Article 172: Calculation of Compensation
The latest monthly salary, including regular benefits but excluding certain allowances, is used to calculate compensation. Variable compensation is based on the average of the last three months, capped at 90 development units.
Article 173: Adjustment of Compensation
Compensation is adjusted based on the Consumer Price Index.
Article 174: Job Protection
For protected workers, termination requires prior court authorization.
Article 175: Limitation of Compensation
If an alternative compensation agreement exists, statutory compensation is limited to the period not covered by the agreement.
Article 176: Incompatibility of Compensation
Compensation under Article 163 is incompatible with other damage claims. The worker receives the higher amount.
Article 177: Release, Waiver, and Consent
Release, waiver, and consent must be in writing and signed by the worker and union representative or ratified before an inspector or authorized official.
Article 178: Tax Treatment of Compensation
Awards and compensation for termination are generally not taxable, but certain additional payments may be subject to income tax.