Employment 2026 Comparisons

Costa Rican labour law does not formally classify employees in “blue-collar” or “white-collar” categories. These are business and labour market concepts commonly used internationally to describe the nature of work performed; however, they are not legal categories that determine rights and obligations under Costa Rican law.

Under Costa Rican law, the key legal question concerns whether the individual performs services under close and direct supervision by the employer and its representatives, as well as the payment modality. That factual test, rather than the job title, determines the category of the employee and the applicable shift.

Generally, employees in Costa Rica are entitled to the same core labour rights and protections regardless of whether their duties are predominantly manual, technical, administrative or managerial. Employment rights such as minimum wages, working shifts limitations, Christmas bonus, vacation, social security coverage, termination protections and mandatory employment benefits are principally governed by the existence of an employment relationship rather than by a blue-collar or white-collar classification.

Relevant Employee Categories in Costa Rica

Employees of trust (equivalent to “exempt employees”)

Employees that may fall outside the ordinary working-time limits and work up to 12 hours per day, according to Article 143 of the Labour Code. This exception depends on the substance of the role, including authority to represent the employer, decision-making autonomy, supervisory responsibilities, access to sensitive information, absence of immediate supervision and having a flexible schedule (this means they will not clock in or out).

It is key that the employment contract clearly reflects that condition and classification. However, the title alone is insufficient.

Domestic employees

Costa Rican legislation contains specific provisions applicable to domestic workers. They have the same fundamental employment rights as other employees, subject to specific rules adapted to domestic service. Food and accommodation may constitute salary in kind but cannot replace the statutory minimum wage. They are entitled to 15 annual vacation days (instead of just two calendar weeks, which includes rest days).

Alternative workforce classifications

The more relevant distinctions are the contract duration (indefinite-term contracts, fixed-term contracts, project-based contracts), working-time arrangement (full- or part-time employees), work location (remote, hybrid, or on-site employees).

When managing a workforce in Costa Rica, employers should avoid relying solely on blue-collar or white-collar labels to determine employment rights. Labour authorities will instead examine factors such as:

• the existence of subordination;
• employee’s actual duties and responsibilities;
• level of management authority;
• working hours and overtime practices; and
• the terms of the employment agreement.

Costa Rican labour law presumes an employment contract where one individual provides services in benefit of another, under their supervision and in exchange for remuneration.

An employment relationship is generally characterised by three core elements:

• personal service (meaning that the individual must perform the work personally, without sending a substitute or a third party);
• remuneration (usually periodic and paid on a fixed predetermined date); and, most importantly
• subordination, meaning that the employer has the power to direct, supervise and organise the work.

The standard agreement is an indefinite-term contract. The legal framework is based on the principle of employment continuity, which seeks to provide employees with stability and predictable income to meet their personal and family needs. As a result, indefinite-term contracts are the standard form of employment, whereas fixed-term and project-based arrangements are treated as exceptional forms of hiring.

This protective approach also seeks to prevent employers from using alternative contractual structures to avoid labour obligations, including minimum wage requirements, social security contributions and statutory employment benefits. In practice, labour authorities and courts will examine the reality of the relationship rather than the label assigned by the parties.

Indefinite-Term Contracts

The employee knows the date on which the employment relationship begins, but there is no predetermined termination date. From a practical perspective, employers should assume that any position intended to satisfy an ongoing business need will generally be performed under an indefinite-term contract.

Fixed-Term Contracts

They are permitted only when the nature of the work justifies a temporary arrangement. Both parties know from the outset the commencement date and the expected termination date of the employment relationship.

Generally, a fixed-term contract may not exceed one year. Once this period is exceeded, the employment relationship is generally deemed to have become indefinite, together with all corresponding legal consequences.

A longer term, up to five years, is permitted for services requiring special technical preparation. However, these limits do not remove the need for genuine temporary justification.

In this regard, case law has consistently reinforced this principle by rejecting the use of fixed-term contracts for activities that are permanent and form part of the employer’s ordinary business operations. Courts have repeatedly concluded that employees engaged in ongoing business activities should be hired on an indefinite-term basis, regardless of the contractual label chosen by the parties. Examples include teachers working for educational institutions or employees performing core activities for a company.

In short, businesses should exercise caution when using fixed-term or project-based contracts for positions connected to their ordinary and ongoing operations, as these arrangements may be reclassified as indefinite-term employment if they do not meet the legal requirements for temporary hiring.

Project-Based Contracts

Under this arrangement, the employment relationship is linked to the completion of an identified project, work or undertaking rather than to a specific calendar period. Project-based contracts are also considered exceptional and may only be used where the nature of the work genuinely supports this type of arrangement. The contract terminates upon completion of the project for which the employee was hired.

Written and Verbal Contracts

As a rule, employment contracts should be executed in writing. Costa Rican law permits verbal employment contracts only in specified situations, but they are not recommended.

In the event of doubt, the authorities favour the employee. Thus, a written agreement provides clarity regarding the parties’ rights and obligations and serves as important evidence in the event of a dispute.

