In Uruguay, labour and employment regulations apply both to blue-collar and white-collar workers. However, there are some particularities in each regime that must be considered.

• Wage payment – in general terms, the difference between these two categories of workers is reflected in the way in which the payment of wages is agreed. For white-collar workers, wages are paid monthly, while for blue-collar workers, companies usually agree to pay salaries on an hourly or daily basis.
• Overtime – while blue-collar employees are entitled to overtime payment, the following worker categories are not: (i) high positions, and (ii) university professionals.
• Particular situations – the construction industry and rural workers have special labour statutes with their own particularities in terms of employment relationships.

In Uruguay, the general rule is that it is not mandatory to have a written employment contract. However, it is highly recommended to make the rules between the parties clear from the beginning.

Special Situations

Uruguayan labour legislation establishes that it is mandatory to sign an employment contract in certain situations, such as teleworking, salesmen and travelling workers’ contracts. In these cases, the law establishes certain minimum content requirements that the contracts must include. In the event of non-compliance with these requirements, the Ministry of Labour may request the adjustment of the agreement as applicable.

At the same time, judges generally require the existence of a written employment contract in cases of fixed-term relationships (for harvest, term, work, substitution, among others).

Types of Contracts

There are different ways of hiring an employee.

• Payment of salary and working days – workers can be hired and paid on a monthly, daily and/or hourly basis.
• Time of hiring – employees can be hired for a definite period, or for a specific term (for example, for a construction site, for a harvest or for a substitution). Those hired for a fixed term are not entitled to severance payment in the event of termination of the labour relationship.
• Place of work – personnel can be hired to work fully remotely, 100% on-site, or in a hybrid format.

Terms of contract

The inclusion of the following clauses in the employment contracts is recommended: (i) salary determination, (ii) employment benefits, (iii) working hours, (iv) place of work, (v) confidentiality of information, (vi) intellectual property, (vii) ethical commitments, (viii) non-competition, (ix) non-recruitment, (x) protection against labour or sexual harassment and (xi) protection of personal data, among others.

The number of working hours depends on the type of activity of the company.

• Industry – in general, industrial-type workplaces have a 48-hour working week. In principle, this regime runs from Monday to Saturday at a rate of eight hours per day, although it is possible to eliminate Saturday and redistribute the hours among the remaining working days of the week.
• Trade and services – companies under this category have a 44-hour working week (eight hours from Monday to Friday and four hours on Saturdays). As in the case of industry-categorised companies, working hours can be distributed from Monday to Friday.

Overtime is paid at double the normal hourly rate (100% overtime) and is paid whenever the worker exceeds the normal (which will depend on the type of contract the workers have and the type of activity the company develops) daily working hours. When overtime hours are worked on the remaining days (for example, Saturdays or Sundays) or holidays, they are paid at a higher rate (150% overtime).

Although professionals and high-ranking employees within the companies are excluded from this regime, overtime regulations are not flexible.

In Uruguay there are two forms of minimum wage setting.

• Interprofessional minimum wage – the national minimum wage, which applies to all professions and is set by the government. Currently, it is about USD550 per month.
• Company-specific wages – company-specific wages are set by collective bargaining, in which unions, companies and government participate, through the mechanism of the “Wage Council”. This system classifies companies according to their activity and oversees setting wages by category and other benefits for all companies in the same sector. 
• Additional legal benefits – in addition to wages, Uruguayan labour law establishes some mandatory benefits such as: (i) the third-salary tenth (dubbed aguinaldo), 20 days a year holiday paid by each year, and (ii) the holiday salary, which consists of the same amount that is paid by the holiday, deducting taxes.

There is a general holiday regime of 20 days per year worked.

Additionally, the law establishes the following special leaves:

• study leave – between three and nine days per year are granted for study, depending on the worker’s workload (this is paid by the employer);
• marriage leave – three days (this is paid by the employer);
• family bereavement leave – three days (this is paid by the employer;
• maternity leave – 98 days of leave (this is paid by the social security governmental entity);
• paternity leave – 13 days of leave (three are paid by the company and ten are paid by the social security governmental institution);
• blood donation leave – two days (this is paid by the employer); and
• leave for gynaecological examination – one day per year for female workers (this is paid by the employer).

There are also other special leave regimes for terminally ill dependents or for disabled children.

The law also foresees special situations in which some of the described leaves can be further extended.

In Uruguay there is no specific regulation referring to the non-competition of workers. However, labour judges admit the validity of this type of clause in employment contracts.

In this sense, it is important that the contractual terms of the employee’s non-competition clause with the company are well defined, and that the parties to the contract are clear about its scope.

In principle, the violation by an employee of a non-competition clause correctly drafted, can lead to dismissal for gross misconduct, which implies that the worker will not be entitled to severance payment after termination of the relationship.

