Contributed By Bufete Godínez y Asociados
The Labour Code does not differentiate between blue- and white-collar workers. However, there are very specific references to those workers who occupy high-ranking positions in a company, such as managers or administrators who are considered to be representatives of the employer (Article 5) and “trusted employees”. These workers may work an extended work day (Article 143) and are excluded from the group that may declare a strike (Article 382).
There are also dispersed regulations for workers in agricultural and livestock activities, in hiring materials (Article 22), salary (Articles 19, 157 and 166), working day (Article 139), weekly rest (Article 152) and dismissal (Article 82).
Different types of employment contracts can be used depending on various factors such as the category of worker to be employed and the term within which the work will be carried out. The most commonly used employment contracts include a contract for an indeterminate period and a contract for a specific period of time, which may be for a periodic term or for specific work (Articles 26 and 27 of the Labour Code).
A fixed-term contract is of an exceptional nature and is justified according to the nature of the service that is to be carried out. Such a contract cannot exceed a period of one year, including extensions made throughout the term of the employment relationship. In the case of services that require special technical input, the maximum term can be extended to five years. However, if at the expiration of a fixed-term contract the causes of and the nature of the work that gave rise to the contract persist, the fixed-term contract will be considered to be indeterminate.
A verbal contract can only be made in a limited number of cases (Article 22 of the Labour Code), eg agricultural or livestock workers and temporary workers whose term of appointment does not exceed 90 days. Written employment contracts are mandatory in all other cases (Articles 23 and 24 of the Labour Code).
In the event that no employment contract has been agreed, the employer is under a duty to prove the working conditions that a written employment contract would provide proof of (Articles 25 and 478 of the Labour Code).
The minimum content of an employment contract (Article 24 of the Labour Code) includes the following:
The daily and weekly work limits depend on the type of work (Articles 136 and 138 of the Labour Code).
A daytime shift (between 5 a.m. and 7 p.m.) has a daily limit of 8 hours, which can be increased to 10 hours per day subject to a weekly limit of 48 hours provided that the work is not unhealthy or dangerous.
Night shifts (from 7 p.m. to 5 a.m.) are subject to a limit of 6 hours (which cannot be extended) with a weekly limit of 36 hours.
A mixed day shift (which is one that begins on a day shift and ends into a night shift or vice versa) is subject to a daily limit of 7 hours extendable to 8 hours with a weekly limit of 42 hours, provided that the work is not unhealthy or dangerous.
In the event that the mixed day is extended by 3.5 hours or more in the portion that corresponds to night time working, the daily and weekly limits will be those of night time.
Article 143 of the Labour Code provides for exceptional weekly and daily working hours for certain workers, eg managers, administrators, trusted personnel and workers who perform their duties outside the workplace whose daily limit is 12 hours subject to a weekly limit of 72 hours.
According to Articles 135 and 136 of the Labour Code, the limits to the daily and weekly hours cannot be waived by the worker.
However, it is possible to negotiate flexible conditions regarding the working day. Part-time work is allowed. The working day can be continuous or fractioned (ie has an uninterrupted rest period of one hour), cumulative (the weekly working day is compressed into 5 days) or non-cumulative (the ordinary weekly working day is composed of 6 days). It is also permissible to negotiate terms relating to remote working.
Overtime is counted from the end of the workday. As for remuneration, the pay rate must be 50% more than the ordinary salary. On holidays or weekly rest days, which are paid at double the ordinary rate, the rate for overtime is triple the normal rate (Articles 139, 140, 149 and 152 of the Labour Code).
The only workers exempted from working overtime are adolescent workers (aged less than 18 years).
It is not possible to work overtime when the daily work day is longer than 12 hours, nor is it possible to work when the work to be carried out is unhealthy or dangerous.
Article 57 of the Political Constitution enshrines the right of the worker to an annual minimum wage. The said minimum wage applies from January 1 to December 31 of each year and is set for the private sector by the Salary Council, an organ attached to the Ministry of Labour and Social Security which is composed of representatives of the workers, employers and government officials. This is the only participation of a governmental entity in the setting of salaries.
There is no single minimum wage. The minimum wage is set depending on whether the employee is a specialised, qualified or unskilled worker, according to their educational training (bachelor's degree, high school or technical education) and for some specific occupations (eg domestic servant). For workers with part-time contracts, the salary is proportionate to the minimum wage.
