Employment 2022

Last Updated July 06, 2022

Costa Rica

Law and Practice

Authors



Facio & Cañas was founded in 1942 and is the most traditional full-service law firm in Costa Rica, comprised of different generations of attorneys with the highest professional and ethical standards, providing innovative legal services. The contributor, Luis Ángel Sánchez Montero, partner of the firm, is widely recognised as a top-tier lawyer for his solid experience in the labour, employment and immigration fields. He is a former judge of the Supreme Court of Justice and the only member of the LATAM Network of Labour Counsels in Costa Rica, advising local and transnational companies in these areas, including the successful restructuring of tailor-made compensation packages, adding huge value to businesses' operations. Over the past years, he has built a solid team with professionals of the highest level. The immigration team also includes Erick Rojas and Karla Yung, who support all immigration procedures and structure solid strategies to offer clients the best solutions for their immigration needs.

On Friday, 3 June 2022, the Law to Combat Labour Discrimination against Women During Maternity – number 10211 – was published and enacted.

This law amended Articles 94, 94 bis, 95, 96, 97 and 100 of the Labour Code.

The main changes include the following.

  • The impossibility, for the employer, to require a pregnancy test during the hiring process. This would be considered discriminatory.
  • The obligation to grant the employee paid leave to obtain medical certificates to demonstrate pregnancy. This period will be up to one day.
  • The obligation to give paid leave to the mother or person in charge of the child to attend medical services and collect breastfeeding certificates from healthcare centres.
  • In the event that a pregnant or breastfeeding employee is dismissed without just cause, the employee will have two options:
    1. To request reinstatement in the workplace to the full enjoyment of her rights.
    2. To terminate the contract making the employer responsible, which implies the payment of severance and notice by the employer plus additional indemnities.
  • In the event that a breastfeeding employee is dismissed, in addition to severance pay, the employee will be entitled to an amount of damages to be determined by the labour court. This is a substantive change because before the new law, damages were limited to just ten days' salary. Damages still need to be demonstrated, but there is no limit for the judge on the amount to approve.
  • Granting of special leave in the following cases.
    1. Individual adoption: three months' paid leave for the adoptive parent. This starts from the day following the date on which the minor is handed over. A certificate from the National Children's Trust (Patronato Nacional de la Infancia or PANI), the family court or the notary public must be presented, providing the adoption proceedings and their favourable resolution.
    1. Joint adoption: one three-month paid leave of absence for the adoptive parents, divisible according to their decision. This starts from the day following the date on which the minor is handed over. A certificate from PANI, the family court or the notary public must be presented, providing the adoption proceedings and their favourable resolution.
    1. Biological father: leave with payment for two days per week during the first four weeks after the birth of the child. It is not determined that the days must be distributed over the four weeks, so it is possible for the parties (employee and employer) to schedule when those eight days are taken.
    2. Death of the mother in childbirth or during the postpartum period: special leave for the father or caregiver as beneficiary of the deceased mother. That is, the mother would have been entitled to maternity leave if alive. The father or person in charge must commit to taking responsibility for the child's upbringing.
  • The Labour Code no longer speaks of "remuneration" during leave but of "allowance". The payment of leave must be counted towards the labour rights deriving from the employment contract, as has been done in the past.
  • Special leaves do not interrupt the employment contract.
  • Once the leave, incapacity (if necessary) or holidays (during the leave) have elapsed, the employee will return to their position and only in exceptional cases, duly justified, may they be placed in another position equivalent in remuneration, which is related to their aptitudes, capacity and competence.
  • Breastfeeding employees may choose one of the following intervals for breastfeeding or extracting breastmilk:
    1. 15 minutes every three hours;
    2. half an hour twice a day;
    3. one hour at the start of the working day;
    4. one hour before the end of the working day; or
    5. coming to work one hour later or leaving one hour earlier (for either of these two options, the hour must be paid).
  • The obligation, when breastfeeding mothers are on the staff, to provide a specially conditioned space on the company premises where mothers can breastfeed their children safely or extract their breastmilk and store it in a suitable space at the workplace. This place must guarantee privacy and hygiene and must be approved by the occupational health and safety office.

