EMPLOYMENT OF WORKERS

 

Can I freely agree with my employees their working conditions?

 

You have the right to reach an agreement freely with your employees but only on some of the other conditions, because there are others expressly governed by law which you cannot change, even if the employee would agree to accept such changes. They are mandatory pursuant to law. Therefore, it is very important for you to learn about these conditions and rights granted by law to workers, which cannot be waived by them. Thus, you will avoid agreeing upon conditions that may be illegal, resulting in future Court problems to you with the financial consequences that are always involved in such cases. You have to take into account that Labor Law, as one of its main purposes, seeks to balance any inequalities that may exist between employers and workers, considered, respectively, as the strong party and the weak party in the employment relationship. For this purpose, there is a series of Principle of Labor Law directed to protect in particular the interests of workers. Some of these principles are: the labor protective principle, the non-waivability of labor rights by workers, the principle of precedence of reality, and the principle of continuity of the employment relationship.

 

Seeking this same labor protection purpose, the law expressly regulates some working conditions, such as work hours, minimum wage, the weekly rest, etc., which you, as the employer, cannot fail to honor, even -as already stated- if the workers consent otherwise.

 

Which are the differences between an employment agreement and a professional services agreement? Would my employer’s obligation change from one case to the other? Can I freely elect either option?

 

The employment agreement, as expressed by its own name, is governed by Labor Law, and the professional services agreement is governed by Commercial Law. The rights and obligations set forth in the Labor Code are only applicable to individuals engaged under an employment agreement, including, for example, maximum number of work hours, the right to enjoy one weekly day rest, payment of holidays, worker’s obligation to meet a specific hourly schedule and follow the employer’s orders concerning the performance of the work, the employer’s duty to have the workers duly insured with the Costa Rican Social Security Administration (“Caja Costarricense de Seguro Social”), etc.

 

What the labor doctrine calls “legal subordination” does not exist in a professional services agreement. This is the element by means of which the employer may exercise powers of authority and direction over employees, and even enforce disciplinary sanctions. The individual engaged to provide professional service is not required to meet any work schedule or perform the work at any specific location, or explain to the contracting party how the work is being performed, etc.

 

It is important to advise that the decision on the employment modality to be used does not depend upon you or upon an agreement between you and the employee, but exclusively on the type of work involved and the working conditions required by you. Therefore, if it is necessary for you, as the employer, that the worker should meet a specific work schedule, comply with a given dress code, perform work under your authority and be subject to orders for a better work performance, and even to sanctions if the worker fails to comply with the established rules, then the negotiation with such worker shall be necessary of a LABOR nature. However, if you just need someone committed to perform a specific work within a fixed term, whether the individual works a minimum number of hours per day or not, works on holidays, Saturdays or Sundays or not, or performs the work at the company facilities or elsewhere, knowing that you cannot instruct the worker on the best manner to perform the work, then this engagement shall be governed by the COMMERCIAL Law, and can be agreed upon as a professional services agreement.

 

Some employers try to "force" the execution of professional services agreements based on the idea that they would be much more cost-effective than an employment agreement, because the employer would not be required in such case to recognize the aforesaid labor benefits and rights, such as the employer’s duty to have the workers duly insured with the Costa Rican Social Security Administration, severance pay in the event of dismissal, payment of the mandatory Christmas Bonus (“aguinaldo”) and payment of 50% of their wages to pregnant workers during the disability period, etc.

 

This practice is not at all advisable, not only because it is illegal but also extremely risky to the employer, which might face eventually an unfavorable judgment in Court labor proceedings or if visited by an inspector from the Ministry of Labor, being ordered to pay all labor benefits not honored during the whole term of the employment of the worker. Likewise, the Costa Rican Social Security Administration could demand the immediate insurance of the worker and payment of any contributions not paid by the employer in benefit of the worker, plus any fines applicable in these cases. Let us recall that what really counts in Labor Law is the real and true nature of the provision of the services and the condition under which the work was performed. This is known as the Principle of Precedence of Reality. Furthermore, under the Principle of Non-Waivability of labor rights, even if the worker has voluntarily agreed to work under a specific type of agreement, the employer cannot agreed upon it, in view of the fact that no worker has the possibility to deprive himself/herself voluntarily of an advantage established in his/her favor, such as a more beneficial contracting modality.