Other Formal Requirements

The Labour Code establish the following formalities in an employment contract:

• the parties’ identification details;
• the employee’s residence where relevant to an assignment away from their usual residence;
• the agreement’s term or extension period ‒ confirmation that it is indefinite, project-based or piece-rate;
• job duties, working schedule, and place of work;
• salary, payment method, payment period and payment location;
• any agreed additional terms;
• the date and place of signature; and
• the parties’ signatures (or witness signatures where a party cannot sign).

Additionally, employers should ensure that employment terms are clearly documented and consistently applied in practice. The contract should also address the practical rules that will govern the employment relationship or else refer to the applicable policies. These provisions must not waive or reduce mandatory statutory rights.

From a practical business perspective, employers should ensure that the contractual structure accurately reflects the reality of the employment relationship. Labour authorities and courts will look beyond contractual wording and assess the actual services performed by the employee.

The ordinary daytime working limit is eight hours per day and 48 hours per week. Daytime work is performed between 5am and 7pm. The ordinary night-work limit is six hours per day (worked between 7pm and 5am) and a mixed shift is generally limited to seven hours per day. A mixed shift becomes night work if at least three-and-a-half hours fall between 7pm and 5am.

For non-hazardous work, the parties may agree to daytime shifts of up to ten hours or mixed shifts of up to eight hours, provided the weekly total does not exceed 48 hours. Rest and meal periods should be clearly defined.

A continuous shift requires at least a 30-minute paid break, in which the employee remains at the employer’s disposal. For an unpaid break the employer must grant an hour of continuous break

Overtime is paid at not less than 150% of the ordinary hourly rate and total ordinary and overtime work generally may not exceed 12 hours per day. Employees should also receive a 12-hour break between shifts.

Flexible schedules are possible, but they must continue to respect daily and weekly limits, rest periods and overtime rules. Remote work may also incorporate flexible hours if agreed in advance and if it does not disrupt normal business operations. The parties must set clear performance, monitoring and availability criteria, and teleworkers have a statutory right to digital disconnection outside their agreed working time, except for urgent and unforeseen situations accepted by the employee.

There is no separate statutory formality regime for part-time contracts. Nevertheless, the contract should specify the weekly and daily hours, the schedule or the method for setting it, the proportional salary, payment frequency, and the treatment of overtime. Part-time employees remain entitled to statutory protections.

Costa Rica has a statutory minimum wage system, set by an Executive Branch decree, normally through periodic revisions. The schedule differentiates between occupations and skill levels and whether the wage is paid by day or month. Employers should confirm the current applicable category before hiring an employee and whenever an update is due.

Salary may exceed the applicable minimum by agreement and employers may use fixed pay, commissions, productivity payments, or a combination of these. The compensation structure should be documented clearly because regular remuneration and some variable payments may affect the calculation of other employment entitlements (Christmas bonus, sick-leave pay, vacation time). Costa Rica also applies an equal-pay principle for equal work performed in the same position, working time and efficiency conditions, without discrimination based on age, sex or nationality.

Private-sector employees are entitled to an annual aguinaldo (Christmas bonus), commonly described as a 13th-month payment. This does not have a salary nature. It is calculated as one twelfth of all ordinary and extraordinary salary earned by the employee between December 1st of the previous year and November 30th of the current year and paid in December. An employee leaving before December is entitled to a proportional amount.

Bonuses are not mandatory unless provided by contract, policy, collective agreement, statute, or established practice. They generally have a salary nature, unless they are not periodic, habitual, or based on the employee’s performance or if they come as a one-time payment. A payment presented as discretionary may become an enforceable benefit if it is granted regularly and without a sufficiently clear reservation of discretion.

Vacation

Employees accrue at least two weeks of paid vacation after each 50 weeks of continuous service. If employment ends earlier, a full-time employee would be entitled to at least one day of leave for each month worked, payable on termination.

Vacation should be enjoyed rather than paid out. Payment in lieu is principally allowed on termination or in other limited statutory circumstances. Employers should keep reliable leave records and avoid practices that prevent employees from taking their accrued time off.

Maternity Leave

Pregnant employees are entitled to paid maternity leave of one month before childbirth and three months after, funded equally by the employer and the Costa Rican Social Security Administration (Caja Costarricense de Seguro Social, or CCSS). If the baby is born before the maternity leave has been approved, the mother loses the initial month of maternity leave and would only have access to the three months post-partum.

Maternity leave does not interrupt the employment relationship and the employee continues to accrue statutory employment rights during that period. The benefit is subject to the applicable social security requirements. Employees are also protected from dismissal during pregnancy and maternity leave, except for serious cause and with prior authorisation from the labour authorities.

Breastfeeding Leave and Protection

The statutory breastfeeding protection extends for at least the child’s first year and may be extended for as long as the child continues to receive breast milk by medical certification. Employees are entitled to paid time to attend the relevant medical services for the newborn, the mother or the caregiver and to obtain breastfeeding certificates.

During the breastfeeding period, the employee has special protection against dismissal (unless there is serious cause and with the proper authorisation by the Labour Ministry).

A breastfeeding employee is entitled to one paid hour during the ordinary working day for breastfeeding purposes. Employers must also provide the statutory breastfeeding facilities and should address milk-expression arrangements in accordance with the applicable rules (up to 25 minutes of paid time every three hours).