COVID-19 Update

Upon Decree No 42227-MP-S enacted on 16 March 2020, a state of national emergency was declared by the government. Recently, by Decree No 43650-MP-S the state of emergency was terminated. This Decree was published in La Gaceta (official journal) of 17 August 2022, and came into force that same day. It was signed by Rodrigo Chaves Robles (president of Costa Rica), Natalia Díaz Quintana (of the Ministry of Presidential Affairs) and Joselyn María Chacón Madrigal (of the Ministry of Health).

Immigration restrictions, transit limitations and other measures were ceased.

Costa Rica follows the “indefinite employment doctrine”, whereby upon any person becoming an “employee”, a comprehensive and protectionist set of labour rules will automatically govern the relationship.

Therefore, what really defines the type of the relationship (whether of an employment or outsourcing nature) is not the agreement of the parties, but the nature of the services agreed. If the type of services and other elements contained in the contract (ie, remuneration) are customary in an employment relationship, then the contracting party that receives services will be considered and treated as an “employer” for legal, tax and social security purposes.

Moreover, since Costa Rican employment rules are of public policy, labour courts will likely disregard any waiver of the employee’s rights under local laws. This includes the choice of (i) the type of contract, (ii) the law and (iii) the forum, among others not legally enforceable.

Costa Rican labour, social security and tax rules follow the “territoriality principle”, whereby the jurisdiction is established depending on the place where the services are rendered. Regardless of the content and wording of the contracts or even the nationality of the contractor, the Costa Rican labour, tax and social security rules will prevail.

The standard employment contract is for an indefinite period, but fixed-term contracts are valid depending on the nature of the services (Articles 26 and 27 of the Labour Code).

Written employment contracts are mandatory in most cases (Articles 23 and 24 of the Labour Code). In the case of absence of a written document, the employer has the burden of proof to demonstrate the employment conditions (Articles 25 and 478 of the Labour Code).

The minimum content of an employment contract is established by law (Article 24 of the Labour Code). It is important to stress that policies, procedures, guidelines and similar documents acknowledged and accepted by the employee become part of the employment contract. Such documents are fully enforceable.

The daily and weekly work shift limits depend on the hours worked (Articles 136 and 138 of the Labour Code).

  • Daily shift (between 5am and 7pm) – may include up to eight hours per day and 48 hours per week. The eight hours may be increased to ten hours as long as the weekly limit of 48 hours is adhered to, excluding unhealthy or dangerous conditions of work (compressed shift in five days).
  • Mixed shift – from 1:31am to 10:29pm. Cannot surpass seven hours per day and 42 per week. It is extendable to eight hours with a weekly limit of 40 hours during five days, provided that the work is not unhealthy or dangerous.
  • Night shift (from 7pm to 5am) – six hours per day and 36 per week (which cannot be extended).

Overtime must be paid with a 50% increase on the standard rate.

For certain positions (ie, high-level executives), a sales workforce or employees rendering services out of the company’s facilities, among others, Article 143 of the Labour Code states a daily limit of 12 hours and 72 hours per week, including a rest of 1.5 hours.

Part-time employees or reduced work shifts are valid.

The minimum rest period is half an hour per day, with salary payment. If the leisure period is equal to, or more than, one continuous hour and without restriction to leave the facilities, that rest period is not included within the effective working hours described.

It is common that minimum wage limits are surpassed by employers. Article 163 of the Labour Code establishes that the parties may determine salaries as long as the resulting agreement is at least equal to the minimum salary defined for the job description.

Minimum wages are determined annually and apply from 1 January to 31 December each year. Minimum wages are determined for different categories and job descriptions in an official list issued by the Ministry of Labour and Social Security ("definitions of job descriptions and salary categories").

Furthermore, the parties may agree on many types of benefits.

If any benefit falls into the scope of salary, it will imply additional costs for the employer. Good structuring and management of compensation is important to avoid unnecessary costs and to add value to the employer's operation without affecting the employee's rights.

