The Latest in Labour Law in Uruguay

I. Introduction

Uruguayan employment laws are scattered (no Labour Code has been enacted yet) and, in some cases, they date back to the start of the 20th century. On top of that, new regulations are constantly being passed to be in line with current ideals, business models, union participation, and technological developments. All these elements converge to create an ever-changing area which could be challenging to navigate for businessmen and employees alike.

That which follows is a guide of paramount items to consider from a labour and employment perspective when considering doing business in Uruguay.

II. Working hours and overtime

The maximum daily working hours is eight, with a maximum of 48 hours per week for blue-collar employees and a maximum of 44 hours per week for white-collar employees. There are exceptions to this general rule for specific industries and activities.

There is a mandatory middle rest for employees working eight-hour shifts, which could range from half an hour (considered a paid resting time) to two-and-a-half hours (considered an unpaid resting time).

Uruguayan laws require overtime compensation. Services provided in excess of an employee’s regular working hours are considered overtime. For example, parties may agree that the employee will work a seven-hour shift (that is, seven hours a day – 35 hours per week), in which case all services provided after the seventh hour are considered overtime.

Overtime must be paid with a 100% surcharge when performed on business days, and with a 150% surcharge when performed on non-business days or non-working days.

There are certain employees who are not entitled to overtime and are outside the scope of the daily working hour limitation. Such employees are:

• key personnel – eg, managers;
• university-educated professionals and/or certain highly specialised employees; and
• certain salespeople who sell products outside the company’s premises.

III. Employment benefits

a. Salary

For their services, employees are entitled to receive the agreed salary. Salary can be agreed to be paid:

• per day or per month – in Uruguay (UY) it is not possible to determine an annual salary; and
• in any currency.

Salary must be equal or higher to the minimum salary determined by applicable collective bargaining decisions.

b. Paid time off and vacation salary

Employees are entitled to 20 paid business days off per year (prorated for employees who were employed after the civil year – a standard year comprising 365 days (366 in a leap year) – started). One additional day is granted for every four years of service after the fifth.

Paid-time off must be enjoyed within the calendar year following the year of generation and may not be rolled over (nevertheless, such is a common practice). By written agreement between employers and employees, paid time off could be enjoyed in more than one period.

Paid time off is paid by the employer and the amount must be calculated as follows: (i) monthly employees are entitled to receive full payment of their monthly remuneration as if they had actually rendered services (leave payment is deferred to the moment at which the employee receives their monthly payment); and (ii) payment for day labourers amounts to the average daily remuneration of the employee.

While enjoying paid time off, employees are entitled to receive an additional employment benefit: so called, “vacation salary” (Salario Vacacional). Vacation salary amounts to 100% of the net amount of the paid time-off benefit.

c. Thirteenth salary

Employees are entitled to a so-called “thirteenth salary” (Sueldo Anual Complementario or Aguinaldo), amounting to one twelfth of the aggregate sums collected by the employee during the calendar year. As per the Decree of the Executive Branch issued every year, payment of this benefit is made in two instalments: (i) June (which covers sums collected in the December–May period), and (ii) December (which covers sums collected in the June–November period).

d. Other benefits

Individual employment agreements, collective bargaining agreements and company policies can recognise additional employment benefits to the ones stated above and/or exceed thresholds determined by applicable legislation. In other words, UY laws only determine mandatory minimums, which can be surpassed by other applicable provisions. If such additional benefits are stipulated in any applicable employment documentation, they are mandatory for all parties to comply with.

IV. Outsourcing

Outsourcing is widely spread in Uruguay. Companies are entitled to outsource any activity and engage with companies that employ individuals to provide services on behalf of the contracting company.

As per the Uruguayan Outsourcing Act, companies who outsource activities would be responsible for the following liabilities related to outsourced employees:

• payment of employment benefits;
• severance payments;
• social security obligations; and
• State Office mandatory insurance (for employment-related accidents and illnesses).

Such responsibility cannot be discharged or waived so if the outsourced company fails to honour these obligations towards its employees, then the principal company will be deemed liable for such obligations for the period in which the outsourced employee provided services. To ensure control over compliance by the outsourced company regarding employment and social security obligation, principal companies are entitled by legislation to request certain information/documentation from outsourced companies; if the information is not provided and/or depicts non-compliance, principal companies may withhold (from the payments to be made to the outsourced company) the respective percentage referred to outsourced employees’ employment benefits.

