Employment 2019 Second Edition

Last Updated September 10, 2019

Chile

Law and Practice

Authors



Uribe, Hübner & Cía provides counselling in almost all areas of law, including civil law, commercial law, labour law, insurance law, antitrust, tax planning and consultancy, and government procurement. The firm actively supports and takes part in numerous university and academic activities, including undergraduate and graduate programmes, as well as in national and international professional associations. UH&C works closely with other law firms on specific cases, through either national or international networks. UH&C´s lawyers are members of the Chilean Bar Association and the International Bar Association, and the office is an active member of the Chilean main chambers of commerce.

In Chile, there has been no distinction between white-collar and blue-collar workers since 1978, with all workers generally having the same rights and obligations.

There are only special statutes for certain activities, mainly with respect to the work day and schedule, and specific aspects of each activity, for farm workers; captains, officers and ship crew; airline pilots and crew; port workers; arts and entertainment workers; domestic workers; chauffeurs of intercity buses and intercity cargo trucks; the professors of schools; and professional sportsmen and the personnel related to them. Recently another special statute was enacted, for employees that work in contact or call centres.

The employment contract must be in writing and must cover certain matters, such as the individualisation of the parties and the nationality and date of birth of the worker, the amount, form and period of payment of compensation, the duration and distribution of the workday, and the term of the contract, which can be for a fixed time, by work or task, or of indefinite duration. The parties may add any other pact they agree on, provided it is not contrary to the current legislation.

A fixed-time contract can be renewed only once, for another fixed time. The duration of the fixed term cannot exceed one year. If the worker continues to work beyond the fixed term, with the knowledge of the employer, the contract becomes indefinite. The same is true if the worker has provided discontinuous fixed-term work for more than 12 months within a period of 15 months for the same employer.

The work schedule cannot exceed more than 45 hours per week, and this maximum cannot be distributed over more than six or fewer than five days. The daily work day cannot exceed ten hours.

The working hours limit does not apply to managers, agents with general administrative powers, employees who perform their duties without direct supervision or those who do not perform their duties at the employer's premises.

Any worker who has a work schedule can work overtime, which cannot be more than two hours per day and is paid with a 50% surcharge on the hourly amount of the agreed salary. Overtime must be agreed upon for temporary needs, which cannot exceed three months.

The law provides the possibility to agree on alternative working day distribution for the following individuals::

  • workers who have part-time work of 30 hours a week or less; and
  • students between 18 and 24 years of age who are studying regularly or are in the process of obtaining their higher education degree.

There is a minimum monthly salary of CLP301,000 (approx. USD436), which must be paid in Chilean currency.

It is mandatory to pay annual bonuses if the employer has profits and the obligation to maintain account books. This bonus obligation can be fulfilled in two ways, with the first being to distribute 30% of the company's liquid profits among all workers, in proportion to the remuneration received by each employee during the year (January to December). Utility is understood as the one that determines the Chilean IRS for the determination of the income tax of the company.

The other way to fulfil the bonus obligation, which does not involve paying part of the profits is to pay the workers 25% of their monthly salaries, whatever the employer's profit. This amount can be anticipated by the employer, so many companies incorporate the amount into the monthly remuneration.

Government only intervenes in compensation when there is an increase in the minimum wage, which is normally done annually.

Workers are entitled to 15 days of paid leave per year, which are preferably to be taken in spring or summer. Saturdays, Sundays and holidays are not included in this period, so vacations normally amount to 21 days. Ten working days have to be taken in one period, and the rest can be split with the agreement of the employer.

After ten years of work, an employee is entitled to an additional day of vacation every three further years of work.

The holiday can accumulate, but only for two consecutive periods.

The payment of the remuneration during the annual holiday corresponds to the employer's wage; if the worker had a variable remuneration it is calculated according to the average wage over the last three months worked.

In the case of the death of an employee's spouse, child or domestic partner, there is a legal permit of seven consecutive days with the right to remuneration from the employer.

Female workers over 40 years of age and male workers over 50 years of age are entitled to leave for half a day a year to have mammography or prostate exams.

Female workers are entitled to a maternity leave of six weeks before delivery and 12 weeks after it. The remuneration during maternity leave is paid by the corresponding health system, with a maximum limit that varies permanently.

For births of two or more children, one week of leave must be added for each child, starting with the second.

Six weeks of permitted leave must be added where the child is born before 33 weeks of gestation or weighs less than 1,500 grams.

If these last two circumstances occur, the one that grants more postnatal time will be valid.

There is an additional, mandatory maternity leave in these two circumstances, consisting of 12 or 18 weeks, depending on the mother's choice:

  • 12 weeks for those mothers who decide not to return to work after the postnatal period; or
  • 18 weeks for those mothers who decide to reintegrate after the postnatal period. When they are subject to work hours they must return for half days.

