Legal Alert Covid-19: Short Law amending the Employment Protection Law

1 June, 2020

June 1, 2020 / By Luis Parada y Alfonso Bustamante We inform that on June 1, 2020 Law No. 21,232 (hereinafter the “Short Law”), which amends Law No. 21,277 on Employment Protection (hereinafter the “LPE”) was published in the Official Gazette. Please find below the most relevant changes of this new law: 1. The current regime for the payment of social security contributions by employees with suspend contracts (full-fledged or by mutual agreement of the parties), currently calculated at 50% of the value of the las remuneration, is amended by the following one: a) For old age contributions, Pension Fund Administrator (“AFP”) commission and Disability and survivors´ insurance: The contributions to be paid by the employer will be calculated at 100% of the amount of the unemployment benefits granted by the LPE. b) Health and other Social Security contributions: The last monthly salary received must be considered, without prejudice to the current taxable limits. c) It is established that the payment of contributions under this new form of calculation is retroactive for all those persons with suspended contracts under the LPE, prior to the entry into force of the Short Law. 2. Termination of employment contract during the period of suspension: a) Dismissal for company needs and employer eviction is prohibited while the legal or conventional suspension of employment contracts remains in force. b) Notwithstanding the foregoing, the causes for termination by mutual agreement of the parties, voluntary resignation of the worker, death of the worker, expiration of the agreed term and conclusion of the work or service that gave rise to the contract (for contracts for work or labor) are applicable to the suspended workers. c) For workers who are not affected by the law, it is possible to apply the causes of the company´s needs and employer eviction. d) The compensations for the termination of the contract must be calculated in accordance with the last accrued monthly remuneration. e) In the event of termination of the employment contract due to the application of the company´s needs, the employer may not deducted from the severance indemnity, the part of the employer´s contribution to the unemployment insurance destined to the worker´s saving funds. 3. Effects in cases of suspension of the employment relationship, by act or declaration of authority or mutual agreement of the parties; entry into force of agreements on reduction of working hours and remuneration; and alimony: a) Workers from companies excluded from paralysis, whose work is not necessary for the provision of services excluded from the referred measure, may avail themselves to the law through the suspension pact by mutual agreement. b) In cases of suspension of the employment relationship by an agreement between the employer and employee, a presumption of “partial assignment of activity” is incorporated, a necessary condition for the signing of these agreements, consisting of the fact that in the month prior to the signing of the suspension agreement, income from sales or services, without taking into account VAT, has decreased by at least 20%, compared to the same month in the immediately preceding year. c) It is clarified that the agreement to suspend […]

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