Feature Note /

New Labor Reform comes into force and effect in 2017

Labor Reform
6 October, 2016

Expansion of the scope of collective bargaining, strengthening the role of unions and their benefits, right to strike and minimum services are the main changes included in the Labor Reform

Below is a description of the most essential aspects of the new law:

Expansion of the scope of collective bargaining

Employees that were forbidden from bargaining, particularly, apprentices in large companies, now have enhanced rights to do so, with respect to common conditions but not remunerations, and employees hired for specific tasks or temporary sites will be able to do so through specific proceedings. The law prohibits employees vested with the power to represent the employer from bargaining, including those with general powers of administration, such as managers and assistant managers.

Regarding micro and small companies, this prohibition is also applicable to the dependent personnel that holds upper management positions.

Strengthening the role of unions

Each union that engages in collective bargaining will do so on behalf of its affiliates and employees shall be able to freely join or quit a Union whenever they desire to. In the event of disenrollment from a union that negotiated a currently valid collective instrument, said worker shall continue being governed and bound by the same, being bound to pay the ordinary monthly installment throughout the instrument’s effective term. Regarding inter-company unions, the reform enshrines the right to negotiate with the company which has the number of members equal to the number required for the company union to engage in negotiations. Although the original bill intended to eliminate the coexistence between negotiating groups and unions, assigning the entitlement for collective bargaining to the union or unions, excluding negotiation groups, the Constitutional Court declared that said provisions were unconstitutional. Nevertheless, the fact that there is no negotiation procedure for said groups generates uncertainty regarding whether or not the instruments that they subscribe with the employer can be qualified as collective instruments.

Unions can negotiate new benefits

The benefits obtained by the union will be granted only to the workers that were involved in the respective collective bargaining process. In the respective negotiation or following the same, the negotiating union and the employer shall be entitled to agree on the total or partial application of the benefits of a collective instrument to workers that are not affiliated to the union, in accordance to what may be established in this regard. In the event that no agreement is reached, the unilateral extension by the employer shall be considered an anti-union practice. The employer shall be entitled to extend the clause on adjustment of remunerations in accordance with the Consumer Price Index without prior agreement. It is explicitly set forth by the law that the individual agreements on remunerations based on capabilities, qualifications, suitability, responsibility or productivity of the worker, do not constitute an anti-union practice.

Extension of unions’ right to information

Large companies will be required to disclose information to its unions on a yearly basis, including information such as the general balance sheet, statements of earnings and audited financial statements. Additionally, they must provide any other public information that must be submitted or made available to the Superintendence of Securities and Insurances, within the term of 30 days following the date when any such information is made available. The information that must be provided for the case of small and micro companies is simplified. The employer shall provide specific and necessary information, in any type of company, for the purposes of preparing the collective bargaining process.

Simplification of the regulated collective bargaining process

The principle of good faith is explicitly enshrined, as the parties’ duties in relation to the agreed upon obligations and deadlines. Negotiations between the union and the employer may be conducted in a regulated or unregulated manner. In this last case, labor protection and the right to strike shall apply. The stipulations contained in the collective bargaining agreement that is in force and effect are the minimum starting offer of the collective bargaining process and, consequently, the employer’s proposal must include at least the same content, except for: conventional adjustability, real increase agreed in the currently valid contract, covenants pertaining to special working conditions and benefits granted only on occasion of the execution of the collective instrument. If no collective bargaining agreement currently exists, the minimum starting offer is the employer’s answer. Collective bargaining agreements may be in force and effect for a maximum term of three years. Workers that have participated in the negotiation may freely join or quit the union, but the latter shall continue to be governed by the collective bargaining agreement that is in force. Under certain assumptions, inter-company negotiation shall be mandatory for medium and large companies. The instruments and options for mediation and arbitration are strengthened. In any cases when a strike has been voted favorably, and upon the request of any of the involved parties, in addition to any case when the strike is forced, the parties will at any time – provided they are in mutual agreement – be entitled to request a voluntary and mandatory mediation.

Right to strike and to minimum services and “necessary adjustments

The employer may not replace employees involved in the strike, neither with internal nor with external personnel. The infraction of this rule is a severe disloyal practice, sanctioned with a fine ranging between 10 to 100 UTM per each negotiating employee. The union shall provide emergency teams, comprised by bargaining employees, the purpose of which is to perform the company’s “minimum services,” allowing for:

  1. Protection of tangible assets and of the company’s facilities.
  2. Ensuring the prevention of environmental and sanitary damages.
  3. Service for the population’s basic needs.
  4. Ensuring the supply of essential public services.
  5. Prevention of accidents.

A bilateral proceeding is created for the purposes of qualifying companies in which strikes may be forbidden, establishing the right to a complaint procedure before the relevant Court of Appeals in respect of the resolution that declares the admissibility or inadmissibility of strikes.

In turn, a new aspect established by the law is that the employer, exercising its legal rights, may amend the shifts or working hours and carry out any necessary amendments are required to ensure that the workers that are not involved in the strike can perform the functions agreed in their work contracts, without this constituting a disloyal practice, nor a breach of the prohibition to replace workers. The foregoing has not been defined and the courts are expected to actively participate in the process of implementing this reform, along with the Labor Directorate.

On September 8, 2016, the Official Gazette published Law No. 20,940 titled “Modernization of the labor relationship system”, which will come into effect on April 1, 2017. Throughout its legislative approval process, this item was known as the “Labor Reform”.

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