The employer is obliged to reinstate the worker, unless, due to the nature and conditions of their individual work, the employee can only complete their tasks within the hours they performed before their prenatal leave.

The refusal of the employer to reinstate the employee must be substantiated, and the worker must be informed within three days of her request to return to work having been received.

If both parents work, parental postnatal leave can be assigned to the father, at the mother's choice.

If permission has been granted for an additional 12 or 18 weeks (see above), the father may, from the seventh week, make use of the leave for the number of weeks that the mother indicates, with the authorisation of the mother.

The father's use of the leave must always be at the end of the period. The company must inform the employee's pension system for the payment of the corresponding subsidy, before the use of the permit.

If the mother dies during childbirth or during the post-birth leave, the permission will correspond to the father or to the person who has custody of the child.

The father is entitled to five days of continuous or discontinuous leave for the birth of a child, during the first month of the child's life. Remuneration is paid by the employer.

Workers who suffer from a common illness have the right to rest by absenting or reducing their working hours. For this, a medical licence from a doctor, dentist or midwife must be presented to the employer.

The remuneration during the medical licence is paid by the health system. If the licence is for ten 10 days or less, it is paid from the fourth day of rest. If the rest is more than ten days, every rest day is paid. The amount paid by the health system has a monthly limit, which varies.

Licences can be renewed indefinitely, but it is common for the health system to make repairs after two years and to begin to process the disability withdrawal.

There are also licences for accidents at work and occupational diseases, which are covered by special insurance established by law. Normally, these place responsibilities on the employers, since it is part of their duty to take care of the life and health of the workers, so workers who suffer these kinds of accidents or illnesses can demand to be paid moral damages (a kind of punitive damages).

The labour legislation expressly establishes that an employee's negotiations within the business that have been prohibited in writing in the employment contract is a cause of dismissal of the worker without the right to compensation for years of service. The jurisprudence and the authors admit that, even without the prohibition clause agreed in the employment contract, non-competition during the labour relationship is part of the duty of loyalty of the worker and, therefore, its infraction is a cause of dismissal, authorising the termination of the employment contract without compensation for termination of contract.

As with the obligation of confidentiality, there are no special rules regarding non-competition once the employment relationship has ended.

There are divided judgments on the matter, with some considering that the prohibition on competing after the labour relationship ends violates the fundamental right of freedom of contract enshrined in the Political Constitution, and that the experience and knowledge of the worker in a given subject are part of their means of work.

In a ruling of 27 January 2011, the Supreme Court stated: “the pacts … of non-competition between workers and employers, with effects subsequent to the termination of the employment contract, are not that they oppose the legal system, but quite the opposite, because through them they seek to prevent a socially reprehensible and legally illegal activity, such as unfair competition, through the use of knowledge or information acquired during the extinct relationship. Thus, in no way can it be said that business organizations cannot protect themselves from an activity in that sense, through contracts in which the commitment of the worker is agreed not to work after the end of their contract, for themselves or for another entrepreneur, in activities similar to those he had been doing for the relevant purposes, it is necessary to state that although, as previously seen, the party that supports the obligation not to develop the activity in competition, at least in doctrine, must be subject to an adequate consideration, it is not less than, in this case, it is constituted by the high remuneration that the defendant received in his capacity as Manager, according to the same contract that contains the eleventh clause, so often referred to.” In this case, the prohibition of non-competition agreed was for a period of two years after the end of the employment relationship. The Supreme Court decision resulted in the compensation of damages requested in the lawsuit.

In cases where the non-competition clauses have been given value after the employment relationship, these are for workers who hold high positions, often of a managerial nature and with high salaries.

There are no specific labour regulations, but solicitation can be prevented through law 20,169, which regulates unfair competition. The law is quite broad in its application and aims to protect competitors, consumers and, in general, any person whose legitimate interests are affected by an act of unfair competition.

The law has a non-restrictive list of behaviours that are considered unfair competition, but establishes that, in general, any conduct contrary to good faith or good customs that, by illegitimate means, seeks to divert clients from an agent of the market is an act of unfair competition.

In a judgment of 14 May 2010, the non-solicitation clause was validated, where it was reasoned thus: “… before analyzing the evidence rendered, it is worth the following reflections: did the clause in question make sense after analyzing what happened in practice? Is it legitimate to try to avoid a massive resignation of the entire broker team, literally raised by the competition, on the 7th day of December of two thousand and nine, with concert, without any possibility of reaction? It seems that they would be behaviours worth trying to avoid, to prevent predatory behaviours in the markets and merciless struggles for market positioning.

