Date: March 25^th, 2020

Author: Erica S. Geringer Zapico

1. COVID-19 PANDEMIC AS FORCE MAJEURE. HEALTH EMERGENCY.

As a consequence of the current health emergency, most companies have been suffering serious economic problems, especially the ones in which homeworking is not possible.

For this reason, we have been consulted about the potential application of force majeure in labor relationships and its considerations. According to the Jurisprudence guidelines, nowadays situation could be framed with force majeure because:

• The normal execution of duties and tasks is prevented by a factual situation that can be proved. Situations like workers not being able to assist to workplaces nor fulfill their duties with the homeworking modality are one example of this. Another case could be related to workers being allowed to go to their working place but not having enough work to perform as the result of the reduction of demand and absences of work. All these circumstances make it impossible to continue the labor activity naturally.
• The company is not responsible for the situation: We are talking about a pandemic that produces damages in a global capacity, which means that if the company takes all the precautions established by the Government and still gets affected, then the situation is not a result of the employers risks or the activity itself.
• Every preventive measure in order to avoid the crisis was taken by the Company and they could still not avoid it.
• The cause persists through time. This will depend on the factual scenario and the regulation that will be published regarding this matter.
• To apply this, seniority sequence and family responsibility must be respected.
• The measures applied have their origin in the present reality.

The Force Majeure is not a common scenario. It is the outcome of a crisis that was intensified by the publication of the SOCIAL AND PREVENTIVE MANDATORY ISOLATION stated on Decree Nº 297/2020.

Furthermore, we feel like it is important to remark that in a normal and regular situation, this type of suspensions or dismissals are the last resources. This are considered extreme tools, used only when every single prior possibility has been exhausted. Nowadays, and taking into consideration the context, the restrictive criteria for its application is getting tightened.

Depending on the outcome of the present reality, there is a pretty good chance that many companies will be in the need to evaluate the application of this type of decision. To be able to fulfill the norms, they must not only comply with the proper procedures, but also be aware of (i) the norms that are being published daily, (ii) the spirit of the mentioned legislation and (iii) the state policy that has a tendency to maintain and protect the sources of employment.

2. FORCE MAJEURE SUSPENSIONS OR DISMISSALS (ART. 218 CC AND 247 CC LABOR LAW)

Suspensions and dismissals based on Force Majeure are regulated in the Labor Law Nº 20.744. We will proceed to inform about both scenarios.

On the one hand, if the employer decides to apply a suspension, they must perform a reliable notification. By this, we mean that they must notify using the writing form, explaining the basis of the force majeure (justifying the fair cause) and have a fixed deadline. In order to proceed with this kind of suspensions, the rules that work for the cases of suspension as a consequence of the lack or reduction of work must be respected. Those rules are based on:

• Starting with workers that have the least seniority inside each specialty.
• Regarding the workers that started working on the same semester, the suspensions must start with the ones that have the least family responsibilities, even if this affects the seniority order.

As for the deadlines, the legislation provides that the force majeure suspensions that are dully probed, could be extended for a maximum period of 75 days within a year, calculated from the first suspension no matter the reason for it.

On the other hand, we will proceed to explain the force majeure on dismissals or as a result of the lack or reduction of work that cannot be attributed to the employer and that it is validly justified. When this scenario takes place, the worker has the right to receive as payment a compensation equivalent to half of the one expected in article 245 Labor Law.

In this case, the norm establishes that the dismissals have to follow the same rules as the suspensions (first for the workers with less seniority inside each specialty and if they started working the same semester, then it starts with the ones with less families responsibilities).

3. NON- REMUNERATIVE PROVISIONS (ART. 223 bis LABOR WORK)

According to Article 223 bis from the Labor Work, in the context of force majeure the employer could decide to compensate the fallen assets. In this case, the mentioned compensation could be settled (i) individually, or (ii) with the group of workers; or (iii) with the labor unions with representation. This will be non-remunerative, and the agreement must be approved by the Ministry of Labor, Employment and Social Security.

4. PREVENTIVE CRISIS PROCEDURE (LAW 24.013) AND SPECIAL PRIOR PROCEDURE (DECREE 328/88)

Both cases are administrative processes prior to the communication and application of the force majeure suspensions or the dismissals. These procedures are presented at the Ministry of Employment, Labor and Social Security and the main reason for them is to find solutions or mechanisms that allow a smaller impact.

A Preventive Crisis Procedure (Article 98 and ss from the National Employment Law) will be initiated if:

• More than 15% of the workers are affected in companies with less than 400 workers
• More than 10% of the workers are affected in companies that have between 400 and 1000 workers
• More than 5% of the workers are affected in companies with more than 1000 workers.

During the crisis procedure, the employer cannot apply suspensions nor dismissals and the workers cannot use labor unions measures. Either the employer or the labor union that represents the worker have competence to present it at the Ministry of Labor.

Regarding the requirements for the presentation, they are detailed in Decrees N° 265/2002 y 2072/1994. The submission must include the basis of the request and offer the necessary supporting documents. Once the submission was received, the Ministry of Labor proceeds to transfer to the other party and summon both the employer and the labor union to reach an agreement. This situation has two outcomes:

1. If the agreement is not achieved, a negotiation period of 10 days will open. Once the period is over, and if no agreement came out of this, the crisis procedure will conclude.
2. If the agreement is achieved, the Ministry of Labor will approve or reject it with justified resolution.

The Special Procedure regulated by Decree N. º 328/1988, is used when the percentages necessary for the Preventive Crisis Procedures are not reached. For this, the employer, before arguing measures of force majeure, must communicate his decision to the Ministry of Labor, informing: (i) the causes that justify it, (ii) if the hole company is affected or just a part of it, (iii) if it´s effect is definitive or transitory and in this case, (iv) the deadline, the measures adopted to stop the situation and the information of the workers.  The notification must be made with at least 10 advanced days to the application of the measure, having to deliver a copy to the labor union. The Ministry of Labor can celebrate audiences and propose solution alternatives.

5. STATE MEASURES

Given the current situation, a series of measures were taken to protect employment and help the companies fulfill their obligations so as to avoid worst-case scenarios. In order to minimize the economic impact of the health crisis, it has already been decided to (i) exempt the sectors affected by the pandemic from employer burdens, (ii) expand the REPRO program, (iii) reinforce unemployment insurance and (iv) increase the budget for public work.

Moreover, the Government has announced that it will invest in the production and supply of food and basic supplies through lines of credit, and the “Now 12” program will be renewed, among other initiatives.