Workers whose hiring salary is higher than the legal minimum are only entitled to an adjustment to prevent them from falling below that minimum; however, it is a common practice to increase wages by the same percentage provided for in the annual minimum wage review.
Additionally, workers are entitled to an additional payment known as a Christmas bonus, equivalent to one-twelfth of the salary received in the preceding year, which is paid in December.
Whereas the bonuses, incentives or prizes awarded to workers for their performance or productivity are voluntary, they are considered to have a salary nature.
Benefits in kind (vehicle, room, educational expenses etc) are also voluntary and most of them are considered as equivalent to salary with certain exceptions (eg life and medical insurance policies). Their value is calculated at 50% of the salary value unless a different value is determined or agreed upon (Article 166 of the Labour Code).
Article 153 of the Labour Code establishes that every worker has a right to paid average wages for annual leave for a minimum of 2 weeks for every 50 weeks worked. In the event that that the worker has not completed 50 weeks service, he or she will be entitled to at least one day of vacation for each month worked. Because a minimum has already been legally established, the right to paid holidays can be extended by common agreement or a collective agreement between the employer and the employees.
Maternity leave is paid for four months (one month before delivery and three months after delivery). During this period, the employer pays 50% of the salary and the remaining part is borne by the Costa Rican Social Security Fund. In the case of multiple births, this period may be extended by one month for each new-born child. In the case of adoption, the period is three months (Article 95 of the Labour Code).
Mothers are entitled to a nursing licence with pay for one hour a day; mothers working part-time are entitled to a proportionate rest. The custom is to take this paid leave at the beginning or end of the day. The duration of the licence is maintained as long as a doctor certifies the nursing status (Article 97 of the Labour Code).
From the beginning of the employment relationship, the employer has an obligation to insure every worker with the Costa Rican Social Security Fund against sickness and maternity leave, as well as disability, old age and death, as well as with the National Insurance Institute with regard to work risks.
During the first three days of disability due to illness or a non-occupational accident, the employer will pay 50% of the salary as a subsidy (Article 79 of the Labour Code) and from the fourth day the Costa Rican Social Security Fund will take over of the payment of a subsidy equivalent to 60% of the worker's salary. In case of work risks, the subsidy is paid by the National Insurance Institute from day one.
Medical Appointment Permit
Permission to go to a medical appointment shall be given without pay.
Licence for the Care of Minors and Terminally Ill Patients
Workers who are responsible for terminally ill patients and seriously ill minors may apply for a disability licence from the Costa Rican Social Security Fund for a period determined by the doctor. During this licence, the subsidy will be paid by the above institution (Law No 7756 of February 25, 1998).
A worker's duty of confidentiality is derived from the principle of good faith (Article 19 of the Labour Code) which need not be subject of an express agreement, although this is increasingly the case in either the original employment contract or in complementary confidentiality agreements. The worker must refrain from revealing confidential information he or she has acquired from the company in the execution of his or her work to people who are not authorised to receive it. Information that is considered confidential should be detailed. The revelation of technical, commercial or manufacturing secrets is not acceptable and provides grounds for justified dismissal (Articles 71 and 81 of the Labour Code) with no employer liability.
The validity of a non-competition clause is not regulated by legal rules. However, the Second Chamber of the Supreme Court of Justice recognises that, as a requirement to demonstrate the validity and reasonableness of a non-competition clause after the termination of the contract, compensation should be paid.
In a particular case that did not constitute jurisprudence, the court held that compensation equal to 50% of the salary that the worker had been receiving prior to ceasing employment was reasonable for the duration of the clause.
Although no claims have been examined as regards sufficiency of compensation, the amount must be reasonable and proportionate to the limitations imposed on the worker.
Non-solicitation clauses are becoming increasingly common in the termination agreements of senior management contracts, with regard to former employees of the company and the company's clients.
Non-solicitation clauses are also included in contracts by companies that provide personnel. In this type of contract companies are prohibited from directly employing such personnel until an agreed time period has elapsed. However, the validity of these clauses has yet to be determined by the courts.
