A new law has been approved by Congress, making significant changes in Chilean labor law that necessarily will have consequences on all companies established in the country. No news of this magnitude had occurred in Chilean labor law since the approval of what was called "Labor Plan", a legal reform that materialized in the eighties, whereby our legislation was adapted to the demands of flexibility and adaptability inherent to an increasingly globalized and competitive economy. The Labor Plan, together with other measures to modernize the Chilean economy, were the basis for the growth of our exports and of our accelerated development during the last decade.
Notwithstanding these positive results, since the enactment of the Labor Plan, there were groups that disagreed with its contents, which they considered excessively liberal, since it significantly reduced mandatory severance payments as well as it deprived the unions of their traditional negotiating power.
Taking care of said criticism, the new labor law creates more protection and legal rights to the employees and their union organizations, and increases the supervising authority of the labor governmental agencies.
In broad outline, the changes introduced by the new law (that will become effective on November 1, 2001) are the following: it further regulates dismissals, making it more restrictive for the employers; it increases severance payments in case of unjustified dismissals; it reduces the maximum regular working hours per week; it defines and prohibits actions of discrimination; it facilitates the formation of unions; it expands the privileges of the union leaders; it forbids anti-union employers’ practices; it increases the supervising authority of the labor governmental agencies as well as the fines the latter may impose on the employers.
Naturally, under this scenario, the companies will have to be more careful in complying with the labor legislation. Among other things, dismissals must be subject of careful study, since, if considered undue by a labor court, the costs associated thereto can be increased significantly. In addition, those who are responsible for the administration of personnel must avoid incurring in discriminatory conducts, particularly in recruiting personnel, that could end in a labor lawsuit.
As the new labor law makes it easier for unions to be formed, prohibits the dismissal of the union leaders, and provides greater protection to unionized workers, the employers, in addition to adapting their conduct and policies to the new legislation, must give special attention on improving relations inside the company.
Notwithstanding these changes, our labor law is still more liberal than that of most Latin American and European countries.
In summary, the current practices on the above mentioned matters will need to be adapted to the new legislation in order to prevent labor contingencies and fines. Adequate legal advisory assistance in labor matters will become a much more important matter when doing business in Chile.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