The law regulating unfair competition allows the following petitions to be made to the respective court:

  • an action to cease the act, or to prohibit it if it has not yet been implemented;
  • a declaratory action of an act of unfair competition, if the disturbance created by it subsists;
  • an action of removal of the effects produced by the act, through the publication of the conviction or a correction at the expense of the perpetrator or other suitable means; and
  • compensation action for damages caused by the act, subject to the provisions of the Civil Code.

The General Law of Data Protection, N°19,628 of August 1999, establishes that the processing of personal data can only be carried out when the law or the owner expressly authorises or consents to it. The law also grants the right of every person – not only employees – to compel the entity responsible for a bank that is dedicated to public or private personal data processing to inform about the data related to him/her, its origin and destination, the purpose of the storage and an individualisation of people or organisms to which such data is transmitted regularly. If the personal data is wrong, inaccurate, vague or incomplete, the owner has the right to demand its modification. Without prejudice to legal exceptions, the owner may also require the information to be removed if the storage is not legal or if the data is outdated. According to this act, "personal data" is that which relates to any information concerning natural, identified or identifiable persons.

In September 2001,Law N°19,759 was enacted, introducing a new “Article 154 bis” to the Labour Code, establishing that the employer must ensure the confidentiality of information and personal data regarding its employees to which he has obtained access as a result of the labour relationship.

Lastly, in June 2018, the protection of personal data was raised to a right of constitutional rank, by means of Law N° 21,096. Henceforth, data protection is also covered by the special rules and procedures contained in the Labour Code, in order to effectively protect the fundamental rights of employees.

At least 85% of workers for the same employer must be Chilean, with the following exceptions:

  • specialist technical staff;
  • foreigners whose spouses or domestic partners are Chilean, or who are widows or widowers of a Chilean spouse; and
  • foreigners who have resided in the country for more than five years, not counting sporadic absences.

There is no special registration obligation for foreign workers. However, if the work is carried out under a visa subject to an employment contract, the employer must notify the immigration service of the Ministry of Foreign Affairs when the worker resigns or the employment contract is terminated.

Unions can engage in all activities that are contemplated in their statutes and are not prohibited by law.

The main functions of trade union organisations are to represent workers in collective bargaining processes, to sign the corresponding collective agreements and to enforce the rights of workers who are members of their union.

The affected workers do not need to request representation in order for the union to represent them in the rights that arise from the collective contract, nor is that requirement needed when claiming legal or contractual violations that affect most members of the organisation. When there are few workers affected by any infraction, the intervention of the trade union organisation must be done upon the request of those affected.

In companies with good labour relations, unions are a good means of communicating the concerns that workers may have, which increases productivity.

In Chile, the constitution or dissolution of a union is free, as is the affiliation or disenrollment of workers. Freedom of association is a fundamental right, guaranteed in the Political Constitution.

The constitution of a union is simple and does not require any act of authority. It is enough for an act to be drawn up stating that the statutes are approved before a Minister of Faith for the minimum quorum of workers required by law, for a board of directors to be elected and for those statutes to be deposited in the respective Labour Inspectorate.

As many unions as possible can be formed within a company, provided that the minimum quorum established by law is complied with, which varies according to the number of workers the company has. In any case, if there are 250 or more workers, they can always form a union regardless of the percentage they represent among the workers of a company.

The Labour Code recognises the following different types of union organisations:

  • the company union, which groups workers from the same company;
  • the establishment union, which brings together workers from a certain part of the company or from a branch;
  • the inter-company union, which affiliates workers of two or more companies;
  • the federation, which is the union of three or more unions;
  • the confederation, which brings together three or more federations or 20 or more unions; and
  • trade union centres, which are national level organisations to represent the general interests of workers.

Trade union organisations are run by a directory, the number of which varies according to the number of members it gathers. The directors have protection against dismissal (“fuero laboral”) without prior authorisation from a court from the date they communicate their election to the employer – which cannot be more than 15 days before the election – and up to six months after the leave their position. In the case of inter-company unions, workers have the right to elect union delegates, whose number varies according to the number of workers of that company affiliated to the union, as with company unions. If one or more union directors have been elected in the company, the union delegates to be elected will be reduced by the same number of directors.

The Labour Code establishes a series of non-taxative behaviours that constitute anti-union practices that may be committed by the employer, by the worker or by trade union organisations, such as impeding the formation or operation of trade unions, exerting pressure through threats of loss of employment, or executing discrimination to encourage or discourage union membership, among others.

The penalties for anti-union practices are as follows:

  • fines that vary according to the size of the company, between CLP245,000 (USD340) and CLP14,700,000 (USD20,400);
  • reparation measures that are generally classes on freedom of association and the role of trade unions;
  • the semi-annual publication of companies that have been convicted of anti-union practices; and
  • a prohibition on contracting with the State for two years, which is the most serious of all sanctions for some companies.