Article 5 of the Labour Code establishes that it is necessary to have the informed consent of the worker before his or her personal information can be collected. Employers must inform their workers of the existence of a database for the purpose of data collection, the recipients of the said data, the treatment of that data and the employee's rights to review, rectify, delete or correct that data. The employer may only store information that is accurate, truthful and current, both in the recruitment and selection process and during the worker's working life.
There is no limit to the number of foreigners that a company can hire; the limitations contained in Article 13 of the Labour Code were declared unconstitutional.
During the authorisation process for work permits for foreigners, advisory opinions prepared by the Ministry of Labour and Social Security are used to assess whether the hiring of a foreign worker will displace domestic labour (Articles 7.1 and 8 of the General Law of Migration and Foreigners).
Employers can only hire foreigners who hold a work permit and a temporary or permanent residence permit that authorises them to work. In case of non-compliance with the above, a fine of between two and twelve times the amount of a base salary (between US$1,475 and US$8,850) may be imposed on the employer.
A spouse who is a dependent of a temporary resident worker may also be authorised to work (Article 80 of the General Law on Migration and Foreigners).
It is also possible to request the temporary residence of executives, representatives, managers and technical personnel of companies already established in the country (Article 68 of the General Law of Migration and Foreigners).
The General Directorate of Migration and Foreigners authorises the entry and stay of foreigners. It is they who register and authorise the permanent or temporary residence of people who intend to work in Costa Rica. The application requirements depend on the applicant's immigration category and whether he or she is seeking temporary or permanent residence.
Companies can register with the General Directorate of Migration and Foreigners and, by so doing, receive special treatment which can see reduced deadlines for the processing of residence applications.
Freedom of association is a fundamental right enshrined in Article 60 of the Political Constitution of Costa Rica. This rule enshrines the power of employers and workers to organise freely. Closed shop or union shop clauses are unconstitutional.
Costa Rica has ratified agreements numbered 87, 98 and 135 as well as recommendation number 143 of the International Labour Organisation which guarantees the right to organise and to collective bargaining.
The legislation regulates in detail the organisation of trade unions but does not have similar rules for other forms of non-union representation, such as the so-called “Permanent Committee of Workers” which must be elected by a workers' assembly (Decree No 37184-MTSS June 19, 2012).
As of 2018, according to data from the Statistical Yearbook of the Ministry of Labour and Social Security, the trade union membership rate was 14.2%. However, while the public sector was 90.4%, the private sector only reached 3.2%.
Article 339 of the Labour Code defines unions as a permanent association of workers or employers or persons of independent professions or trades constituted exclusively for the study, improvement and protection of their respective economic and social interests.
Article 342 of the Labour Code recognises the following types of unions:
A worker can be affiliated to more than one union; preference is not given to a single organisation in the same company or workplace or two or more unions of the same class or of different classes. Such unions can coexist.
Unions require a minimum number of 12 workers (Article 343 of the Labour Code). Meeting in a constituent assembly, they must approve the bylaws and appoint the board of directors; foreigners may not be designated as leaders – a legal and constitutional prohibition that has been questioned by the controlling body of the International Labour Organisation. Unions must be registered with the Department of Social Organisations (formerly the Office of Trade Unions) of the Ministry of Labour and Social Security, whose procedure is normally prompt (Article 344 of the Labour Code).
For its part, and without being exclusive to the organisation of trade unions, permanent workers committees are made up of a maximum of 3 workers and must be elected in an assembly in which at least 50% of the workers of the company take part (Executive Decree 37184-MTSS of June 19, 2012). In practice, these committees are constituted exclusively in private companies.
Collective bargaining mainly takes place through the conclusion of collective bargaining agreements or, in their absence, through direct arrangements. The union is the only legitimate body that can negotiate a collective bargaining agreement, while both the union and the permanent workers committees can negotiate a direct settlement.
If a union gathers a number of members equal to or greater than one third of the affiliated workers, the employer must accept the negotiation process otherwise a reason to strike will exist. If a complete agreement is not reached within 30 days, the matters for which there is no agreement may be submitted to a conciliatory process and, if the latter fails, to an arbitration procedure with the consent of the parties (Article 644 of the Labour Code).