Other statutory family-related leave includes:

• three months’ paid leave for a single adopter (or three months shared between joint adopters by agreement);
• paid paternity leave of two days per week during the first four weeks after a child’s birth; and
• special paid post-natal leave for the biological father, or another working caregiver, if the mother dies within the statutory maternity leave.

Bereavement

Employees are entitled to:

• three business days of paid leave for the death of a first-degree relative by consanguinity or affinity; and
• one business day of paid leave for the death of a second- or third-degree relative by consanguinity or affinity.

Each employer should draft their applicable policies to determine how the request is handled and the back-up documentation that will be required, among others.

Sick Leave

Illness and disability benefits are mainly administered through the Costa Rican Social Security Administration (for common accidents or illnesses) or the administrator of the policy against occupational hazards (for work-related accidents of illnesses). The applicable benefit, duration, and employer contribution depend on the medical sick-leave certificate and the rules applied by the medical authority.

Leave to Take Care of a Terminally Ill Patient

An active salaried insured person may be designated as the responsible caregiver for a terminally ill patient and may obtain a special leave and the corresponding subsidy (paid by the CCSS). For this purpose, the patient must have a medical diagnosis of a terminal illness and a life expectancy of six months or less.

Confidentiality, Non-Disparagement and Employee Liability

Confidentiality obligations are generally enforceable when they protect legitimate confidential business information, are clearly defined, and do not operate as a disguised restriction on future employment. They may continue after termination, particularly for trade secrets, customer information, technical data and other information that is not public. Employers should use targeted definitions, limited access controls and separate data security obligations rather than relying on broadly worded clauses.

Costa Rican law does not provide a standalone statutory regime for non-disparagement clauses. Any restriction must therefore be drafted consistently with constitutional rights, labour protections, and the employee’s right to report misconduct or co-operate with authorities. This type of clauses should not prevent an employee from co-operating with authorities, reporting unlawful conduct, exercising statutory rights, participating in labour proceedings, or making legally protected disclosures. A clause that is overly broad or used to suppress protected activity carries a material enforceability risk.

Post-termination non-compete obligations have been allowed by case law. However, they are addressed restrictively because they limit constitutional freedom to work. A restriction may be valid only where it protects a legitimate employer interest (trade secrets, strategic know-how, or close relationships with key customers) and is balanced against the employee’s interests and ability to earn a living (tailored to the employee’s actual role and access to sensitive information).

The non-compete clause must be limited in duration and geographic reach and include restricted activities and the competitors covered. It should be clear enough to allow the employee to understand what work is restricted.

There is no statutory formula for the necessary compensation or an absolute maximum duration. The assessment is fact-sensitive. The judicial authorities have held that the compensation should be separately identified, commercially meaningful, and payable in a manner that genuinely supports the employee during the restricted period.

Enforcement is normally pursued through the labour courts when the covenant arises from an employment relationship. The employer will need to prove the clause’s validity, the employee’s breach, the existence of loss, and the contractual or legal basis for the remedy sought. A contractual penalty may assist with quantification, but it should be proportionate and will not cure a covenant that is otherwise invalid or excessive.

During employment, exclusivity and non-competition obligations are easier to justify because the employee owes duties of loyalty and good faith. Even then, restrictions should be connected to the employee’s role.

A post-termination non-solicitation covenant is more defensible when it prohibits active solicitation of named or objectively identifiable employees or customers with whom the former employee had material contact. It should be limited in duration and should distinguish active solicitation from accepting unsolicited approaches, general advertising or independent hiring by a new employer.

It is riskier to prohibit a former employee from accepting an unsolicited approach by a former colleague, making a general recruitment advertisement or working for an employer that independently hires former co-workers. A provision that effectively prevents the former employee from building a team or working in their sector may be treated as an overbroad non-compete and should carry appropriate compensation if it materially limits employment opportunities.

Law No 8968 is the principal data protection statute and applies to the automated and manual processing of personal data in private-sector employment, including recruitment, personnel files, payroll, benefits, performance management, workplace investigations, monitoring data, and termination records.

Employers will commonly act as responsible for the database. Thus, they must:

• process data for a defined, explicit and legitimate purpose;
• collect information that is adequate and relevant to that purpose;
• keep data accurate; and
• protect data through appropriate technical and organisational measures.

Employment records should not be retained indefinitely merely because they may be useful in the future.

Before collecting data, the employer must give employees and applicants clear information about the relevant database, the purpose of collection, the recipients or users of the data, whether responding is mandatory, the consequences of refusal, available rights, and the controller’s identity and address.

Informed and express consent is generally required for processing and transfers unless a statutory exception applies. In employment, consent should not be treated as the sole solution because the relationship is not fully balanced. It is recommended that employers limit processing to information that is necessary, inform the employee in advance, and identify any legal obligation that requires the data.

Sensitive data, including health data, biometric information, racial or ethnic origin, political opinions, religious beliefs, sexual orientation and certain socio-economic information, receives enhanced protection. Employees are generally not required to provide sensitive data and its processing is prohibited unless a statutory exception applies. Employers should collect health and accommodation information only to the extent necessary, restrict access to personnel with a genuine need to know, and maintain heightened security.

Employees have rights of access, rectification, deletion and control over the transfer of their data.