In Chile, the employee representative bodies are the employers' associations, which are mainly grouped into different branches of activity, such as the Chilean Construction Chamber, the Bank Association, the National Chamber of Commerce, the National Agricultural Society, the National Mining Society and the Factory Development Society. All of them, in turn, are part of the Confederation of Production and Commerce.

They are entities that maintain study groups and bring together entrepreneurs who have an important voice in the defence of their interests and the country's policies. Such associations seek to contribute to the process of sustained economic growth in Chile, so that people can improve their quality of life through the promotion of employment, an improvement in opportunities, individual initiative and respect for private property.

Although they maintain relations and meetings with most representative organisations of the unions, they do not participate in collective bargaining, since such processes take place in Chile at the level of each company and not by branch or area of activity.

Contracts or collective agreements are the product of a regulated or unregulated collective bargaining.

The difference between them is the possibility of strike by workers in regulated collective bargaining. In unregulated collective bargaining, the parties meet at any time to negotiate the clauses of the agreement without the possibility of strike. Of course, if an unregulated collective bargaining agreement is not reached, the union will always have the possibility of negotiating in a regulated manner within the terms and conditions established by law.

Regulated Collective Bargaining

Collective bargaining is a procedure ordered by stages, through which an employer relates to one or more trade union organisations or workers, in order to establish matters of common interest in the work, especially related to remuneration or other benefits and, in general, to common working conditions.

Stages of a Regulated Collective Bargaining

A regulated negotiation is carried out according to the legal deadlines and periods. The main stages of a regulated negotiation are as follows:

  • determination of minimum services and emergency equipment;
  • presentation of the draft collective agreement by the union;
  • analysis of the proposal by the company;
  • company response to the union;
  • analysis of the response by the union;
  • negotiation table;
  • voting between last offer and strike;
  • Labour Inspector mediation; and
  • eventually, strike.

Minimum services and emergency equipment during the strike

Minimum services and emergency equipment must be qualified before the negotiations are started, by proposing the employer to all unions within the company, at least 180 days before the expiration of the current contract or 15 days after communicating the constitution of a union, if one does not exist in the company.

Collective bargaining does not begin until the minimum services and emergency equipment are determined.

Presentation of the collective contract project by the union

If there is a collective instrument in force in the company, the project must be submitted between 60 days and 45 days prior to the expiration date of the current instrument. If the minimum services and emergency equipment are not resolved, the 16 days are counted from the day following their resolution.

The contract project must contain at least the following information:

  • the parties involved in the negotiation, with a list of all members of the union affiliated by then;
  • the clauses that are proposed;
  • the term of the contract, which cannot be less than two years or more than three;
  • the details of the members of the negotiating commission; and
  • the physical and electronic address of the union(s) involved.

Once the collective contract project has been submitted, all workers affiliated with the union and affected by the negotiation must remain there during the entire process, until the stage of individual reintegration in the event of a strike.

Analysis of the proposal by the company

Once the proposal of the union is received, the company analyses the aspects of form and substance, and evaluates the concrete possibilities of satisfying the union's expectations, according to the real financial situation of the company, as well as its policies.

Company response to the union

The company must provide a written response to a member of the union bargaining commission and refer to the email mentioned in the union project. The communication must contain the following:

  • a response to each of the clauses of the workers' project;
  • an email from the company;
  • the appointment of a negotiating commission of three attorneys who are part of the company;
  • at a minimum, a contemplation of the “floor”, which is the same stipulations as in the current contract ( if one exists), with the corresponding values ​​to be paid at the end of the term of the instrument that is extinguished, excluding the readjustment clauses, the real increases clauses, the agreements on special working conditions and the benefits granted only on the occasion of the signing of the collective instrument. If there is no collective bargaining agreement, the “floor” refers to the benefits that the employer has delivered to the workers on a regular and periodic basis; and
  • the challenges of the workers and the observations of the union project.

The employer must respond to the draft collective contract within ten days of its presentation.

A copy of the response, duly received by a member of the union board, must be sent to the Labour Inspectorate within five days of receipt.

Analysis of the response by the union

The union carries out its analysis of the company's proposal, and the meetings to negotiate the contract begin. Generally, a calendar is established by mutual agreement, detailing the schedule and the approximate duration of the meetings.

Negotiating table

The negotiating commissions of both the union and the company, together with their advisers, if they wish, meet as many times as necessary in order to reach an agreement directly.

If the negotiating table reaches an agreement, this will be the collective contract, which must be in writing; a copy signed by the parties must be sent to the Labour Inspectorate within five days of its subscription.