As noted, liability is, in principle, joint and several (employees can go after the assets of the contractor or those of the company indistinctly and even jointly). However, if the principal company conducts the reasonable checks previously stated on the outsourced company employment and social security records specified in the UY Outsourcing Act, liability will be secondary (an outsourced employee would need to go first against the contractor’s assets, and only thereafter, if the contractor’s assets are not sufficient to meet the claim, the employee would, then and only then, be entitled to go against the company’s assets).

In addition to the above rule, additional considerations apply depending on the location where outsourced services are provided. If outsourced services are provided within the principal company’s premises and/or under the company’s direct/material control, the company would also be obliged to comply with all applicable health and safety regulations. Non-compliance with such regulations in a scenario that causes life-threatening risk to employees could determine that a company is criminally liable (refer to part VIII below).

On the other hand, if services are provided within an outsourced company’s premises and/or locations outside of the principal company’s control, the principal would comply with legislation by reasonably checking that the outsourced company is complying with applicable health and safety regulations.

V. Termination of employment

1. General regulation

Termination of employment determined by unilateral decision of the company will entitle employees to receive mandatory severance (unless termination was grounded in employee’s gross misconduct).

In the case of monthly employees, severance would amount to the total remuneration of one month of work for each year worked (or fraction thereof), up to a maximum of six months.

For day labourers, provided that they have worked at least 100 days, severance will be calculated on the basis of the daily payment and employee’s seniority, with a maximum of 150 daily payments.

Union delegates, pregnant women, employees who have suffered abuses and sexual harassment, women who are victims or have been victims of gender-based violence, employees who have suffered work-related accidents, and sick employees whose labour relationship is unilaterally terminated by the employer could be entitled to additional compensation as explained below.

2. Common illness, occupational illness and work-related accidents

Regarding common illness, applicable regulations establish a stability period of 30 days after the employee’s effective reinstatement under penalty of a double severance payment. However, this situation is exempted in cases of employee gross misconduct or whenever termination is not related to an employee’s illness.

Regulation in re occupational illnesses and work-related accidents is different. First and foremost, this regulation is subject to the employee duly reporting his/her accident or occupational illness to the Insurance State Office (Banco de Seguros del Estado) – or when the employer concealed or did not report the accident.

Having complied with this formal prerequisite, the employee must be effectively reintegrated to their position after overcoming their ailment. After reinstallation, a stability period of 180 days will apply.

There are two options regarding an employer’s penalty for not complying with the reinstallation and/or stability obligations: (i) triple severance payment; or (ii) common severance payment plus payment of salaries that would have accrued during the 180-day stability period.

The employer may be exempted from this payment only by an employee’s gross misconduct or reasonable supervening cause. Judges have been very rigorous when determining the scope of the concept of reasonable cause: most of them understand that the closing or reorganisation of companies is not included within such concept.

3. Pregnancy, victims of gender-based violence and sexually abused women

For a six-month period as from the imposition of precautionary measures due to gender-based violence, women in favour of whom such measures have been ordered may not be terminated. If terminated, such employees would be legally entitled to receive six months of their annual salary (in addition to common severance).

The penalty for not complying with this stability period can be understood as mandatory: an employer would be obliged to pay the additional amount regardless of prior conduct or justifications.

Termination of pregnant employees determines an additional payment of six months of their salary. For purposes of this additional payment, it is legally understood that pregnancy comprises the pregnancy period, the maternity-leave period and an additional stability period of 180 days after reinstatement.

If the employer is not aware of the employee’s pregnancy at the time of her dismissal, the employer cannot be held liable for this special regulation.

Law No 18.561 determines that any employee that is a victim of sexual harassment may (i) claim compensation for moral damages of six monthly payments; or (ii) consider himself/herself indirectly dismissed and would be legally entitled to receive, in addition to common severance, a further six months of their salary as compensation. In this hypothesis, the employee must prove the acts of sexual harassment carried out against him/her.