Transfers to thirds parties (group companies, vendors, or overseas recipients) require an appropriate legal basis, transparent notice and contractual safeguards on purpose, confidentiality, security, onward transfer, and deletion or return. Monitoring must be transparent, necessary and proportionate, with policies describing the purpose, data collected, recipients, and retention period. Companies should not intrude unnecessarily into private communications or be implemented in a manner inconsistent with employee dignity.

The Data Protection Agency of the Inhabitants (Prodhab) supervises compliance and can receive complaints, order corrective action and impose administrative sanctions. Breaches may lead to fines calculated by reference to the statutory base salary and, for very serious infringements, suspension of the database’s operation.

It is key to consider that the registration of a database before Prodhab is expressly required for public or private databases administered for distribution, dissemination or commercialisation, as well as in other cases required by law. Based on this, employers should assess their particular processing activities rather than assume that every internal HR database is registrable.

Costa Rica does not impose a general quota for hiring a specified number or percentage of Costa Rican nationals. However, if a national employee complies with the job profile in the same way a foreign employee, the company should opt to hire the Costa Rican national.

Based on the foregoing, the key limitation for hiring a foreign employee is immigration compliance. Foreign nationals may only work in Costa Rica if they hold the appropriate immigration status and work authorisation. Employers are prohibited from hiring employees who do not have the authorisation to perform the activities for which they are being hired.

In Costa Rica, there is no legal requirement to execute a different or special employment contract just because the employee is a foreign national. The employer must verify the immigration authorisation before the start of employment and must comply with all labour and social security obligations.

If the employee is not an expatriated employee (for whom the company usually covers the costs), it is key that the employment contract includes a provision that states that the employee is responsible for maintaining its migratory status up to date.

Once authorised to work, foreign employees are generally subject to the same mandatory labour protections as Costa Rican employees, including (but not limited to) minimum wage, working-time limits, social security protections, occupational risk coverage, and the same termination rules.

Complex assignments, expatriation, regional transfers and cross-border remote work require co-ordinated immigration, labour, tax, and social security review.

The appropriate immigration route will depend on the individual’s role, duration of stay, and remuneration arrangements, as well as whether the services will be performed for a Costa Rican entity or remotely for a foreign employer.

There is no separate labour registration or headcount reporting requirement that applies merely because an employee is a foreign national. However, if the company decided to undertake the risk of hiring an individual that is still requesting their migratory permit, the company should ask the CCSS for a temporary number to be able to include the employee in its payroll and comply with other regulations.

Costa Rica was the first country in the Central American region to regulate remote work, as Law No 9738 came into force in 2019. It is defined as work performed outside the employer’s premises through the technology and communication platforms that allow for this to happen.

It includes home-based work (where the employee works from home) and mobile work (where the employee performs duties on an itinerant basis, in the field or while travelling, using portable devices). The law even allows remote work to occur outside the Costa Rican territory; however, it leaves certain aspects open to interpretation (what happens in the event of an accident, how the accident should be reported, and how a potential termination abroad should be handled). Based on the foregoing, it is key for employers that allow remote work to regulate the matter through an internal policy.

As part of the requirements and restrictions for remote work, the law states the following.

• Voluntary basis ‒ remote work must be agreed between employer and employee, either from the beginning of the employment relationship or through an amendment to the employment contract during the relationship.
• Written agreement ‒ the parties must execute an agreement/contract and a policy setting out the applicable terms and conditions, expectations, control mechanisms, and responsibilities. The agreement/contract should also cover aspects related to data privacy and confidentiality.
• Employers must inform employees of occupational health and safety measures and requirements applicable while in remote work. The occupational risk insurance policy will protect and cover the employee in remote work in the way same as for on-site work; however, the employer must alert the policy administrator that the coverage must extend to the employee’s home or abroad. In the event of an accident, the employer may be requested to provide evidence that the place in which the accident occurred was approved for remote work.
• Working hours and the right to disconnect ‒ it is key for employers to regulate how overtime will be approved, so as to avoid any unwanted or unnecessary claims regarding work outside working hours.
• Equipment ‒ employers generally provide necessary equipment unless another arrangement is expressly agreed. In either case, employers can monitor the duties performed in remote work.
• Social security – remote employees remain covered by the social security system.
• For work performed abroad at the employer’s request and with the employee’s consent, the employer must provide the relevant tools and arrange occupational risk and other required insurance, including extraterritorial coverage

Costa Rican labour law does not establish a statutory establishment to sabbatical leave. Thus, it may be granted by the employer on a voluntary basis according to its internal policies and collective bargaining agreements or by labour employment contract. The conditions of this leave must be agreed by the employer and the employee and must include its duration, compensation (paid or unpaid), and the employee’s rights and obligations during the leave, among other conditions.

Unless the employer has made a binding commitment through a contract, policy or established practice, an employee is not generally entitled to demand this type of leave.

If the leave is authorised and granted by the employer, the parties should record the arrangement in writing before the leave begins ‒ preferably in a signed addendum or leave agreement. This ensures that the conditions are clear for both parties.