The deadline for reaching the agreement is the date of the termination of the current collective instrument or 45 days after the presentation of the draft collective contract when there is no current collective agreement, if the parties have not agreed to the legal extensions.

Normally, unions submit the agreement reached at the table for the approval of the assembly.

If the negotiations of the table do not lead to a collective agreement within the deadlines established by law, it is the workers who must decide whether to accept the employer's last offer or to declare a strike.

Employer’s last offer

At least two days before the last five days of the existing collective agreement, the employer can submit a final offer signed by their negotiating commission. If there is no collective agreement in force, the last offer is presented at least two days before the last five days of a term of 45 days, counted from the presentation of the project by the union.

In order for the workers to exercise their right to withdraw from the strike and negotiate their return to work as of the 16th day of the start of the strike, the last offer must contain at least:

  • the same stipulations as those of the current collective instrument, readjusted in the CPI since the last readjustment and the effective date of the instrument; and
  • a minimum annual readjustment of the CPI, for the period of the contract.

If the last offer does not contain these minimum requirements, or does not meet the deadlines, the workers can negotiate their individual withdrawal from the strike from the 30th day after the strike began.

Voting strike and last offer

The union bargaining commission must call a personal, secret vote between the strike or the last offer of the employer, in the presence of a Minister of Faith. The strike or last offer must be voted on within the last five days of the valid instrument. If no such instrument exists, the vote is taken within the last five days of a total of 45, from the presentation of the project by the union.

The strike or last offer must be agreed on by the absolute majority of workers in the company which is negotiating. If said quorum is not fulfilled, the union bargaining commission has three days to adhere to the “floor” of the negotiation, in which case the collective agreement will last for 18 months. If they do not exercise this power, it is understood that the last offer of the employer is accepted.

If the strike is agreed, it must be made effective at the beginning of the work schedule of the fifth day following the date of its approval.

Either party may request mediation from the Labour Inspector within four days of the strike being agreed. Mediation is mandatory and extends for a period of five business days.

During the strike, the work contract will be deemed suspended for the workers involved in the negotiation. Workers will not be obliged to provide their services, nor will the employer be obliged to pay their salaries, benefits and royalties derived from said contract.

During the strike, workers may carry out temporary work outside the company and voluntarily make social security contributions.

Prohibition of hiring external replacement workers during the strike

The hiring of external workers to replace those who are on strike is prohibited as an unfair practice.

The strike does not affect the freedom of work of those who are not involved in it, nor the performance of the functions agreed in their employment contract. Such uninvolved workers can replace those who are on strike as long as they do not change roles.

In the chapter on unfair practices in collective bargaining, the Labour Code indicates that the employer may modify work shifts or schedules in the exercise of his powers, and make the necessary adjustments to ensure that workers not involved in the strike execute the functions of their employment contracts, without it being an unfair practice or a violation of the replacement ban. However, it is unfair practice to change the establishment in which those not involved in the strike must provide services to replace the workers who participate in it.

The strike of workers of a contractor or subcontractor does not affect the main company, which can hire other contractors or other workers directly to carry out the work of those who are on strike.

Individual reinstatement of workers

In medium and large companies, if the employer makes a final offer on the terms indicated above, workers can be reinstated individually from the 16th day of the strike. If that offer has not been made, the reinstatement can be exercised from day 30.

Strike termination

A strike can be terminated in the following ways:

  • by signing the collective agreement; by communicating to the union negotiating commission of the employer, in writing, the decision to sign a collective contract subject to the “floor” of the negotiation; and
  • with the full reinstatement of all striking workers.

Unfair Practices in Collective Bargaining

The Labour Code establishes a series of non-taxative behaviours that constitute unfair practices and collective bargaining, such as the execution of actions that violate the principle of good faith, the hiring of external replacement workers during the strike, breaching the duty to provide the emergency equipment that has been agreed or indicated by the authority, and preventing workers or managers who are not participating in the strike from entering the company, among others.

The penalties for unfair practices in collective bargaining are the same as those for anti-union practices:

  • fines that vary according to the size of the company, between CHP245,000 (USD340) and CHP14,700,000 (USD20,400);
  • reparation measures, which are generally talks about the desirability of collective bargaining and workers' rights;
  • the semi-annual publication of companies that have been convicted of unfair practices; and
  • a prohibition on contracting with the State for two years, which is the most serious of all sanctions for some companies.

The termination of the employment contract must be in writing and for any of the causes established in the Labour Code. The dismissal letter must also specify the facts on which the grounds for dismissal are based.

Termination by will or by the needs of the company entitles the worker to severance payment.

The termination of the employment contract must be notified at least 30 days in advance. If no advance notice is given, 30 days' monthly salary must be paid as compensation.