 

Can I employ a worker for a fixed period of time?

 

You can engage the services of a worker under the modality of a fixed-term agreement if this type of agreement is applicable by law to the type of work to be performed by this individual. The Principle of Precedence of Reality provides that the agreement between the parties to the employment relationship does not really matter, but actually the real working conditions; therefore, employer and worker cannot choose at their convenience the type of contractual modality.

 

Fixed term agreements are those which, as expressed by their name, are executed for provision of services over a specific number of days, months, etc. The most important feature in fixed term agreements is that the worker is engaged to meet some transitory needs of the company, not permanent needs, thus knowing in advance the exact date of determination or at least an approximate date. Otherwise, if the work for which the worker has been employed responds to permanent needs of the employer, making impossible to fix a termination date, then the agreement cannot be a fixed term contract, but necessarily an indefinite term agreement.

 

Labor Law, through the Principle of Continuity, seeks the stability or permanence of the employment relationship, aimed to protect the interests of workers to guarantee themselves lasting and permanent means of living, as well as the employer’s interest in having the services of the workers indefinitely. For such reason, the Labor Code tends to give preference to indefinite-term employment relationships, providing that the execution of fixed-term or specific work agreements may only occur when allowed by the nature of the services to be provided, to the extent that if the causes that originated the employment agreement subsist as of the date of expiration of the term, then there shall be an indefinite-term employment agreement. Furthermore, the Law provides that an employer cannot execute fixed term agreements for more than one-year terms. A term of effectiveness of up to 5 years can be agreed upon only for services that require the technical training of the worker. Regarding the likelihood of extending the term of a fixed-term employment agreement as originally established, this shall be admitted only when the services rendered are extraordinary and non-permanent in nature for the company and the reasons for execution of such agreement do subsist.

 

It is then important to refer to a practice followed by some employers, dismissing and signing new agreements with the same workers every year. This type of negotiation is apparently convenient to them from the point of view of profitability for the company, because as opposed to indefinite term agreement, under specific work or fixed-term agreements, the employer is not required to pay, upon termination of the agreement, any labor benefits, such as severance pay or compensation in lieu of prior notice of termination. However, this practice is not only illegal but risky, because as soon as a labor inspector or judge leans about it, the employer may be ordered to cover all those labor benefits and compensations rights that the employer never paid to the workers.

 

I have granted my workers benefits and concessions that I never undertook to grant. Can I stop paying them at any time?

 

Even if it seems logical to think that your verbal or writing agreement with the workers at the beginning of the employment relationship should be observed and complied at all times, and that some of those conditions have changed lately (have become “softer”) in the benefit of workers, the Labor Law provides that there are certain benefits which, by repetition in the course of time, or the evident will of the employer to grant them, become full workers’ rights in the employment relationship and therefore, cannot be disregarded by the employer. This is what is known in labor doctrine as vested rights.

 

It is not feasible to determine, without knowing specific details of the types of benefits that you have granted to your workers, if it would be possible for you to stop granting them, even if you never undertook formally to recognize them. It would be then necessary to learn the nature of those benefits, how long have they lasted, the intention behind them, etc. The confirmation of whether or not those benefits would constitute vested rights of your workers and therefore cannot be disregarded would depend on the assessment of all these elements. This would occur, for example, in the case of a youngster who agreed, when negotiation the original employment agreement, to be assigned to work upon the employer’s request at any location, within the country or abroad. However, if such employer has failed to exercise for an extended period of time the right to require from the worker a change of workplace, the employer would lose such possibility, in view of the fact that the worker would have acquired the right to work at the original location where he/she has always performed his/her duties.

 

The acquisition of this vested right in favor of the worker is justified in our example by the fact that the stability that has been enjoyed by the worker in such workplace would have likely result in his/her acquisition of family, study or other commitments, making impossible or very damaging for the worker to change the location of the workplace. Therefore, even though the employment agreement empowered the employer to request from the worker a change in the workplace, such right would have become void due to the use and practice in the benefit of the worker.

 

This is the reason for which vested rights may result in the disregard of certain conditions, a modification of contractual clauses or the emergence of new rights not expressly agreed upon by and between the parties.