A direct settlement can be signed at any time during a strike or conciliation or arbitration procedure or at any other time (Article 616 of the Labour Code). However, if a direct settlement is already being negotiated, priority to bargain collectively lies with the union that is able to sign a collective bargaining agreement.
Workers can also exercise the right to strike through the union or by a coalition of workers (Article 372 of the Labour Code). The union may request the certification of the legality of the strike at any time from the start to the end of the strike (Article 661 of the Labour Code).
Trade unions may file lawsuits of collective legal interest before the labour courts without the need for workers to expressly grant them power of attorney (Article 446 of the Labour Code). The same does not happen when it comes to socio-economic conflicts, where a specific power must be granted by the affiliates.
The private sector is governed by dismissal at will. An employer can fire a worker without just cause or motivation based subject to the payment of workers' compensation (Article 63 of the Political Constitution and 85 subsection (d) of the Labour Code). In a private company, no prior or due process need be followed prior to dismissal, except in the case of workers subject to special privileges where judicial or administrative authorisation must first be obtained (Article 540 of the Labour Code).
The Labour Code also has a list of grounds for disciplinary dismissal that are individual (Article 81) and collective (Article 369), for which no compensation should be paid. Conversely, Article 254 of the Labour Code contemplates dismissal due to the fault of the employer for health reasons derived from work risks and when relocation of the worker is not possible.
There are no regulations pertaining to dismissal for objective reasons nor are there limitations on the execution of collective dismissals.
Except in the case of workers that fall within a special jurisdiction, there is no necessity to follow a prior administrative or judicial authorisation procedure.
Contracts for an undetermined period
When a worker is dismissed without just cause in contracts for an indefinite period of time, the employer must give advance notice and pay severance compensation to the employee (Articles 28 and 29 of the Labour Code). If the employee resigns, he or she must give the employer advance notice.
Both notice and severance are payable upon completion of the probationary period. If the notice cannot be delivered on time, it can be made subject to compensation in money. During the notice period, the employee is entitled to a licence for one day per week with pay in order to seek out new employment. With the agreement of both parties, these licences may be taken cumulatively. According to Article 28 of the Labour Code, the only formality is that the notice must be communicated in writing or, if the employment contract was agreed verbally, it must be presented before two witnesses.
If during the period of notice the employee commits a serious breach, the employer may sanction the said breach by way of immediate dismissal.
The duration of the notice varies according to the seniority of the employment relationship (Article 28 of the Labour Code). If the employment relationship has existed for more than 3 but less than 6 months, 1 week's notice must be given; if the employment relationship has existed for more than 6 months but less than one year, 15 days' notice must be given; and if it is after 1 year, 1 month's notice is required.
The payment of severance pay depends on the seniority of the worker (Article 29 of the Labour Code). If the employment relationship has existed for more than 3 months but less than 6 months, the employee must be given 7 days' severance pay. If the employee has been employed for more than 6 months but less than 1 year, 14 days' severance pay. After 1 year, the following scale is applied:
Contracts for a specific time
In a fixed-term contract either party may terminate without cause before the end of the term or upon the conclusion of the work, provided that compensation is paid. The employer is responsible for two indemnities: one for the damages caused and the other that is fixed according to the duration of the contract. In the case of the worker, he or she will only have to pay damages.
The first indemnity is calculated according to specific damages and losses. The valuation criteria reflects the duration of the contract, the importance of the function being performed and the difficulty that the worker has in procuring equivalent employment (or for the employer to find a substitute). The parties usually establish a compensatory sum by mutual agreement.
The second indemnity is set in proportion to one day's salary for every seven days of continuous work performed, subject to a minimum of three days' salary. However, if the contract had a term of six months or more or the execution of the work, due to its nature or relevance, should last that term or another, the compensation may not be less than 22 days salary.
Articles 81 and 367 of the Labour Code define the reasons that are considered serious enough to justify disciplinary dismissal. The courts have determined that the serious cause must “be so serious that it does not allow the continuation of the employment relationship” (Second Chamber of the Supreme Court of Justice, Vote No 113-1991).
According to the Second Chamber of the Supreme Court of Justice, to invoke disciplinary action on the basis of a serious fault the company must be able to establish the damage caused and the attribution or link between the action of the worker and that damage, eg direct (property damage etc) or potential (damage to the image of the company etc). The above must have been aggravating factors in his or her relationship with the company, which takes into account intention, repetition of behaviour and the cost of the damage etc.
