Costa Rica: Labor Procedure Reform Law Makes Sweeping Changes To Labor Code

On July 25, 2017, Costa Rica's Labor Procedure Reform (Reforma Procesal Laboral or RPL) Law No. 9343 became effective. Despite its name, the law amended not only the procedural part of the country's Labor Code, but also the collective bargaining law and individual labor law governing the employer-employee relationship—348 articles of the Labor Code in total, or nearly half of the country's labor and employment laws.

Obtaining approval of the RPL was a long and difficult slog. In September 2012, lawmakers approved a version of the RPL dating back to 2000. A month later, former Costa Rica President Laura Chinchilla vetoed the law—only to withdraw the veto in May 2013.

A year and a half later, in December 2014, current President Luis Guillermo Solís lifted the veto. In August 2015, the Constitutional Chamber of the Supreme Court declared both Chinchilla´s withdrawal of the veto and Solís´ lifting of the veto unconstitutional. Consequently, in December 2015, the nine political parties of the nation's Legislative Assembly filed a new bill of law which, in January 2016, was jointly signed by President Solís, the President of the Legislative Assembly and the President of the Supreme Court of Justice. It was not until July 2017 that the RPL became law.

Judicial Procedure

Procedurally, the RPL creates an internal reorganization of the labor courts throughout the country. It also limits the scope of some of the labor courts to only analyzing and deciding employment and labor matters—thus establishing new jurisdictional structure.

Prior to the RPL, labor law matters could last three or four years, or even longer. With the aim of resolving matters in a much shorter period of time, the RPL mandates that many types of matters that previously had to be adjudicated via written communications will henceforth be handled orally. Now, following the response to the lawsuit, there will be a preliminary hearing, at which the judge will hear motions, oppositions, and defenses, including with relation to the admissibility of evidence at trial, and, in complex cases, a supplementary hearing if needed.

In addition, under the RPL, in a case brought by an employee where not all possible claims were included, the judge is now permitted to advise the parties that the court may raise damage amounts above the amount sought by the employee.

The RPL also creates a Public Labor Defense Office to provide free legal assistance to employees whose monthly salary is lower than about US $1,400. Employees who earn more may also request the Office's help, but must pay for it.

Collective action

In connection with collective action by employees, the RPL requires that, even if a workplace is unionized, the union cannot call a strike unless it has the support of at least 50 percent of the workforce. The point of this threshold is to ensure a more representative decision, one made with greater participation of the employees. If there is no union at the company, or a group of unions whose membership, alone or collectively, constitutes 50 percent of the workforce, a secret ballot will take place with the participation of all employees. Under this scenario, the secret ballot must have an affirmative result and the votes of at least 35% of all the employees at the company to validate a strike.

Likewise, the RPL clarifies the manner in which workers are to be notified when a strike has been declared illegal or otherwise terminated and the amount of time they have to return to their workplace. It also ensures that they are able to return under the same work conditions they enjoyed before the strike began.

Finally, the RPL shortens the amount of time a judge has to issue a decision regarding the legality or illegality of a strike to three days.

Individual labor law

With respect to individual employees, the RPL amendments address four main areas: (i) dismissal letters, (ii) discrimination, (iii) special protection for employees (with certain conditions) and (iv) statute of limitations.

Under the RPL, a letter of dismissal must be given to the employee at the time the employer orally communicates the dismissal. If the employee refuses to accept it, the letter must be filed with the nearest office of the Ministry of Labor within 10 calendar days of the dismissal. Once the letter is given to the employee, a one-year statute of limitations for the employee to file any claim or labor lawsuit begins to run;—however, the RPL also sets forth a list of events or circumstances that will toll the statute. If the dismissal is for cause, the dismissal letter must explain the reason(s) for the dismissal and, in the event of an eventual claim or lawsuit, only this explanation will be taken into consideration by the court. Discrimination is not a new topic in the Labor Code. However, the RPL extends the number of protected classes to fourteen, from the prior four (age, gender, ethnicity and religion).

The ten new protected classes are: race, sexual orientation, marital status, political opinion, national ascendency, social origin, affiliation, handicap, unionization, economic situation, or any other analogue discrimination form.

Under the RPL, employees deemed deserving of special protection (e.g., union leaders, women on maternity leave or breastfeeding, minors, sexual harassment claimants, employees claiming a conflict with the union, or any other employee who is awarded a special protection, by law or regulation) will have the right to due process prior to dismissal, either in a proceeding before the Ministry of Labor or the Labor Court, depending on the employee.

In order to protect employees from discrimination and other wrongs, a special procedure has been established allowing a judge, as a precautionary measure, to suspend injurious administrative acts. Under this procedure, the cause of the lawsuit must be given within 24 hours after it is filed and the defendant is then given a period of time to render a report. In addition, lower court decisions may now be appealed to the Second Chamber of the Supreme Court. Depending on the decision of the court, the employer may be responsible for some of the employee's legal fees and/or costs.

If the Ministry of Labor or the Labor Court determines that the employer has the right to dismiss the protected employee, the Ministry will issue a decision allowing the dismissal, and the employer has up to one month from the date of the decision to dismiss the employee.

Regarding the statute of limitations, the employee has six months to terminate the employment relationship for cause, and the state has two years to sanction an employer for any violation to the labor laws.

Even though it is still too early to understand all the implications of the RPL, we recommend that our clients in Costa Rica, as well as businesses interested in setting up operations in Costa Rica, become informed about these changes and their effects by seeking professional legal advice from the Dentons Muñoz Costa Rica Employment and Labor Law team.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

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.

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