What is discussed at the judicial level is the validity of non-competition clauses once the employment relationship has ended. In these cases, judges usually request that this point be previously defined in the employment contract, stating clearly the following: (i) a certain term under which the non-competition clause will apply, and (ii) the payment of a certain indemnity for it.

Non-solicitation clauses are common, both in employment and service contracts with customers.

In the case of service contracts, it is usual for companies to require the payment of fines in the event that a client decides to hire a worker who was on the company’s payroll.

It is not usual to include such fines in the employment contracts of workers, bearing in mind that, in order to demand such an obligation, a remuneration should be established that compensates such limitation.

Personal Data Protection Law No 18.331, and the related Governmental Decree No 414/009, applies to employment relationships (collectively, the “PDPL”).

The PDPL prohibits requesting certain particularly sensitive data of the employee, regarding which the company does not have a justified reason to have knowledge (racial and ethnic origin, political preferences, religious or moral convictions, affiliation to a particular company, etc), political preferences, religious or moral convictions, union membership, and information relating to health or sexual life).

On the other hand, the PDPL regulates the use of video surveillance cameras, as well as other control mechanisms in the workplace, in which it is necessary to respect the privacy of workers.

Companies are obliged to register these types of mechanisms with the Personal Data Regulatory Unit, and to keep their databases protected, informing workers how to access them if necessary.

On the other hand, Law No 18.868 prohibits employers to request workers to take or present a pregnancy test as a requirement for the selection process, admission, promotion and permanence in any position or public and/or private employment.

There are no limitations in the country for foreign workers. It is necessary for them to have a legal residence in Uruguay in order to be able to work.

As long as they have legal residence in the country, they may work in any type of employment.

It is worth mentioning that for companies under a free zone regime, there is a legal limitation, by which they can have up to 25% of foreign personnel in their staff.

Foreign workers must meet the same registration requirements as domestic employees. The only difference will be that foreigners must have a legal migratory residence procedure in Uruguay that allows them to work in the country.

Regarding social security contributions, each case must be analysed separately, depending on whether or not the worker is from a country that has a social and security agreement in place with Uruguay.

There is a specific regulation on teleworking approved in the framework of the COVID-19 pandemic. This regulation establishes special rules regarding the way of working, the protection of the worker’s privacy and the confidentiality of the companies’ data. It also regulates other issues such as how to record working hours, the tools needed to work, the safety and health of workers and how to monitor compliance with these requirements.

For companies under a free zone regime there are certain special rules and restrictions for mobile work, which partly limit teleworking.

The special licensing regime is the one mentioned in 1.5 Other Employment Terms.

Additionally, the company and the employee may agree on more beneficial leave regimes or an unpaid leave system in different situations.

There is no regulation for the latter, but it is something that can be mutually agreed by the parties, and it is advisable to do so in writing.

Among the manifestations of new work modalities, remote work has expanded in Uruguay in a mixed or “hybrid” format. This implies that companies agree with their employees on a system whereby they work in person some days during the week, and on the others, they work from their homes or in another place that allows them to perform their tasks correctly.

Companies have also generated other systems, such as workers only having to assist in the office a few weeks a month.

Finally, there is another modality that allows employees to work from anywhere in the world for a certain period. This system gives workers the benefit to travel and work at the same time.

Uruguay is a country with consolidated trade unions and an umbrella trade union organisation called PITCNT.

The strength of trade union organisations depends in part on the sector of activity in question. There are strongly combative unions and others that are less conflictive and more open to dialogue.

In recent years, certain rules have been approved to regulate their activity, such as: (i) the obligation to have their own legal status, (ii) the limitation of blocking of entrances or streets, and (iii) illegal occupations in companies.

Uruguay’s wage bargaining system is unique. The negotiation of wage amounts and their adjustments is carried out in tripartite bodies, with the participation of labour unions, business chambers and the government, through the Ministry of Labour. This system is called the “Wage Council”.

Negotiations are carried out by the activity sector or sub-sector, applying the agreed wages and benefits to all the companies that are within the same sector.

The Wage Councils are convened by the government every two years. Wage adjustments are generally set on a semi-annual or annual basis, generally linked to the increase in inflation (currently approximately 8% per year).

It is normal in Uruguay for collective bargaining agreements to be entered into whether at the company, activity sector or Wage Council level.

Each sector of activity generally has its own agreement or benefits, and therefore there is a wide range of special regulations applicable to companies depending on the activity they carry out.

It is always advisable when deciding to make an investment or undertaking in Uruguay to define the labour costs associated with the sector of activity of the company, in view of the particularities that may exist in each case.

In Uruguay, in principle, the company’s right to dismiss is free. Therefore, a company may define a dismissal for any reason whatsoever, as long as it is legal (ie, it is not discriminatory or carried out with violence or similar).

In other words, no specific reasons are required to proceed with a dismissal, as is the case in other countries.