In general, there is no procedure that must be observed prior to dismissal for a serious offence; however, the employer must provide the employee with the following documents: (i) a letter of dismissal which details the facts that support it (which are also the only ones that may be discussed in court) and (ii) a certificate that states the period of employment and the work performed and, if the employee requests, the cause of termination (Articles 35 and 500 of the Labour Code).
Exceptions to this rule include cases of sexual harassment, whereupon an investigative commission composed of three people of different sex must investigate the complaint within a period of three months. The National Directorate of Labour Inspection must be informed of the beginning of the procedure and its result. Both the accused and the complainant may take their own legal advice (Law No 7476 of February 3, 1995).
Article 414 of the Labour Code establishes a limitation period of one month for the commencement of disciplinary measures, which must be accounted for from the date of the breach or from when the breach became known to the company. In cases where, by decision of the company or otherwise, a formal investigation procedure must be followed, the worker must be informed within one month of the beginning of the same.
Termination agreements are permitted subject to Article 86 subsection (c) of the Labour Code. A termination of a labour contract by mutual agreement must include the amount agreed and a breakdown of the rights included therein, which may include workers' compensation and other rights such as holidays and a proportional Christmas bonus.
These agreements can be made in three ways: privately before witnesses in the same company; before the Ministry of Labour and Social Security; or in private centres for Alternate Conflict Resolution authorised by the same ministry.
When made privately before witnesses in the same company, the agreement may be subject to judicial review in its entirety. If any of the other options are used, the agreement will only be revised with regard to inalienable rights, such as the payment of salaries, vacations and bonuses.
An employee would only require the presence of a lawyer or a union representative in an alternate conflict resolution centre if he or she is affiliated with a union, which is rare in the private sector.
Labour terminations by mutual agreement have become increasingly common, thereby reducing litigation.
Waivers of legal, contractual and conventional rights in employment contracts are null (Article 11 of the Labour Code), including waivers regarding the filing of judicial or administrative claims during and after the validity of the employment contract (Second Chamber of the Supreme Court of Justice, Vote No 363-2006).
Some categories of employees are protected from dismissal unless the employer can prove the existence of a serious offence, which must be demonstrated before a third party (eg a judicial or administrative authority as the case may be) and only if a resolution authorising the dismissal is obtained.
The categories of workers who are subject to this due process include:
The first three types of cases must be pursued before the National Directorate of Labour Inspection. The last type must be pursued before the judicial or administrative authority that is in charge of handling the conflict or has the means to resolve it. In the case of the National Directorate of Labour Inspection, the Constitutional Chamber of the Supreme Court of Justice has set a maximum processing period of three months, but this is regularly exceeded.
The expression “representatives freely elected by workers” refers to members of the Permanent Committee of Workers and although Article 367 of the Labour Code establishes that the number of representatives depends on the number of unionised workers (one for the first twenty unionised workers in the respective company and one for every twenty-five additional unionised workers, up to a maximum of four) the courts have provided a broader protection. Union leaders and representatives are appointed without a numerical limit.
In the case of “persons reporting sexual harassment”, the maximum term of protection after the conclusion of the investigation process has yet to be defined.
A special case is that of adolescent workers aged between 15 but less than 18 years of age (Article 91 of the Code of Children and Adolescents), whose dismissal without employer responsibility must be authorised by the National Directorate of Labour Inspection, but in the case of dismissal with employer responsibility (ie severance pay), the Ministry of Labour will review the indemnities to be paid.
Most of the judicial proceedings before the labour courts come from workers who challenge the way in which their employment was terminated. The most common reasons for challenge include that:
Where it is alleged that the dismissal is void, either because it is discriminatory or due to failure to comply with due process, the employee may seek reinstatement and the payment of salaries and bonuses no longer received from the date of termination up to the point of reinstatement, the moral damage caused, interest, indexation and costs.
Where the dismissal is contested or has been waived with employer responsibility, the worker's claim consists of the payment of severance pay according to the type of contract, the moral damage caused, interest, indexation and costs.
Article 33 enshrines the principles of equality and non-discrimination. Specifically, Article 57 regulates equal pay and Article 68 prohibits discrimination at work. Costa Rica has also ratified agreements 100 and 111 of the International Labour Organisation, which are fully applicable.