The written agreement should state, at a minimum:

• the purpose and exact start and end dates of the leave;
• whether the leave is paid, partially paid or unpaid;
• whether either party may request an early return, extension or cancellation and the applicable notice period;
• the employee’s position or the agreed return-to-work arrangements at the end of the leave;
• treatment of salary, incentives, vacation accrual, seniority and other contractual benefits;
• treatment of CCSS reporting and contributions, National Insurance Institute (Instituto Nacional de Seguros, or INS) coverage and any private benefits, including medical insurance, pension plans or allowances;
• confidentiality, data security, company property and conflict-of-interest obligations that continue during the leave; and
• the documents, approvals, and payroll actions required to implement the arrangement.

If sabbatical is granted unpaid, the employee must pay attention to the implications regarding salary payments, social security contributions and other employee benefits.

The employer should use a consistent approval process to avoid any discrimination claims. Even though timing and operational needs may be evaluated, it is strongly recommended to regulate the general process through an internal policy.

Costan Rican law does not specifically regulate desk sharing or other similar workplace models. Companies are free to implement these practices, provided they comply with labour regulations. Among the alternatives through internal policies are the following: workplace safety, ergonomics, accessibility and proper accommodations, secure storage, access-control records and the handling of personal data in shared spaces. Internal policies should establish booking and attendance rules, identify permitted locations and provide a clear-desk and secure-printing protocol to ensure that employees have appropriate equipment and a safe place to work.

As a general rule, employers are required to provide appropriate work tools; however, for remote work, the law allows employees to use personal equipment. This should be permitted only under clear written rules and an express agreement. Employers should address security standards, software installation, remote access, the separation of business and personal data, incident reporting, company access to business information, and the return or deletion of company data at the end of employment.

Monitoring and AI-enabled analytics must have a defined business purpose and comply with the transparency, necessity and proportionality principles outlined in 3.1 Data Privacy Law and Employment.

Regarding the use of AI in recruitment or employee management programmes, Costa Rica has no regulation. It is key that any of these automated tools or tasks still require a meaningful human review. The human interaction is key to validate the accuracy and relevance of the criteria used, protect personal data and avoid decisions based on prohibited discriminatory grounds.

Based on the foregoing, a human manager should remain accountable for employment decisions, as any automated outputs would still imply a certain level of liability by the company. Thus, it is recommended that automated outputs inform – rather than replace – a fair and documented assessment.

Trade unions are permanent organisations formed to protect employees’ economic and social interests. Employees may join or refrain from joining and employers may not interfere with union activity or discriminate because of union membership.

Costa Rican law recognises four principal types of employee unions:

• occupational or craft unions;
• company unions (formed by employees in different occupations who work for the same employer);
• industry unions (formed by employees in different occupations who work for two or more employers in the same industry); and
• mixed or multi-trade unions (formed by employees in different activities).

The employee does not need to create a new company union merely because there is no union established at their workplace. Individual membership in an existing union does not require the employee to file a new union-registration application with the Labour Ministry. The union may represent its members within the scope of its statutory authority and its own rules, including before an employer where the relevant workplace or bargaining context is covered.

Membership in an existing union is protected by freedom of association. An employer may not refuse to hire, dismiss, discipline, disadvantage or otherwise discriminate against an employee because the employee joins, supports or participates in a union. However, ordinary affiliation alone does not automatically entail that the employee is in a protected category that confers enhanced job-stability protection (fuero sindical).

That enhanced protection applies to defined categories and periods ‒ for example, a limited number of union officers in the relevant company, calculated by reference to the number of unionised employees there and union members who formally notify the Ministry of Labour and Social Security (Ministerio de Trabajo y Seguridad Social, or MTSS) of their candidacy for a union governing body. The protection is designed to safeguard collective representation, but it does not excuse misconduct: an employer may pursue disciplinary action for just cause, subject to the applicable due process (termination request before the MTSS).

A union may be formed by at least 12 employees and must be registered with the MTSS after its constitution. The filing normally includes the constitutive assembly record, the union’s by-laws, identification of the union’s governing body, and a means for receiving notifications.

For practical risk-management purposes, employers should note that employees involved in the formation of a union may benefit from statutory union protection. The organisers should notify both the MTSS and the employer, through a reliable means, of their intention to establish the union and identify the individuals seeking that protection. Employers should not take adverse action against those employees without first assessing the applicable union protection rules and procedures.

Once established, unions may represent employees, negotiate collective bargaining agreements, participate in labour disputes and defend employee rights, among others.

Costa Rican law does not establish a general work council system and collective worker representation is primarily exercised through trade unions. However, the Labour Code also expressly recognises employee representative bodies for particular purposes.

By way of example, regarding occupational health and safety committees, their role is to promote workplace health and safety for workplaces with more than ten employees. Additionally, in the context of labour disputes, employees may appoint a representative to participate in direct settlement procedures and to file claims or proposals to the employer. These representative bodies have limited functions to solve specific issues for which they are constituted.

As regards direct arrangements, they are a statutory mechanism for resolving collective economic and social disputes through direct negotiation between the employer and employees. It differs from collective bargaining conducted by a union and from formal conciliation or arbitration. The Labour Code identifies direct arrangement, conciliation and arbitration as separate methods of resolving collective disputes.

For a direct arrangement, employees may form a permanent council or committee at each workplace. The committee may have no more than three members and is responsible for presenting employees’ complaints or requests, verbally or in writing, to the employer or its representatives. The committee must notify the MTSS’s Department of Labour Relations of its formation and membership within five days of appointment.