When the worker has an indefinite work contract that has been in force for more than one year, the grounds for termination by will and by the company's needs entitle the employee to one month's compensation for each year of service and fraction thereof greater than six months provided continuously to the employer.

Termination by will is only applicable to workers who are managers or proxies, or whose services are within the exclusive confidence of the employer. Those who do not meet these criteria can be dismissed for the cause of the company's needs, which must be based on the rationalisation or modernisation of services, low productivity, or changes in market conditions or the economy, provided that they make it necessary to single out one or more workers. 

The legal severance payment that corresponds to these two causes has two caps, as follows: 

  • a maximum of 11 years of services are indemnified; and 
  • the calculation basis has a legal limit of USD3,580 (this basis varies day by day according to the inflation in the country).

Advance notification of 30 days and severance payment are not applicable when the termination of an employment contract has been made justifiably for reasons such as lack of probity, labour or sexual harassment, serious breach of the obligations imposed by the employment contract, etc.

In these cases, the notification of dismissal must be given in writing, personally or by registered letter addressed to the address of the worker indicated in his employment contract. The cause or grounds for dismissal must be indicated, as well as the facts that justify the termination of the contract. The letter should also state whether the worker's social security contributions are paid, and should be accompanied by the proof of payment, if applicable.

Protection of Fundamental Rights

The legislation establishes the protection of the following fundamental rights against the power of the employer:

  • protection of the life and physical or psychological integrity of the worker;
  • the respect and protection of privacy, the honour of the person and his family, and the protection of the worker's private data;
  • the inviolability of all forms of private communication;
  • freedom of conscience, the manifestation of all beliefs and the free exercise of all beliefs that do not oppose morality, good customs or public order;
  • the freedom of opinion and of informing without prior censorship, without prejudice to responding to the crimes and abuses mentioned in the exercise of these freedoms;
  • freedom of work and the protection thereof;
  • non-discrimination; and
  • the right to compensation – a worker cannot be fired for having sued their employer or having resorted to the Labour Inspectorate in defence of their labour rights.

These rights are protected during the validity of the employment relationship, but also against dismissal. If the worker considers that fundamental rights were violated at the termination of his employment contract, or that there were anti-union practices, unfair practices or discrimination, he/she can bring a law suit before the Labour Courts, in which he/she can be awarded an additional payment of up to 11 monthly salaries, without a cap.

If the dismissal was discriminatory or there were anti-union practices, the worker can choose between being reinstated at work or receiving the additional payment.

In addition to the workers' compensation already indicated for up to 11 monthly salaries, the employer can be sentenced to the following:

  • the cessation of behaviour that damages fundamental rights;
  • a fine up to USD4,000, depending on the size of the company;
  • reparation measures, which are generally talks about the fundamental rights of workers;
  • the registration of the sentence in the Labour Inspectorate; and
  • a prohibition on contracting with the State for two years.

Termination agreements are not only allowed but are recommended, in order not to have to discuss aspects of the employment relationship once it has come to an end.

These termination agreements must be in writing and signed or ratified before a Labour Inspector. They can also be ratified before a Notary Public or, if there is none in the locality, before a Civil Registry officer.

It is recommended that the termination agreement must specifically contain the obligations of which the parties are released and terminated, since the courts are more demanding in this regard and many do not accept generic releases.

There is a specific protection (called “fuero laboral” in Chile) against the dismissal of certain workers, whose labour contracts can only be terminated by cause and with previous authorisation from the Labour Court. Such workers are as follows:

  • union leaders, who have the protection from 15 days before their election up to six months after they cease acting in the role;
  • union delegates of inter-company unions, from the day of the election until six months after they cease to be delegated;
  • pregnant women – the protection goes from the day of conception until one year after the day of birth;
  • a representative of the workers in the Health and Security Committee of the company, from their election until the end of the mandate;
  • workers who are part of a collective bargaining process, who are protected from ten days prior to the presentation of the collective contract project until 30 days after the signing of the respective contract; and
  • workers who have a medical leave for common illness or for a work-related accident or occupational disease, who cannot be fired by will or for the company's needs. This is not properly a “fuero”, but an impediment to terminate the employment contract for the two reasons indicated.

Any worker who considers that his dismissal has been unjustified, improper or inadmissible may sue in the competent Labour Court to request that the dismissal be declared as such, and order the payment of compensation for lack of prior notice, corresponding to 30 days of the previous compensation, along with severance payment for the number of years of service and fraction greater than six months provided continuously to the employer.

The legal severance payment has the two caps already mentioned: 

  • a maximum of 11 years of service is indemnified; and 
  • the calculation basis has a legal limit of USD3,580 (this basis varies day by day according to the inflation in the country).