 

In conclusion, even if you had not undertaken to grant certain benefits to the workers, the existence of certain elements, such as, for example, a reiterated recognition thereof over certain period of time might have resulted in the creation of vested rights for the workers, of which they cannot be deprived; even if there were written employment agreements that make no reference to any of such benefits.

 

Can I change the working conditions of my workers without their consent? In which cases?

 

One of the rights that you have as the employer is to introduce changes to the working conditions originally agreed upon with your workers, for the purpose of adapting the course of business of your company to the changing conditions in which the operations of your company are conducted. The doctrine refers to this situation as ius variandi. For example, if a bakery is established at a distance of one hundred meters from the one you own, you might be forced to demand your employees to start working one hour earlier than originally agreed upon, being this the only option you have to keep your business clientele.

 

However, in order for an employer to exercise this right of introducing changes, the following circumstances have to exist:

 

·         The changes are motivated by actual needs of the company and not by a mere whimsical reason or any other underlying intentions.

·         The changes do not affect the essential conditions of the employment agreement originally upon or which may have arisen subsequently as vested rights of your workers, such as wages, work hours and position held, when such changes are adverse to the worker.

·         The changes do not affect seriously the rights of the workers (real inconveniences, health hazards, situations that may be degrading to the workers due to a necessary adjustment to tasks that the employee is not specialized to perform).

 

In our bakery example, you may well change the work hours of your workers, but you cannot demand from them to work longer hours than those originally agreed upon, unless -of course- that the workers agree to work such longer hours for a higher salary, provided that the legal limits for work hours are not exceeded. However, if the change in the work hours forces the workers to incur heavier expenses, such as taking cabs to go to work due to the unavailability of autobuses, they you cannot demand a change in the working schedule.

 

Unilateral, not allowed, modifications to the employment agreement by the employer are known in the doctrine as abusive ius variandi.

 

The following are modifications that are not allowed:

 

·         Those referred to work hours, increasing or reducing them, in the latter case when it implies a reduction in the compensation paid.

·         Those that affect the worker’s direct pay or any other additional benefits.

·         Those that imply a change of worksite location.

·         Changes in the worksite ranks.

 

SOME SITUATIONS DURING THE TRIAL PERIOD

 

I need to hire a new worker. How long should the trial period and which are the rigts of the worker during this period?

 

First, it is important to bear in mind that the trial period is only applicable in the case of indefinite-term employment agreements, that is, those under which the workers meet permanent needs of the employer. Under specific work or fixed-term agreements, the employer does not have the possibility of a trial period to assess if the worker has the conditions and skills required to perform the work needed by the employer. You have 3 months to “test” your workers, counted from the date on which they actually started working. This term is 1 monthi only in the case of domestic help. Should you consider upon expiration of this period that the worker is not suitable, you may dismiss the worker not being liable for severance pay or compensation in lieu of prior notice of termination, being your sole obligation to pay vacation time and the mandatory Christmas bonus on a proportional basis as accrued by the worker and obviously any portion of the salary unpaid at that time.

 

During this trial period of 3 months, you, as the employer, and your worker as well, are required to observe exactly the same rights and obligations granted by law to workers and employers. For example, Social Security, minimum salary, occupational hazards insurance, enjoyment of holidays, etc.

 

The trial period is indirectly established in the Labor Code, which provides that the compensation in lieu of prior notice of termination and the severance pay take effect after the first 3 months of work. The Ministry of Labor has estimated repeatedly in its resolution that this trial period is in effect also when there is a change in position; for example, when you promote a worker to hold a position of greater responsibility with an increased salary. It has been considered that you and the worker both have a term of three months to define if the skills and expertise of the worker are enough to hold the new position. However, in this case the worker also has the right to decide whether or not he/she wants to hold such new position, even if you consider that the worker does meet the respective requirements. If the worker finally rejects the promotion, he/she shall have the right to go back to his/her former position under the same conditions, including, obviously, the salary that the worker received for it before the promotion trial period.

 

It is important to be advised that when a recently hired worker becomes pregnant, you cannot dismiss her, even during the trial period, in accordance with the provisions of Article 94 bis of the Labor Code.

 

OUTSOURCING COMPANIES

 

I have retained the services of a company that provides me with the workers i need for certain special activities. Do I hold any direct obligation or liability towards said workers?