The committee represents employees in the direct arrangement process. The committee differs from a trade union, as it does not have the general legal personality, autonomy or range of collective functions of a union. It should not be employer-appointed or employer-controlled.

If there is no union in the company, freely elected employee representatives may also receive the specific job-stability protection provided by Article 367 of the Labour Code, in the same proportion and for the same period applicable to protected union officers.

A collective bargaining agreement (convención colectiva) is the instrument through which the legally authorised parties negotiate terms and conditions of employment. It must be in writing and filed with the MTSS. Once the collective bargaining agreement is duly registered, it has the same force as a law within its scope of application (which means that it is binding for the parties). The collective bargaining agreement cannot reduce mandatory statutory minimums.

A collective labour contract is a different statutory instrument. It involves a union acting as an intermediary for members who will perform specified work. A collective labour contract must:

• be executed in writing in three counterparts;
• be submitted by the employer to the Labour Inspectorate within five days of its execution, amendment or novation;
• be signed by union representatives with sufficient authority; and
• specify the work that will be performed, duration, working hours, individual remuneration, method and place of payment, place of performance, and any other agreed terms.

The dissolution of the union does not extinguish the rights and obligations arising from the contract.

A direct arrangement is a statutory dispute-resolution and negotiation mechanism between an employer and employees, usually acting through a permanent committee of up to three employee representatives. If negotiations result in an agreement, the parties must prepare a written record of the terms agreed and send an authenticated copy to the MTSS within 24 hours of signature.

During negotiations for a collective bargaining agreement, a conciliation or arbitration procedure, or a lawful strike, a direct arrangement may be concluded only with the organisation or committee responsible for that negotiation or dispute. This prevents the employer from bypassing the employees’ authorised collective representative by negotiating a competing arrangement with another group.

Costa Rican labour law abides by the free dismissal principle for indefinite-term employment relationships. This means that an employer may terminate an indefinite-term employment contract without cause, provided the termination is not discriminatory, retaliatory, or otherwise prohibited by special statutory protection.

If the termination is not based on objective reasons, the company could face reinstatement, back pay, damages, and additional remedies. However, if the company documents the objective reason, it is possible to terminate the employee without having cause for termination.

This differs from employment “at will” (in the common-law sense), as employer liability and the payment of the statutory termination entitlements (including notice or payment in lieu of notice and severance pay) would still apply.

By contrast, a dismissal without employer liability (a dismissal with cause) must be supported by one of the statutory grounds established in the Labour Code (Article 81 of the Labour Code or another applicable legal ground). For more information, see 7.3 Dismissal for (Serious) Cause.

Costa Rica does not have a specific statutory collective redundancy regime, so workforce reductions are implemented through individual terminations under the ordinary rules governing employment termination. Employers must assess cases in which special statutory protections, anti-discrimination rules or collective bargaining obligations may apply.

Finally, other causes of termination are resignation, retirement, mutual agreement, death of the employee, and completion of a project or the contract’s term (for fixed-term contracts and project-based contracts), as well as termination with cause by the employee (in case of breaches of the employer’s obligations).

For fixed-term and project-based contracts, if the contract ends after the completion of the term or project, only inalienable rights would be due. However, if the parties decide to end the relationship beforehand, without having just cause, the terminating party must compensate the other for the specific damages and losses proved before the labour courts. This assessment should consider the remaining contract term, the importance of the duties performed, and the difficulty the other party has in finding a replacement or an equivalent work opportunity.

Where the employer terminates a fixed-term or project-based contract early without just cause, it must also pay the employee an additional statutory indemnity at the time of termination.

Besides the aforementioned contracts, as well as the resignation, the dismissal with cause and the mutual agreement (in which the terms may be negotiated), the other causes of termination would entail the payment of severance, as they are considered terminations with employer’s liability.

Indefinite-term employees dismissed with employer liability are entitled to notice or payment in lieu. Similarly, if an employee resigns, the employer is entitled to be notified in advance of the employee’s intent to terminate the relationship.

The notice period depends on the employee’s seniority, as follows:

• one week after at least three months and up to six months of service;
• two weeks after more than six months and up to one year of service; and
• one month after more than one year of service.

Notice should generally be documented and be granted in writing (especially as the employer has the burden of the proof).

If an employee resigns without giving the required notice and without the employer waiving this employee obligation, the employer may submit a claim before court to recover the corresponding amount. The employer has up to one month from the termination date to submit the claim. This is not an automatic deduction. The employer should not unilaterally offset the alleged amount against pending salary, accrued vacation time, proportional Christmas bonus (aguinaldo) or other termination entitlements without a lawful basis.

Employees dismissed with employer liability may also be entitled to statutory severance pay. Notice and severance serve different purposes and, where applicable, severance is payable in addition to notice or payment in lieu of notice. It is calculated according to the employee’s length of service.

Ordinary dismissals with employer liability are not generally subject to a specific statutory termination procedure. However, employers should properly document the termination and ensure payment of all statutory termination entitlements due upon termination of employment. No prior governmental authorisation is generally required for an ordinary dismissal. However, employees benefiting from special statutory protection against dismissal may be subject to additional procedural requirements, including – in certain cases ‒ the need to establish just cause and obtain prior authorisation from the competent labour authorities.

