Courts favour the employee

Latin American countries have historically put the staff’s rights ahead of
the companies employing them. But as Liz Simpson finds some local experts are
predicting that this over-protective stance may be ripe for change

They may have distinct geographies, climates and histories, but the
countries from Argentina to Venezuela that are collectively referred to as
Latin America have one key factor in common – their tendency to put employees’
rights ahead of employers’.

"It’s rather like the French way of doing business. If you understand
that model you’ll get a better appreciation of the general approach that Latin
American countries take to things like employee benefits and the protection of
employees if their contract is terminated," explains Adolpho Garcia, head
of the Latin America Practice and partner at international law firm, McDermott,
Will & Emery.

"In Latin America, employees have significant job security that impacts
upon the concept of job entitlement. After an initial trial period of six
months it’s very difficult to fire someone. And these laws are strictly upheld,
which is something that foreign employers should be mindful of."

His colleague, Stuart Berkson, an international tax and transactional lawyer
who advises foreign corporations on business practice in Latin America, agrees.
He points out that even material breaches of an employee’s obligations are
difficult to establish. He adds, "Establishing cause in Latin America
generally requires much more egregious conduct than a US employer’s view. Issues
such as breaches of confidentiality that in the US and other much more liberal
environments would be considered just cause, can prove challenging here."

So what’s the answer? Pilar Mondragon, HR coordinator for high-tech giant
Cisco Systems in Mexico, advises caution when hiring anyone on a permanent
basis.

"Our experience has taught us to be absolutely sure that the person
we’re interviewing is totally qualified and suitable before offering them full
employment," she says. "A lot of companies like ours get around the
problems they’d expect to experience when trying to fire a permanent employee
by only using contract or temporary workers to fill particular roles."

Another issue for HR professionals to be aware of when either sending expats
to Latin America or hiring local employees to work in several different
countries, is the way the courts calculate compensation due upon termination.

"An employee may have worked in the US for 10 years, for example, then
be relocated to Bolivia for two years, followed by Argentina for five years. If
they’re then terminated in Argentina the courts will consider him or her to
have not just five years but 17 years seniority and any provisions and
indemnities will be calculated on that basis," explains Carlos Dodds, head
of the Employment and Labor Practice Group in the Buenos Aires office of
commercial law firm Baker & McKenzie.

And Garcia adds, "There have been several cases in Venezuela precisely along
these lines. One US company thought its liability upon termination was limited
to the time the employee was employed in Venezuela. However, they discovered
that the Venezuelan courts reached back to the time that person worked in Cuba
and applied it to his US-based employment as well."

Another area that can lead to misunderstandings and increased liability
relates to the issuing of benefits in certain Latin American countries.

"When a benefit such as a bonus scheme, offered over and above those
normally given, has been in effect for a certain amount of time it cannot be
taken away without the employee’s prior permission," explains Berkson.

"The market in Latin America changes more quickly than in the EU or US.
While the labour laws themselves may not change that often, the economic
situation triggers amendments that employers can only keep up with by using the
service of local advisers."

Indeed, Berkson sees the challenging economic circumstances that many Latin
American countries face as reinforcing their focus on employee protection.

"Argentina is one country that has been very pro open investment but
which has suffered very difficult economic times in the last one to two
years," says Berkson. "This increases the chances that the rank and
file will be hurt by multi-nationals cutting back or pulling out
completely."

However, Dodds in Buenos Aires predicts a sea change more in favour of
employers. "Employment laws in Latin America have been over-protective in
my view and give the impression that employees here can’t act like grown-ups.

"I think we’ll see countries like Argentina, Brazil and others realise
that these over-protective regulations are not only unnecessary when dealing
with sophisticated multinational organisations but that discriminating so
strongly in favour of employees makes us seem rooted in old-fashioned business
practices."

Meanwhile Dodds helps keep savvy HR professionals up to date on what’s
happening to Latin American employment law by posting relevant news and
amendments on Baker & McKenzie’s website. The company’s Global Alerts are
free bi-monthly newsletters available via the Internet (see www.bmck.com/gel/) and offer one way of
helping employers stay abreast of their legal obligations in this region as
well as others around the globe.

Further legal links

www.bakernet.com

www.bmck.com/gel/

www.mwe.com

www.klegal.com

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