 

In recent years, the number of companies that resort to retain this type of services that you describe has increased, doing so to obtain services such as office cleaning and maintenance, gardening, cafeteria, etc. This type of agreement is commonly known as “outsourcing” agreement. Under it, you receive the benefit of services provided by individuals that come to work at your workplace, but with whom you do not have any employment relationship. You may not even know their names in many cases. Therefore, you do not have labor obligation toward them, not being required to pay their salary or have them insured with the Costa Rican Social Security Administration, or pay them overtime or be concerned about any other labor aspect. Neither are you responsible to instruct them as to how to do their job or to impose disciplinary actions. If you are not satisfied with the services rendered by any such employees you must give notice to the contractor, which is the name given to the company which agree with you, for a fixed amount, to provide you with employees for the performance of specific work. Accordingly, the independent contractor would be solely responsible for overseeing compliance with the labor rights of such employees provided by it to your organization, under the employment relationship between this contractor and said employees.

 

The foregoing should not be confused with another type of contract that is actually of labor nature, under which you, as the employer, ask a person, called the intermediary, to find you some workers you need, and which whom you are going to have an employment relationship. This intermediary plays at times the role of an employer representative before the workers, issuing instructions and orders related to the performance of the work. However, the intermediary does not pay their salaries or has any other labor liability towards them. It is you, as the employer, who ultimately assumes the obligation to oversee compliance with the labor rights of such workers and may demand from them compliance with their obligations.

 

It is extremely important that you can tell the difference between these two modalities and at the time of retaining a company to provide outsourcing companies, you should confirm if such company is sound, with its own capital and duly organized and registered in the Mercantile Registry. Otherwise, should there be any labor problem with any of the workers provided by said company, for example, a work accident, it might happen that the Judge that hears the case may order you to pay for the disability of the worker, if proven that the contractor or outsourcing company does not have the financial means to cover this obligation towards the disabled worker. Even if you consider this situation unfair, you have to bear in mind that the purpose of Labor Law is to level any existing inequalities, fro a financial point of view, between employers and workers, which are respectively considered the strong party and the weak party in the employment relationship.

 

WORK HOURS

 

Which is the maximum amount of time per day that I can require my employees to work?

 

The number of work hours per day depends on the type of work performed by the employees and their work schedule (night, day or mixed shift). Such number of hours are known as daily work hours, and there are two types: regular hours fixed by law as the maximum number of work hours that you, as the employer, can require from the worker under normal conditions; and extraordinary work hours, better known as “overtime”, when work is exceptionally performed beyond the aforesaid daily or weekly limits or else as agreed upon between you and the worker. For this reason, overtime shall be compensated at a higher rate than regular work hours.

For regular work hours and depending on the work schedule, the maximum number of hours you can employ your workers is:

·         Between 5:00 a.m. and 7:00 p.m., 8 hours per day; 48 hours per week. This is known as the day shift.

·         Between 7:00 p.m. and 5:00 a.m., 6 hours per day; 36 hours per week. This is known as the night shift.

·         When the schedule includes day and night hours between 12:00 noon and 10:30 p.m., 7 hours per day; 42 hours per week. This is known as the mixed shift.

·         Likewise, schedules that include day and night hours between 1.30 a.m. and 12 noon, 42 hours per week. This schedule is also known as the mixed shift.

 

In jobs that are not unhealthy or dangerous, the law authorizes the parties to extend the regular work hours up to 10 hours and the mixed shift up to 8 hours, provided these work days do not exceed 48 or 42 weekly hours respectively. With regard to the night shift, the Labor Code does not provide any possibility to extend this shift; therefore, it must be interpreted that the maximum number of work hours per day in the night shift is always 6 hours or 36 hours per week.

 

Likewise, jobs that are not unhealthy or dangerous, the law authorizes the employer to require the employee to work overtime. However, such overtime added to the regular work day cannot exceed 12 hours per day.

 

Finally, as an employer, it is important for you to be aware that any time required by the worker to correct any mistakes made during the regular work day shall not be considered over time, provided that such worker is responsible for such mistakes.

 

Are the time of rest and the lunch time part of the work hours? ¿Do I have to compensate my workers for them?

 

For the regular work day, the law provides for a rest period of at least half an hour. In turn, workers who work up to 12 hours per day due to the nature of their job are entitled to a rest period of one and a half hours.