Finally, in practice, the first three months of an indefinite-term relationship operate as a probationary period, as neither party is entitled to statutory notice or severance. This allows both parties to assess the employee’s suitability for the role and the employment relationship. It does not displace mandatory protections against discrimination, retaliation, or special statutory protection.

Dismissal for serious cause is generally referred to in Costa Rica as a termination without employer liability. It is based on one of the statutory grounds established in the Labour Code and requires conduct attributable to the employee that justifies the immediate termination of the employment relationship.

Examples include serious acts of insubordination, reiterated unjustified absences, loss of trust, and other serious breaches of the employee’s obligations. Repeated misconduct may also justify dismissal where the employee has previously been disciplined for similar conduct and nevertheless continues to breach workplace obligations.

Employers should ensure that the relevant facts and supporting evidence are adequately documented and conduct a case-by-case analysis, even though no formal disciplinary proceeding is generally required. The employer bears the burden of proving the alleged cause if the dismissal is challenged.

For this scenario, the employer must comply with the following.

• The employee’s identified conduct and the decision to dismiss must be properly connected.
• The employer has one month from learning of the cause of dismissal to impose the termination. A preliminary investigation may be necessary, but it should not create an unjustified period of uncertainty for the employee.
• The decision to terminate must be proportional to the seriousness of the conduct, its consequences, and ‒ where relevant ‒ the employee’s recent disciplinary record.
• A written dismissal letter that clearly and specifically sets out the facts, dates and circumstances relied upon is necessary. In a subsequent dispute, the employer is generally limited to the grounds stated in that letter.

If cause is established, the employee remains entitled to the payment of inalienable rights (accrued salary, pending vacation time and proportional Christmas bonus (aguinaldo)). However, the employee would not be entitled to any indemnities: notice pay or severance pay. If cause is not established, the dismissal may be treated as one with employer liability.

Article 86 of the Labour Code recognises mutual consent as a valid ground for terminating an employment relationship.

A private agreement (usually referred to as finiquito) can record a mutual termination, but it cannot validly waive mandatory employment rights. By way of example, the parties cannot negotiate that the pending vacation time, accrued salary or proportional Christmas bonus will not be paid (as they are inalienable rights). However, notice and severance pay have an indemnity character and – in the mutual-consent context – they may be negotiated.

Based on the foregoing, particular care must be taken where the agreement is intended not only to document the mutual termination of employment, but also to settle existing or potential employment claims. If the parties also wish to settle a particular dispute, they should distinguish clearly between amounts that are undisputed and mandatory and matters that may lawfully be compromised.

Costa Rican courts have treated general release language in a private agreement with caution. A broad private release does not automatically eliminate all employment claims.

Where the parties seek to settle a material dispute or obtain a more robust release, formal mediation is advisable. It may be conducted through the MTSS, an authorised ADR centre or even a judge before the claim is filed. Agreements validly reached through these mechanisms may have the authority and effect of a judicial resolution and be immediately enforceable.

Costa Rican law protects employees against dismissal through the following two mechanisms.

• Employees that have a special statutory protection or protected status (fuero de protección in Spanish) may require prior authorisation or a specific due-process procedure before dismissal.
• All employees are protected against retaliatory or discriminatory dismissal on the grounds prohibited by the Labour Code and special legislation.

The following categories are the principal protections relevant to private-sector employment:

• employees who are pregnant, breastfeeding or enjoying statutory maternity, adoption, paternity or special postnatal leave (Article 95 of the Labour Code);
• union founders, officers, candidates and certain employee representatives (Article 367 of the Labour Code);
• complainants in sexual harassment matters (witnesses are protected against retaliation and discrimination);
• underage or adolescent employees (from 15 to 17 years old); and
• employees involved in a collective dispute – once a statement of demands has been submitted and a collective conflict is formally raised, neither party may take reprisals or interfere with the other’s exercise of rights.

These protections do not necessarily amount to absolute immunity from dismissal. Depending on the applicable protection and the grounds for termination, an employer may be required to establish just cause, obtain prior authorisation from the competent labour authorities, and/or follow a specific statutory procedure.

Bear in mind that valid fixed-term contract may end on its objectively agreed date if the temporary basis and end date are real and are not a pretext for discrimination.

Dismissals carried out in breach of these protections may result in reinstatement, back pay and other statutory remedies.

A dismissal is not unlawful merely because it is without cause, provided the employer assumes employer liability and respects statutory protections. Claims most often arise where the employer fails to prove alleged cause, breaches a special protection, or acts on a discriminatory or retaliatory ground.

Where an alleged dismissal for just cause is found to be unjustified, the employer may be ordered to pay the statutory amounts that would have been due upon a termination with employer liability, including notice and severance entitlements where applicable. Different consequences apply where a dismissal violates special statutory protections or anti-discrimination rules. Depending on the applicable statutory regime, remedies may include reinstatement, back pay and other compensation or measures provided by law. Where a dismissal is judicially established to have been based on a prohibited discriminatory ground, reinstatement and the corresponding statutory consequences may apply.

The Costa Rican Labour Code prohibits discrimination through all the stages of the employment relationship, including recruitment, setting of the employment conditions and/or remuneration, defining a promotion or career progression, and termination.