Benefits associated with salary and monthly costs are a Christmas bonus (8.33%), paid vacations (4%), severance (5.33%) and social security, including worker's compensation (approximately 26%). In addition, the employer must withhold social security contributions and tax on salaries from the employee’s salary.

Vacations

Article 153 of the Labour Code establishes the employee's right to two weeks of paid vacation for every 50 continuous weeks duly worked. Otherwise, the employee will only be entitled to one day of vacation for each month worked. Vacation carryover is the rule if an employee does not take their vacation. Pending vacations must be paid with the average of the last 50 weeks of salary, or the inferior time worked for proportional vacations.

Maternity and Paternity Leave

Maternity leave is given one month before childbirth and three months thereafter. During this period, the employer pays 50% of the salary and the remaining amount is paid by the Costa Rican Social Security Fund (Caja Costarricense de Seguro Social or CCSS). In the case of multiple births, this period may be extended by one month for each newborn. In adoption cases, the period consists of three months (Article 95 of the Labour Code). Fathers are eligible to leave with payment of two days per week during the first four weeks after the birth of the child.

Breastfeeding Licence

Mothers are entitled to a nursing licence with payment. Breastfeeding employees may choose one of the following intervals for breastfeeding or extracting breastmilk:

  • 15 minutes every three hours;
  • half an hour twice a day;
  • one hour at the start of the working day;
  • one hour before the end of the working day; or
  • coming to work one hour later or leaving one hour earlier (for either of these two options, the hour must be paid).

This licence is valid as long as the mother keeps nursing the minor, and as long as she provides her employer with a medical certificate (Article 97 of the Labour Code).

Disability Licence (Leave of Absence)

As mentioned, the employer and the employee contribute to the social security fund of the CCSS by means of mandatory monthly deductions and contributions calculated as a percentage of the employee's gross salary.

The employer serves as a withholding agent for deduction purposes on employees' salaries, with employees' contributions being submitted along with the employer’s contributions to the CCSS. If an employer does not deduct (withhold) an employee's social security contribution (Article 30 of the CCSS Act), the employer releases the employee from all liabilities and the employer will be the only party liable before the CCSS.

In addition, the employer must pay workers' compensation insurance, which is provided by the National Insurance Institute (Instituto Nacional de Seguros or INS), to cover the employee in the event of work accidents and illnesses.

During the first three days of disability due to illness or an accident not related to work, the employer must pay 50% of the salary as a subsidy (Article 79 of the Labour Code) and from the fourth day, the CCSS will pay a subsidy of 60% of the employee's salary. In the case of work-related events, the subsidy is paid by the INS from the first day.

Medical Appointment Permit

Permission to go to medical appointments must be granted without payment. The exceptions are permits related to pregnancy tests or certificates necessary for access to maternity leave and child’s medical care. 

Leave for the Care of Minors and Terminally Ill Patients

Law No 7756 allows a leave paid by the CCSS.

Confidentiality

Costa Rica keeps high standards regarding confidentiality regulations.

Confidentiality is a legal obligation. The disclosure of confidential information without consent is a just cause for dismissal and is a crime. The restriction on disclosing confidential information is indefinite.

Nevertheless, it is important to sign non-disclosure agreements or include confidentiality provisions and duties in employment contracts.

The Costa Rican labour courts have ruled and enforced non-competition provisions, as long as the non-competition provision is reasonable and the restricted period is paid. The term, territory, payment and activities must be assessed on a case-by-case basis.

Based on a recent judgment, it is important to ensure an employee’s agreement with the provision and include the possibility for the employer to disable the non-competition obligation before the employee terminates the relationship. This means that the employee is not entitled simply to disregard their obligation if they believe that the agreement is not valid, and the employer may validate if the provision is necessary in accordance with the circumstances.

Non-solicitation provisions are customary and valid. However, there is no case law regarding these provisions.

Costa Rica has high standards on data privacy and data protection. It is advisable to have an employee's written consent to keep and manage personal data. In addition, the data must be kept internally and must be available to the employee, who must know about the existence and purpose of the database, and have the right to access, update and/or delete the information. Before personal data can be transferred to or consulted by third parties, the employee must provide written consent.