 

With regard to compensation for the rest time of your workers, in general terms, employers are not required to pay for them. Only when the rest period is equal to or less than half an hour per work day, the employer is required to pay for it, being assumed that the work day is a continuous period of time, which requires the permanent availability of the worker. However, the work day is considered to be fractioned when the rest period granted to employers exceeds 30 minutes. The employer is not required to compensate the worker for such rest period, because the worker is free during said time. Nevertheless, the courts have ruled that this rest period may be extended up to one hour without resulting in a fractioned work day, mainly when this period of time does not allow workers to go home for meals and do not have any other way to have his/her meals near the workplace. In this case, you, as the employer, would be required to pay for this rest period.

 

Domestic workers, when working 12-hour days, are entitled to at least one hour of rest.

 

Finally, the interval of time that nursing mothers have available for feeding their children is considered a paid work interruption, It may be fifteen minutes every 3 hours, or at the option of the employee, half an hour twice a day.

 

OVERTIME

 

If I need my employees to work overtime, how do I pay them?

 

Should you need your employees to work extraordinary hours or overtime, as commonly called, you are required to pay them an additional fifty percent over the salary agreed upon for the regular work day. This increased compensation shall be taken into account for all legal purposes, such as Social Security contributions, vacations, the mandatory Christmas bonus, legal benefits, etc.

 

However, if your workers are engaged in agricultural work and agree to perform work voluntarily during day time beyond their regular work hours, they shall be paid at the regular rate, not as if they were working overtime. This is known as “fajina” in the rural workers’ jargon.

 

ALL YOU NEED TO KNOW ABOUT HOLIDAYS

 

Which days are holidays and how should I pay them to my workers?

 

The following days are holidays:

 

·         January 1 (New Year Day)

·         April 11 (Juan Santamaría’s Day)

·         Holy Thursday and Good Friday

·         May 1 (International Labor Day)

·         July 25 (Annexation of Nicoya to Costa Rica)

·         August 15 (Mother’s Day and Ascent of the Holy Virgin)

·         September 15 (Independence Day)

·         December 25 (Christmas).

·         August 2 (Day of the Virgen de los Ángeles)

·         October 12 (Day of Encounter of Cultures)

 

As the employer, you are required to allow your workers not to work during the aforesaid holidays.

 

The following situations shall be taken into account for compensation of holidays:

 

All holidays, except for August 2 and October 12, shall be paid to employees, even if not worked. They are known as mandatory payment holidays. The amount to be paid is the same as if the employees had worked on such days, that is, the same salary that your workers receive per day. Now then, it is important to underscore that if you pay your workers on a monthly basis, you are not required to pay them any additional amount for holidays, being understood that the monthly salary already includes payment of all days of the month, including holidays.

 

August 2 and October 12 are non-mandatory payment holidays. This means that even if you have to allow your employees not to work on these holidays, you are not required to pay them. However, it is important to make clear that if you pay your workers on a monthly basis, you cannot discount from the monthly salary payment for those holidays, being understood that the monthly salary agreed upon cannot be touched. In commercial activities, even if workers are paid on a weekly basis, you cannot deduct either the amount of the non-mandatory payment holidays from said weekly salary. This means that the only cases in which the employer may deduct payment for August 2 and October 12 from the salary of the workers are those of work performed in non-commercial activities, for example, agriculture, and provided payment is weekly and not per month.

 

With regard to the procedure for payment of holidays when you have asked your employees to work on them, please check the answer to the question: Can I require my employees to work on holidays? How should I pay them?

 

VACATIONS, DURATION AND TIME FOR THEIR ENJOYMENT

 

How often do I have to grant vacation time to my workers and for how long?

 

The law provides that you are required to grant vacation time to employees after fifty weeks of continuous work, counted from the date they started working, or else from the last time they enjoyed their vacation time. However, for employees who have not been able to work said fifty weeks continuously due to justified disability, maternity leave or some kind of paid leave, the law provides that you are equally required to grant them vacation time after a period of 50 weeks counted from the last time they enjoy their vacations, even if the work has not been continuously performed due to the aforesaid reasons.

 

Upon completion of said 50 weeks, the workers are entitled to enjoy vacation time. However, this does not mean that they have the right to demand the enjoyment of such vacations immediately after this period of time. You, as the employer, decide on the best time for your workers to take vacation time, for which noti