Decisions based on age, ethnicity, sex, religion, race, sexual orientation, marital status, political opinion, national origin or ancestry, social origin, parentage, health condition, disability, trade union affiliation, economic status, reporting or testifying about corruption, or any analogous ground may be considered discriminatory.

Employees with disabilities, medical conditions, work-related injuries or illnesses, or HIV are protected through this anti-discrimination framework and related special legislation. These circumstances do not always create a separate prior authorisation requirement in private employment, but they create heightened dismissal risk. The employer must avoid using subjective reasons as cause for dismissal (even if the termination is with employer’s liability).

Once sufficient facts are established from which discrimination may reasonably be inferred, the employer bears the burden of demonstrating that the challenged measure was based on objective, reasonable and proportionate grounds unrelated to a prohibited discriminatory ground.

Discrimination claims may be brought before the labour courts under the special protection procedures established by Costa Rican labour law. Where a dismissal is found to have been based on a prohibited discriminatory ground, reinstatement, back pay and the corresponding statutory consequences may apply.

Costa Rican employment disputes are managed within an increasingly digital justice system. The legal framework permits electronic documents, electronic case files, filing, notifications, and the receipt and preservation of electronic evidence, subject to the same procedural safeguards as in-person proceedings.

Parties increasingly rely on emails, messaging applications, HR system records, electronic timekeeping, access logs, video, telework-monitoring data and digitally signed agreements – all of which is allowed, as long as sourcing and integrity are clear.

Under Law No 8454, electronic documents have the same legal status and evidentiary force as physical documents, provided that the applicable legal requirements for the specific act are met. A certified digital signature has the same legal value and evidentiary effect as a handwritten signature.

Judicial hearings may be remote or hybrid. The parties and participants should be prepared to verify their identity, maintain a stable connection, use video and ensure that their location permits confidentiality and uninterrupted participation. However, flexibility on practice is usually granted.

Employment disputes in Costa Rica are heard by the specialised labour courts and may involve both individual and collective claims. Parties may be represented by legal counsel and eligible employees may also have access to free legal assistance through the Public Defence Service.

Costa Rican labour procedure does not provide for class actions in the same manner as common-law jurisdictions. However, collective employment rights and interests may be pursued through the mechanisms established by the Labour Code, including union proceedings where legally permitted.

Direct arrangements, conciliation, mediation, and – in defined settings – arbitration may resolve employment disputes. These mechanisms are intended to complement, not displace, the specialised labour courts. These alternative processes do not permit the parties to waive mandatory employment protections or restrict access to judicial remedies.

Conciliation and mediation are the principal alternative mechanisms for individual employment disputes. A valid extrajudicial mediation agreement has the authority and effect of a judicial resolution. They may occur before the MTSS, an authorised ADR centre or the labour courts. If the hearing happens before a private centre, the employee must be assisted by a lawyer or union representative.

In all scenarios, the mediator must ensure that non-waivable, non-disposable and undisputed employment rights are respected. The agreement should identify the disputed issues, as it should not rely on an all-encompassing release.

Regarding arbitration, it is not a standard substitute for the labour courts in individual employment contracts. A pre-dispute arbitration clause requiring an employee to submit all future employment claims to arbitration carries a substantial enforceability risk and is generally considered null. This would particularly be the case where it would operate as a waiver of access to the labour courts or cover mandatory employment rights.

After an individual dispute has arisen, arbitration may be considered only for a specific patrimonial dispute arising out of or closely related to an employment relationship and/or involving rights that the parties may freely dispose of. In short, disputes concerning non-waivable or otherwise non-disposable employment rights may not validly be submitted to arbitration.

Before agreeing to arbitrate an employment dispute, the parties should identify the precise claim, confirm that it is legally disposable and ensure that the employee’s consent is informed and voluntary. In practice, formal mediation is usually the more suitable mechanism for an individual employment dispute.

The Labour Code expressly regulates arbitration for collective economic and social disputes. Mandatory arbitration also applies when a lawful strike in a service of transcendental importance reaches its statutory maximum duration. This regime concerns collective disputes and should not be conflated with arbitration of ordinary individual employment claims.

The labour process is governed by principles of simplicity, informality, speed and gratuitousness or minimum cost. Employees may appear personally, with legal counsel or through an authorised representative, and some may have access to legal assistance through the Public Defense Service.

For accessing the Public Defence Service, the employee must demonstrate that their last or current monthly income does not exceed two base salaries for the administrative assistant position ‒ a threshold that will be confirmed at the time the assistance is requested. This ordinary income limit does not apply with regard to discrimination cases, mothers asserting maternity-related employment rights, and adolescent employees.

The unsuccessful party in a labour process may be ordered to pay the costs incurred by the prevailing party, regardless of who the prevailing party is. Recoverable costs include legal fees and procedural expenses. Legal fees awarded as costs are generally fixed by the court within the statutory range of 15% to 25% of the relevant monetary award or amount at issue, as applicable. Where the proceedings cannot be valued in monetary terms, the amount is determined prudentially by the court.

The court may wholly or partially exempt the unsuccessful party from costs in circumstances established by law, including where the party has litigated in evident good faith, where there has been significant reciprocal success and failure, or in other circumstances provided by the Labour Code. However, any exemption must be duly reasoned.