There are no limits regarding the number or nationalities of foreigners that a company may hire. Immigration regulations include work permits, temporary residencies and stay permits for dependants. For some restricted countries, those citizens will require special categories of entry visas.

It is highly recommended that companies apply for company visa programmes, recording the company in a special registry of authorised companies before the Immigration Ministry. After registration, the company may apply for faster procedures with fewer requirements.

It is important to note that the company/employer must apply for and sponsor the immigration status. Otherwise, the application for a work permit or temporary visa will not be granted.

The application requirements depend on the status requested. Legalised and apostilled certificates – ie, birth certificates and a marriage certificate (for spouse and children) and a police records certificate – must be provided in most proceedings.

For those companies applying for registration status, the requirements will depend on the category under which the status is being requested, with the procedure usually taking one month from filing.

Freedom of association is a fundamental right of employees, who have the right to unionise.

Costa Rica has ratified Conventions 87, 98 and 135, plus recommendation 143 of the International Labour Organization (ILO), which guarantee the right to unionise and to take part in collective bargaining.

In this jurisdiction, the rate of unionised employees in the private sector is relatively low (approximately 3%).

No information has been provided in this jurisdiction.

The union is the only body legitimised to negotiate a collective agreement, while both unions and permanent workers’ committees may negotiate direct settlements.

The private sector is governed by the freedom to dismiss. An employer may dismiss any worker without cause by providing prior notice and a severance payment.

Any employer who terminates the employment relationship without just cause must pay severance indemnities (Articles 28 and 29 of the Labour Code).

Employees in a special category of protection may only be dismissed for just cause, including union officials and representatives; any representative of a legitimate workers' association; pregnant women, mothers on maternity leave or in a nursing period; sexual harassment victims; and under-age employees. Discriminatory dismissals based on sexual orientation, age, race, ethnicity, or spiritual belief are not permitted.

Employees are entitled to receive severance termination payment in the following cases (commonly known as “rights” or “indemnities”):

  • involuntary termination;
  • dismissal without just cause;
  • terminations based on restructuring;
  • retirement;
  • employer’s bankruptcy;
  • force majeure; or
  • death.

Severance termination benefits are as follows.

  • Severance (indemnity) – prior to the introduction of the Workers’ Protection Act (implemented in March 2001), severance pay was roughly calculated as one month’s salary times years of service, limited to eight years. The applicable system for calculating severance payment today is subject to the following terms:
    1. year one – 19.5 days of salary;
    2. year two – 20 days of salary per year served or semester quota thereof;
    3. year three – 20.5 days of salary per year served or semester quota thereof;
    4. year four – 21 days of salary per year served or semester quota thereof;
    5. year five – 21.24 days of salary per year served or semester quota thereof;
    6. year six – 21.5 days of salary per year served or semester quota thereof;
    7. year seven – 22 days of salary per year served or semester quota thereof;
    8. year eight – 22 days of salary per year served or semester quota thereof;
    9. year nine – 22 days of salary per year served or semester quota thereof;
    10. year ten – 21.5 days of salary per year served or semester quota thereof;
    11. year 11 – 21 days of salary per year served or semester quota thereof;
    12. year 12 – 20.5 days of salary per year served or semester quota thereof; and
    13. year 13 and subsequent periods – 20 days of salary per year served or semester quota thereof.

However, employees will only receive severance for the last eight years of service.

  • Prior notice (indemnity) – before a dismissal without just cause, the employer must provide prior notice. (Prior notice is not required if the employee is dismissed with just cause.) Said notice must be provided as follows:
    1. more than three months but less than six months of service – seven days’ notice;
    2. more than six months but less than one year of service – 15 days’ notice;
    3. more than one year of service – 30 days’ notice; and
    4. in lieu of notice, the employer may compensate the employee with an amount equivalent to the salary that would have been earned during the notice period, with payment being based on the employee's average salary earned in the last six months (Article 30.b of the Labour Code).

Regardless of the cause of termination, a proportional Christmas bonus and unused vacations must be paid.