Although not expressly regulated, the same regulation would apply in mobbing (bullying) scenarios.

4. Union-affiliated employees

If proven that an employee was terminated for reasons related to union membership or participation in union activities, termination would be considered null and void and the employee’s effective reinstatement would be judicially determined. If that is the case, the employer must pay the employee all wages that the employee would have been entitled to receive until effective reinstatement.

Procedural legislation has determined an abridged procedure before Court to rule this kind of claim.

5. Abusive dismissal

In cases of significant or notorious arbitrariness, there have been examples of successful claims where damages caused by termination were considered greater than the legal amount established as severance. In such cases, an employee shall be entitled to receive an additional amount to compensate such further damages. In general, but always depending on the case, the additional amount has ranged from one to three times regular severance.

In any case, the employee must prove abusiveness and additional damages.

6. Constructive dismissal

Relevant changes affecting the employment relation if unilaterally determined by the employer – such as salary reduction, working hours variation, and change in the working location – could be understood by the employee as an “indirect” termination of employment, thus exposing the employer to the severance indicated above.

7. Paternity

Recent regulation has determined an stability period of 30 days after any paternity-related absence. Employees terminated within such stability period could be entitled to an additional payment of three months of their salary (unless company proves that termination is not related to paternity).

VI. Unions and collective bargaining

Collective relationships play a paramount role in UY. What follows below is a brief summary of relevant matters.

1. Uruguayan unions have legal and constitutional protection. Employees are free to choose whether to unionise or not, and are specially protected against dismissal based on union-related reasons (refer to part V.4 above).

2. UY law encourages negotiations via collective bargaining. Such negotiations not only relate to salary matters (applicable minimum salary, mandatory semi-annual increases, etc), but also to general workplace conditions, additional employment benefits and/or any other employment-related items parties might agree on.

3. All companies that conduct business in UY must be included in one of the 24 activity groups determined by the government (each group has various subgroups). Each of these groups have their own applicable Salary Council and the inclusion of the company in the corresponding subgroup would automatically determine the application of the decisions issued by such applicable Salary Council.

Salary Councils are tripartite bodies formed by representatives of the Administration, employees and employers that conduct mandatory collective bargaining. Decisions issued by Salary Councils are called “laudos” and are mandatory for all companies included or that should be included in the applicable Salary Council’s scope. In other words, companies are obliged to comply with the employment regulations agreed by the applicable laudos.

Laudos typically set forth (among others) the definition of the different job positions, minimum salaries applicable to each position, periodical mandatory salary increases, additional employment benefits and other employment terms and conditions.

VII. Labour claims

The main government office in charge of dealing with employment law matters is the Ministry of Labour.

Prior to the judicial filing of labour claims, employees must request a preliminary administrative conciliation hearing to be conducted before the Ministry of Labour. In case the matter cannot be settled in such preliminary procedure, Uruguayan law determines a very brief judicial procedure to solve all labour claims.

If a court rules in favour of the employee, the employer will be compelled to pay an additional 10% fine (calculated over the total due amount) plus a further 10% to 20% with regards to damages (calculated over all salary items/benefits) in favour of the employee.

The applicable statute of limitations determines that employees must request the administrative conciliation hearing within the year after the labour relationship has been terminated. An employee is entitled to claim labour credits which he/she understands have accrued within the five previous years.

VIII. Corporate criminal liability

UY laws (Act No 19.196, 25 March 2014) establish potential criminal liabilities to employers (or to the person who effectively has management or direction capabilities on the employer’s behalf) whenever (i) labour health & safety regulations are not complied with; and (ii) such non-compliance puts employees in a serious and concrete life-threatening situation. Typical cases where this law has been applied (and determined its actual enactment) are within construction projects.

When employers are corporations, it has been understood by case law that managers and/or directors who had actual control over employees and/or the specific activity are criminally responsible for such non-compliance. It is not required that the employee suffers an actual employment-related life-threatening accident; the possibility that such accident could have happened is enough for the criminal scenario to trigger.

Penalties can range from three to 24 months of imprisonment. The penalty does not necessarily have to be served in jail; UY criminal laws provide other possible ways of complying, which can even end with no criminal records for the person involved if no other criminal laws are infringed during the conviction period.