The Labour Code reform of 2016 further reinforced this protection and, consequently, discrimination is prohibited on grounds of “age, ethnicity, sex, religion, race, sexual orientation, marital status, political opinion, national ancestry, social origin, affiliation, disability, union affiliation and economic situation” and also for “any other similar form of discrimination”, which is a generic criterion that may involve the jurisprudence of the courts (Article 404 of the Labour Code). Further, the Constitutional Chamber of the Supreme Court of Justice has established a prohibition on differentiation at work without an objective and reasonable basis, including dismissal of workers for health reasons (Vote No 2005-13205).
Anyone who claims to be discriminated against or made subject to discriminatory dismissal must demonstrate clear and precise evidence that their right to equality was violated (Article 409 of the Labour Code). Once the complainant demonstrates the basic requirements, the employer carries the burden of proving that its decision was objective, reasonable and unrelated to discriminatory treatment.
In the event that a worker has been subject to discriminatory dismissal, he or she can go to court within the year following the dismissal through a summary process alleging discriminatory dismissal. He or she may seek the nullity of the same and request, as a precautionary measure, his or her reinstatement with the company (Articles 540 and 542 of the Labour Code). Such precautionary measures are regularly granted without further analysis. The company's response must be ready in 5 days although in practice (despite this being a summary process) this could take approximately 18 months.
If the claim is rejected, the wages already paid as a result of the precautionary measure cannot be recovered; if the claim is accepted, the employee can renounce his or her effective reinstatement and claim only damages, which may include salaries not received prior to the (proposed) reinstatement date and compensation for moral damage.
There is a special labour jurisdiction composed of labour courts and tribunals which are responsible for resolving individual and collective labour disputes and issues related to social security. In the social order of the jurisdiction, the competent bodies to hear labour matters are: the Second Chamber of the Supreme Court of Justice, the Courts of Appeal, the Conciliation and Arbitration Courts and the Labour Courts (Article 429 of the Labour Code).
In the main cities of the country, labour courts are solely dedicated to addressing these issues; in the rest of the country, they are served by mixed courts. The appeals courts are also mixed, except in the capital. The Second Chamber of the Court deals with work issues and family and other matters.
Lawsuits are resolved in two ways. If the amount claimed is less than US$8,900, the final judgment will be delivered by the Court of Appeals. If it is a greater amount, the Second Chamber of the Supreme Court of Justice will decide the case.
Trade Unions can file class action lawsuits (Articles 446, 600, 602, 618 and 635 of the Labour Code).
It is not necessary to have a lawyer to file a lawsuit. As of July 2017, workers can request that the state provide them with a lawyer for free (Article 454 of the Labour Code).
The statute of limitations for a worker to claim his or her rights is one year, counted from the date of termination of the said contract (Article 413 of the Labour Code).
An employment contract may provide for arbitration both during the term of the contract or at the end of the same, but this will not preclude the worker from seeking the protection of the courts (Article 41 of the Political Constitution).
Article 43 of the Political Constitution of Costa Rica recognises that everyone has the right to resolve their economic differences through arbitrators, even if litigation is pending. This arbitration can be carried out in the administrative headquarters of the Ministry of Labour or in the judicial headquarters of the labour courts or in the centres for alternate dispute resolution (Law on Alternate Conflict Resolution and Promotion of Social Peace, Law No 7727 of 9 December 1997 and Article 456 of the Labour Code).
A judicial decision will normally include a ruling on legal fees and other procedural expenses. Legal fees, if granted, can be set in two ways (Article 562 of the Labour Code): (i) by a percentage of between 15% and 25% of the amount granted or (ii) by a fixed sum in case the value of the claim cannot be ascertained.
Procedural expenses (for impressions, expert opinions etc) must be demonstrated with proof of payment.
Where the worker has contracted particular legal advice at his own expense, the lawyer usually claims the costs himself.
If the worker has applied for free representation paid by the state, Article 454 of the Labour Code provides that the lawyer's expenses will be distributed as follows: 50% for strengthening of the specialised section of the Department of Public Defenders of the Judiciary and 50% for the Support Fund for Alternate Conflict Resolution.