Depending on the cause that has been invoked, if the employer loses the trial, the compensation for years of service and fraction greater than six months can be increased between 30% and 100%.

If a fundamental right of the worker has been violated in the dismissal, he may demand his protection (see 6.3 Dismissal for (Serious) Cause (Summary Dismissal)).

In the labour field, the Political Constitution establishes the prohibition of any discrimination based on personal capacity or suitability as a fundamental right, notwithstanding that the law may require Chilean nationality or age limits for certain cases.

For its part, the Labour Code expressly states that acts of discrimination are contrary to the principles of labour law, indicating that these are distinctions, exclusions or preferences based on race, colour, sex, age, marital status, syndication, religion, political opinion, nationality, national ancestry, socio-economic status, language, beliefs, participation in trade organisations, sexual orientation, gender identity, affiliation, personal appearance, illness or disability, or social origin, which are intended to annul or alter equal opportunities or treatment in employment and occupation.

Job offers that indicate any requirement contrary to what is stated in the previous paragraph cannot be made.

The hiring of workers cannot be conditioned to the absence of economic, banking or commercial obligations. Managers, agents or proxies with administrative powers and the workers in charge of the collection, administration or custody of funds or securities of any nature are exempt from this prohibition.

However, distinctions and exclusions based on the qualifications required for a given job are not considered discrimination.

Equal Remuneration Between Men and Women

The employer must comply with the principle of equal pay between men and women who provide the same job. Objective differences based on skills, qualifications and productivity among others are not considered arbitrary.

Inclusion of Disabled People

Law 21.015 provided for the inclusion of persons with disabilities to develop jobs. Public and private institutions that employ 100 or more workers are required to hire people with disabilities to make up 1% of their workforce.

Burden of Proof

Discrimination is prevented by the protection of fundamental rights (see 6.3 Dismissal for (Serious) Cause (Summary Dismissal)). The person affected only need to provide little evidence of discrimination – it is the employer who must explain the rationale for the measures adopted and their proportionality.

In the event of any difference between the worker and the employer, it is very common for the Labour Inspectorate to call the parties to resolve the dispute or reach an agreement.

If this does not occur, the worker can call on the special Labour Court, where class actions can take place.

In class actions referring to rights that emanate from collective agreements, union leaders represent by law the workers affiliated with their union. They also have this representation when the problem or the right discussed involves the majority of union members. Otherwise, workers must grant special power to them or directly to a lawyer who represents them in the corresponding trial.

Arbitration is not possible regarding labour rights; the trial has to be taken before a Labour Court. The law recognises agreements on matters that may be possible from an agreement. Such agreements are produced in the Labour Inspection, before a Notary Public or in the Labour Court itself, before the sentence.

A prevailing employee/employer can be awarded attorney’s fees.

When a worker wins a claim completely, the employer is always ordered to pay the worker's lawyer's fees, which are set by the Labour Court.

If one or more items of the law suit is not won by the worker, then he/she is not awarded attorney’s fees.

On the other hand, it is very rare for a worker to be sentenced to pay the employer's lawyer's fees, unless it is a claim with manifest lack of foundation.

Uribe, Hübner & Cía

Nueva York 33, piso 6
Santiago
Santiago de Chile

+562 2577 5200

oficina@uhc.cl www.uhc.cl
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Trends and Developments


Chilean employment and labour law has undergone several developments in recent years. The most noteworthy include: (i) the tests and criterion applied by the courts in order to declare a group of companies a single employer for employment, labour, and social security purposes (commonly known as “Multirut”); (ii) issues of sexual harassment; and (iii) government proposals to change the regulation of pension plans as well as introduce several amendments to the labour code regarding wages, hours and conditions of employment. We will briefly address each of these issues. 

Common Labour Management

With respect to the first topic, Chilean law provides that two or more companies may be considered to be a single or joint employer for all employment, labour and social security purposes when they share a common labour management and other elements, such as the similarity or complementarity of services or products and when the companies are managed by a single controller. The existence of a single or joint employer shall be declared by a judge upon receipt of a claim brought by an employee or union. Once declared a sole employer, the group of companies will have joint and several liability with regard to obligations deriving from employment contracts. Further, trades unions in the group may enter into collective bargain agreements with all or some of the companies. 

It is understood that common labour management is essential before a company can be considered a single or joint employer; it is not sufficient that other common elements occur within the group of companies, they must a common purpose in employment matters.

However, common labour management is not expressly defined by law and, since the passing of the “Multirut Law” in 2014, its precise meaning has been contested before the courts. At one end of the debate is the traditional concept of subordination, for which it is necessary to prove that two or more companies behave as a sole employer. The determining factor is the exercise of the employer's powers to hire, direct, dismiss or regulate workers who were formally dependent on other group companies.

