After a long debate, the administration of President Milei, elected in November 2023, finally got its first law passed on 27 June 2024.
This new law, formally titled 'Bases and Starting Point for the Freedom of Argentineans', includes several titles, such as a Declaration of Emergency and State Reform, the dissolution of national agencies, privatisations, changes in administrative procedures, changes in the legal regime for public employment, promotion of registered employment, and a 'Labour Modernisation' reform.
There are also tax benefits and incentives for investors in the energy, oil and gas, forestry, tourism, infrastructure, technology and mining sectors.
Before this law, in December 2023, Milei issued a Decree of Necessity and Urgency with 366 articles, which also included a comprehensive labour reform. That Decree was put on hold due to injunctions and other measures filed by several unions. However, after a long negotiation period, and despite of its weak representation in the Congress, the Milei administration succeeded finding sufficient political support to pass these reforms.
The main aim of the labour reform is to reduce conflicts and inefficiencies in the labour market, and to promote job creation and the registration of employees that are in the informal market.
Promoting job creation
To promote job creation, the new law extends the trial period for indefinite-term employment contracts to six months. However, through collective agreement with the legally recognised union, the trial period can be extended to eight months for employers with 100 or fewer employees, and up to one year for employers with five or fewer employees.
The legal regime for seasonal agricultural workers has been changed so that these workers are now subject to a trial period and can be hired through agencies as temporary workers. The obligation to hire from the union pool has been eliminated.
A chapter in the law is dedicated to simplifying the registration process for new employees. A special simplified regime for employers with less than 12 employees will be drafted by the labour authorities. Registration by a third party, even if it is not the primary employer, is now considered sufficient. This reduces risks for startups in Argentina, and for the use of employers of record. Similarly, the employment contract law has been amended to limit the liabilities of user companies when contracting employees from third parties.
Encouraging the registration of informal employees
The reform allows employers to register informal (or partially informal) employment relationships that started before the law is published, without paying penalties or fines, without being included in the register of sanctioned employers, and (subject to limitations) without paying a substantial part of the social security debt for the employee. Particular regulations regarding this process are expected to be forthcoming.
Severance and fines
The law helps to reduce the uncertainties related to labour costs, especially costs arising at termination. It eliminates certain regulations that were intended to encourage formal jobs in the private sector but in practice have only increased severance costs and led to litigation. In particular, all of the extra severance costs for deficient registration of the employment contract were eliminated.
The law further provides that, through a collective agreement, employers and legally recognised unions can agree to substitute the legally required severance payment with a special fund or system. Employers can opt to contract insurance or establish an auto-insurance system at their cost. The system can include payment for separation by mutual agreement.
Increased severance is now the sole remedy for discriminatory dismissal based on race, ethnicity, religion, nationality, ideology, political or union views, sex or gender, sexual orientation, economic status, physical characteristics or disability. The remedy of reinstatement is no longer available. The increased severance is a minimum of 50% and can be raised to 100% in the case of gross discriminatory conduct. The burden of proof falls on the employee alleging discrimination.
Independent workers
Particularly interesting for the gig economy, the scope of application of employment laws is now restricted when services are hired under civil contracts. There is no longer a presumption of an employment relationship when hiring professional services, so long as the contracts and payments comply with the applicable regulations.
Another innovation is the creation of a new status for up to three independent workers collaborating in a small business. These workers would be classified as independent (as long as there is no subordination), with a special social security regime that will be regulated by the executive branch.
Other measures
The new law simplifies the process for withholding payments from third parties (i.e. contractors and subcontractors) when they have not fully complied with their obligations regarding payment of salaries, severance, and social security contributions. A procedure will be established by the tax authorities for withholding and making those payments on their behalf.
Pregnant women are now allowed to work until ten days prior to giving birth, thus extending the period of leave after the date of birth.
To reduce violence associated with strikes, participating in the occupation or blocking of the employer's premises is now expressly considered to be a fair cause for dismissal. Similarly, engaging in or threatening violence against workers who are not striking and damaging or withholding the employer's property are now presumed to be causes for fair dismissal.
Measures omitted
To obtain passage of the new law, the government had to negotiate and eliminate (or at least delay) some other reforms that were included in the suspended presidential order. These include:
- limitations on the right to strike;
- restrictions on union dues;
- elimination of the special statute for salespersons;
- amending the rules on work certificates to allow digital certificates;
- modifications affecting the validity of agreements waiving employment rights;
- the principle of the most favourable law to the employee; and
- a cap on the interest rates applicable to employment law claims.
Takeaway for employers
The changes to the law in this new reform are sweeping (although certainly not as sweeping as originally proposed in the presidential decree). The government is currently working on regulations to implement these legal changes. In addition, we anticipate that further reforms might be implemented in the next few months.
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.