Feature Note / Legal Publications

New employment protection law

covid-19 , labour law
2 April, 2020

On April 1st, 2020, the National Congress approved the bill that establishes exceptional access to the Unemployment Insurance allowance, in order to protect job stability and guarantee income for employees affected by the measures taken to prevent the spread of COVID-19.

 

TEMPORARY SUSPENSION OF THE EMPLOYMENT CONTRACT BY ACT OR ORDER OF AUTHORITY

a) General requirements

The existence of an act or declaration by the authority that establishes health or internal security measures, which involves the cessation of activities, and prevent or totally prohibit the performance of hired work.

The issuance of an order by the Undersecretary of Finance indicating the area or territory affected by the act or declaration of authority.

 

b) Labor effects of the declaration or act of authority

Labor relations will be suspended automatically by law, during the period of the authority’s order.

  1. Employers will be obliged to continue to pay all health and welfare contributions (except those for accidents at work and work-related illnesses), which will be calculated over 50% of the remuneration that serves as the base for calculating the benefit of the Unemployment Insurance.
  2. During the suspension, the Employment Contract may only be terminated on the grounds of the Company’s needs.

 

c) Excluded workers

  • Those that perform activities or establishments excluded from the suspension of activities according to the order of the Undersecretary of Finance;
  • Those who, at the time of the act or declaration of the authority, have signed an agreement by which they continue to receive all or part of their remuneration;
  • Those receiving disability benefits.

 

d) Retroactive effect

Once the order of the Undersecretary of Finance is issued, those workers who were forced to cease activities between 18 March 2020 and the entry into force of the law, either by mutual agreement or as a result of an act or declaration of the authority, or who have agreed to continue providing services, may access the benefit.

 

e) Individual requirements

  • That three continuous social security contributions in the last three months immediately preceding the act or declaration of authority of the relevant worker have been paid; or
  • That at least six monthly social security contributions, whether continuous or discontinuous, in the last twelve months, of the relevant worker have been paid provided that at least the last two social security contributions of the relevant worker have been paid by the same employer in the two months immediately preceding the act or declaration of authority.

f) Execution

  • The employer must apply to the AFC (The Unemployment Fund Manager) for the insurance benefits, and make a simple sworn statement indicating that the respective workers are not excluded from the benefit, sending the necessary information to enable the corresponding payment to each worker.
  • This application and statement can also be made by the worker.
  • The benefit is interrupted if the worker is granted medical leave with the right to disability benefits, but payment is resumed after the end of the medical leave period.

 

g) Control

The supervision will be conducted by referring to the Labour Inspectorate the list of workers who have been affected by the suspension and for whom the benefits of the Unemployment Insurance have been applied for.

 

II. TEMPORARY SUSPENSION OF THE EMPLOYMENT CONTRACT BY AGREEMENT BETWEEN THE PARTIES

 

a) Requirements

Outside the periods covered by the order of the authority, and within 10 months of the passing of the law, the Parties may agree to the temporary suspension of the employment contract.

b) Effects

This agreement will be subject to the general rules of suspension resulting from the act or order of the authority.

c) Operation

The agreement is entered into directly with the worker, or after consultation with the union to which he/she is affiliated.

The employer and the worker and/or the representative of the respective union, must submit to the AFC (The Unemployment Fund Administrator) a simple sworn statement, signed by both parties, in which they must inform of the suspension and state that the worker is not excluded from the benefit.

d) Suspension

It is suspended if a declaration of activity is issued during its term.

e) Validity

Deferred execution of the suspension cannot be agreed. It must be effective, at least, from the first day of the month following the date of the agreement.

 

COVENANTS ON THE TEMPORARY REDUCTION OF WORKING HOURS 

Employers and workers, as well as unions, on behalf of the latter, may agree to a temporary reduction of working hours.

A temporary reduction of more than 50% of the originally agreed working hours cannot be agreed.

 

a) Effects of the covenant

  • The worker will receive a remuneration from the employer equivalent to the reduced working hours, in relation to which the employer must pay the full amount of the social security contributions.
  • Likewise, the worker will have the right to receive a supplementary payment from his Individual Unemployment Account, and once the funds of this account have been fully drawn, the supplementary payment will come from the Solidarity Unemployment Fund (i.e. Fondo de Cesantía Solidario).

If the working hours are reduced by 50%, the supplementary payment will amount to 25% of the average taxable remuneration of the worker earned in the last three months before the start of the covenant. If the reduction is less than 50%, the supplementary payment will be determined proportionally – in both cases with a maximum of CL$225,000. 

b) Requirements

The employer:

  1. The employer must be a VAT taxpayer who has experienced an average decrease of its sales in any period of 3 consecutive months, which exceeds 20% calculated with respect to its average sales in the same 3-month period of the previous fiscal year;
  2. The employer must be in reorganization proceedings;
  3. The employer must be in insolvency proceedings; or
  4. The employer must be a company, establishment or worksite that cannot cease its activities, and needs to reduce the working hours of its workers in order to maintain its operational continuity or to effectively protect the life and health of its workers.

 

For the worker:

  • With an indefinite contract: 10 monthly social security contributions, continuous or discontinuous, with the same employer.
  • With a fixed-term contract or for a specific project or service: 5 monthly social security contributions , continuous or discontinued.

 

Such social security contributions must have been paid during the last 24 months prior to the date of the covenant.

In addition, the last three continuous social security contributions of the worker must have been paid by the same employer with whom he/she signs the temporary working hours reduction covenant.

 

c) Execution

The covenant must be signed through the online platform enabled by the Labour Inspectorate.

d) Duration of the covenant

  • Indefinite term contract: 5 continuous months,
  • Fixed-term contractor for a specific project or service: 3 continuous months.

In both cases, the minimum duration will be 1 month and the execution of the covenant cannot be deferred in time.

e) Termination of the employment relationship during the duration of the covenant

In the event that the employer or worker terminates the employment contract, the legal or contractual compensation that the worker would be entitled to receive will be calculated in accordance with the remuneration and contractual conditions in force prior to the signing of the covenant.

Francisco Espinoza

Senior Asssociate

Alessandri

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