On the other side of the debate, a common labour management exists where a unitary business direction can be identified. This unitary direction can be deduced from the common organisational decisions, business management decisions and financing of the group of companies – this does not require the direction to be of an employment nature. As a general rule, a group of companies is normally defined as a sole or joint employer.

Recently, an intermediate position has gained traction. It equates a common labour management with the existence of unique or similar processes or policies regarding aspects of the labour organisation in a group of companies. The existence of common group policies is not enough (as is the case with unitary business management), the policies must deal directly with labour issues.

None of the above positions is dominant. However, the tendency in recent court rulings has been to find that common labour management exists when taking into account the existence of:

  • common labour policies or guidelines (human resources and labour relations policies applicable to group companies);
  • codes of conduct;
  • hiring and supply policies;
  • performance evaluation systems;
  • the existence of centralised corporate communications maintained by one of the group’s companies;
  • the transfer of workers from one company to the other;
  • common directors and managers and powers of attorney granted to the same persons;
  • financial statements in which the parent company includes its subsidiaries;
  • the use of a single physical space and the use of the same resources (eg web pages and email addresses);
  • presentation to the market as a single company using a common corporate logo; and
  • the identification of the companies as members of a broader economic group.

Sexual Harassment

This area of employment law had not been particularly developed. However, “Me too” and local feminist movements have pressed this issue, fuelled by notorious cases of harassment. This has resulted in a significant increase in employee complaints, internal investigation procedures and litigation before the courts.

Chilean law requires that labour relations be based on treatment compatible with the person’s dignity, forbidding all kinds of harassment in the workplace. The law classifies sexual harassment as serious misconduct which provides the employer with just cause to terminate the employment of the transgressor immediately. The law also imposes a duty on the employer to include in the companies’ internal regulations provisions to ensure a decent and mutually respectful working environment as well as a procedure for investigating complaints and measures for employee protection – including sanctions.

There has been extensive discussion about the nature and reach of unlawful conduct. However, recent court decisions have inclined toward a broad interpretation of harassment which includes the creation of a hostile environment for women by the employer or co-workers. This broad construction of unlawful conduct is based on the dignity of the person and the understanding that sexual harassment harms a variety of fundamental rights protected within the workplace, such as employment discrimination (particularly women), privacy and physical and mental integrity.

Pensions

Finally, the government has proposed to Congress substantial amendments to the regulation of pension plans. In a nutshell, Chilean pension plans are mainly based on a personal savings system. Instead of financing pensions out of the social security contributions paid by the working population, this obliges citizens to save for their own retirement. The amendments seek to provide greater equality in the system by increasing the contribution rate financed by the employer from 10% to 14%. It is expected that this will substantially increase retirement pension payments.

In addition, the government would have Congress approve several changes to the labour code regarding wages, working hours and conditions of employment. The proposed amendments include: the adoption of flexible working hours which will, inter alia, permit the employer and the employees to agree to a four-day work week, the reduction of working hours from a weekly maximum of 45 hours to an average of 41, and other provisions that aim to reconcile work and family life. The proposed amendments also include a provision that classifies gig-economy workers as independent contractors for employment purposes while providing such workers with some (minimal) social security protection.

Aylwin Mendoza Luksic & Valencia

Málaga 339
Las Condes
Santiago
Postal Code 7550255

+56 22 260 8000

contacto@amlv.cl www.amlv.cl
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Law and Practice

Authors



Uribe, Hübner & Cía provides counselling in almost all areas of law, including civil law, commercial law, labour law, insurance law, antitrust, tax planning and consultancy, and government procurement. The firm actively supports and takes part in numerous university and academic activities, including undergraduate and graduate programmes, as well as in national and international professional associations. UH&C works closely with other law firms on specific cases, through either national or international networks. UH&C´s lawyers are members of the Chilean Bar Association and the International Bar Association, and the office is an active member of the Chilean main chambers of commerce.

Trends and Development

Authors



Aylwin Mendoza Luksic & Valencia is a partnership of 30 lawyers with offices in Santiago. The firm has three major practice areas: employment and labour, natural resources and corporate Law. AMLV’s employment and labour department has nine lawyers, led by Andrés Aylwin. The firm supports national and international clients, particularly in the mining industry – such as Codelco, Antofagasta Minerals, Freeport MacMoRan and Lundin Mining – across the spectrum of labour and employment matters, including high-stakes collective-bargaining negotiations, litigation in courts and proceedings before the department of labour's administrative agencies. The firm also advises employers on compliance issues under various labour and employment laws, helping its clients conform their workplace practices and procedures.

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