Articles 81 and 367 of the Labour Code state the due causes for disciplinary terminations, including gross misconduct. In any case, if the dismissal is challenged, the employer must evidence such employee's misconduct, which must be detailed in the letter of dismissal (Article 35 of the Labour Code).

In general terms, there is no prior formality for dismissal. However, the employer must provide the employee with a written dismissal.

It is feasible to settle with res judicata effect, meaning that the settlement cannot be further challenged. The settlement must be signed before an authorised mediation centre to guarantee the legal content and verify the interest of the parties following the Alternative Resolution Act (Resolucion Alterna de Conflictos or RAC).

It is also feasible to settle before the Ministry of Labour and Social Security, or before a court.

Private settlement agreements are not advisable since these can be challenged.

Protected employees may only be dismissed for just cause and after an authorisation process before the Ministry of Labour and Social Security, where the employer must demonstrate good cause for the dismissal. This category of employee includes union officials and representatives; any representative of a legitimate workers' association; pregnant women, mothers on maternity leave or in a nursing period; sexual harassment victims; and under-age employees.

Note that discriminatory dismissals based on sexual orientation, age, race, ethnicity or spiritual belief, among others, are null and void, therefore affected employees have the right to reinstatement after a quick procedure before the labour courts.

Most employment-related judicial proceedings come from ex-workers who challenge termination and incorrect calculations of termination payments, including on prior notice, severance and adjustments of calculations, plus legal interests, indexation, and legal fees and costs (usually between 15% and 25% of the total estimate of the labour claim).

Discrimination in employment is prohibited considering facts of “age, ethnicity, sexual orientation, spiritual belief, race, marital status, political opinion, ancestry, culture, affiliation, disability, and economic situation” and also for “any other similar forms of discrimination”. This is a broad scope that may include all kinds of subjective discriminatory acts.

Anyone who claims a discriminatory termination (as in most common cases), must demonstrate facts that are consistent with discrimination. Then, the employer must prove the legal, objective and reasonable grounds for termination. Otherwise, the victim may be reinstated to their job or may apply for supplementary indemnification.

Costa Rica has specialised labour courts with jurisdiction over individual and collective labour claims and social security matters.

It is mandatory to be legally represented by a lawyer. Workers with low income may ask the state to provide public defence by a lawyer at no cost (Article 454 of the Labour Code).

The statute of limitations is one year after the termination date (Article 413 of the Labour Code).

Labour disputes may be settled by means of alternative dispute resolution. Part of the judicial process is conciliation, being the point at which the parties can reach an agreement that will be approved by the judge and will have the same enforceability as a judgment.

Additionally, in Costa Rica, there are private alternative dispute resolution centres authorised by the Ministry of Labour and Social Security, as well as the Ministry of Justice and Peace, to settle disputes of this nature out of court. The agreements reached at such centres will have the character of a sentence and will generate res judicata. These private centres specialise in arbitration, conciliation and mediation.

Individual labour disputes may be resolved through arbitration, mediation or conciliation processes.

Judicial rulings include legal fees and other procedural expense awards to the winning party. Legal fees, when granted, may reach from 15% up to 25% of the amount granted or the amount initially claimed, but not granted.

Facio & Cañas

Sabana Business Center Building
11th floor
Rohrmoser Bulevar and 68th Street
10108 San José
Costa Rica

+506 2105 3600

+506 2105 3610

lsanchez@fayca.com www.fayca.com
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Law and Practice

Authors



Facio & Cañas was founded in 1942 and is the most traditional full-service law firm in Costa Rica, comprised of different generations of attorneys with the highest professional and ethical standards, providing innovative legal services. The contributor, Luis Ángel Sánchez Montero, partner of the firm, is widely recognised as a top-tier lawyer for his solid experience in the labour, employment and immigration fields. He is a former judge of the Supreme Court of Justice and the only member of the LATAM Network of Labour Counsels in Costa Rica, advising local and transnational companies in these areas, including the successful restructuring of tailor-made compensation packages, adding huge value to businesses' operations. Over the past years, he has built a solid team with professionals of the highest level. The immigration team also includes Erick Rojas and Karla Yung, who support all immigration procedures and structure solid strategies to offer clients the best solutions for their immigration needs.

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