In such cases, of course, the payment of severance indemnity will be legally applicable.

However, there are certain cases in which, in the event of a serious breach of the employment contract, the employee may be entitled to an unfair dismissal payment.

In Uruguay, there are no notice periods for dismissal, nor are there certain formalities that must be complied with. It is required that there is reliable communication from the employer to the employee about the termination and that the employee is discharged from the activity before the social security agencies.

It is advisable that, at the time of termination, a formal record is left stating that the employee has received the notice of termination. In the event that the employee refuses to sign the notice, the general practice is the employer sending a telegram to the employee’s domicile for the record.

The way to dismiss an employee without payment of severance compensation is on the grounds known as “notorious misconduct”. The law does not define the concept, which has been elaborated from judges’ rulings that have resolved particular cases.

In general, in order for this indemnity to apply, it must be a serious situation, or an employee who has been sanctioned by the company for a long time without demonstrating any change in attitude.

There is no special procedure for this type of dismissal, but the company must have the evidence to prove it, since the situation usually tends to be resolved in court.

In Uruguay, termination agreements between workers and companies are admissible. There are no limitations in relation to these agreements.

However, in order for them to have the force of a transaction in legal terms, it is advisable that at the time of the execution of the agreement, a lawyer advises the employee. The agreement may then be submitted to the labour courts for the purpose of being approved by a judge.

Another possibility is filing the documentation before an administrative officer at the Ministry of Labour, which also makes the agreement enforceable between the parties.

Uruguayan law sets forth certain protections against dismissal, some of which are summarised below.

• Special dismissal due to illness – if an employee is dismissed while being ill, or within 30 days of reinstatement, the indemnity payable is double the usual payment.
• Dismissal due to an accident at work – if the company dismisses an employee who had an accident at work during recovery or within 180 days after reinstatement, the indemnity payable is triple the usual payment.
• Dismissal of a pregnant worker – if the company dismisses an employee who is pregnant, or within 180 days of her reinstatement, a severance compensation of six months’ salary is payable, in addition to the ordinary severance payment.
• Dismissal of a union delegate – in the event that the company dismisses a union representative or union member for union reasons, or without just cause, the employee may request the nullity of the dismissal and apply for reinstatement.

There are also other special causes of dismissal for specific cases such as: (i) dismissal of a worker victim of domestic violence, (ii) night worker, and (iii) sexual or harassment, among others.

The submission of claims after the dismissal of a worker is a common practice in Uruguay.

These claims may range, among others, from: (i) severance payment or differences in the items considered for the calculation of the severance compensation, (ii) salary differences, and (iii) overtime or other salary items generated during the employment relationship.

The period that can be covered by the claim is a maximum of five years counting from the day the employment relationship ended, which implies that in some cases the claims may have a relevant amount.

Therefore, it is important that companies have good advice at the time of payment of salaries and conclusion of employment contracts, in order to prevent this type of claim.

Discrimination claims may be based on union, race, sex, or religion, among others. Similar claims may also be based on moral or sexual harassment.

In these cases, the claims are usually associated with what is known as “abusive dismissal” or “moral damage”, which is generally quantified in amounts greater than the dismissal. For example, claims for double or triple the compensation for common dismissal.

Currently, and since the COVID-19 pandemic, in Uruguay it is possible for a hearing in a labour trial to be conducted totally or partially via video conference.

This possibility is not commonly used, and is generally reserved for the testimony of witnesses abroad or with an address far from the place where the trial is to take place.

In Uruguay there is a specialised labour justice system. In Montevideo, there are currently more than 20 labour courts of first instance and four courts of appeals, fully specialised in labour matters.

Labour trials are of relatively short duration compared to some other Latin American countries. In general, a double instance labour trial can last between 12 and 18 months.

The lawsuit may be initiated by an employee or by a group of workers, as long as it deals with claims for individual rights of each one.

In principle, disputes may exist at the collective level; for example, those between a business chamber and a labour union would be outside this special jurisdiction, and the civil courts must deal with the matter.

Arbitration is a possibility in labour matters, although it is rarely used and not at all common.

There are rulings that have admitted it, although there are also courts that have understood that the system can be applied, as long as it does not impede a worker’s access to justice. For example, arbitration in another country, or arbitration which was highly costly for the worker, would not be accepted. This is because the labour judicial process is free of any tax for the worker.

Although it is possible that the party that loses a labour lawsuit may be ordered to pay the costs and expenses of the process, in practice there are very few cases in which this happens.

The cases where this type of condemnation may exist, deal with situations in which serious legal and procedural facts occur in the judicial proceedings that justify an additional indemnity.

It should also be noted that for legal mandate, in all labour lawsuits, the following items shall be added to the amounts that the company may eventually end up paying: (i) a fine of 10% of the claim, and (ii) mandatory damages which range between 10% and 20% of the amount claimed.