Labour Law In Uruguay

As a result of its political, institucional and economic stability, Uruguay is a country which attracts foreign investments.

Except for the already known specific cases of financial crisis, quietness and safety in Uruguay have led foreigners from different parts of the world to invest in Uruguayan lands, real properties, companies, etc.

Therefore, for all who have invested in the country or wish to do so in the future, it is quite interesting to know some theoretical and practical aspects of the labour regime in Uruguay.

I) Labour law principles

The first thing that we should know is that in Uruguay there are some labour law principles which help us having an initial overview of the Uruguayan labour legislation.

Within the range of principles of the labour law itself we understand that there are a few which are particularly relevant and worth mentioning.

* Protective principle, which has three rules:

- "In dubio pro operario" rule (if in doubt, in favour of the worker),
- Most favourable rule (in the face of two rules, the most favourable one for the worker prevails),
- Rule of most beneficial condition.

* Principle of inalienability (workers may not waive the benefits granted by labour laws).

* Principle of primacy of reality (reality always prevail regardless of the documents).

II) El contrato de trabajo

El contrato de trabajo en Uruguay puede ser verbal y no es necesario que conste por escrito.

III) Wage

In our law, there are two kinds of minimum wages, a national one, which is interprofessional, and another minimum wage, which is established by group or branch of activity and results from the tripartite collective bargaining by wage boards; the latter are composed of representatives of the Executive Power, representatives of workers and of the employer, who in a meeting reach a settlement in connection with the minimum wage for each labour category.

The payment of the wage shall be made, preferably in cash, although it may be made in kind.

For the case of a monthly worker, the wage must be paid within the first five working days and never after the first ten calendar days of the following month; for the case of a worker whose wage is paid fortnightly, the same shall be paid within the first five working days following the fortnight; and for the case of a day labourer –whose wage is calculated by day’s work actually worked– his/her wage shall be paid on a weekly basis, that is, upon expiration of each week.

IV) Working day

The working day has a double limitation; on the one hand, the worker may not work over 8 hours a day, and on the other hand, the worker may not work over 44 or 48 hours a week, depending on the activity carried out by the company.

In this sense, the limit of the working day for commercial establishments has been set at 8 hours a day and 44 hours a week, while for industrial establishments the daily limit is the same, but the weekly limit has been set at 48 hours. The above mentioned limit of industrial establishments refers to factory or plant operators, but not to administrative or commercial staff, whose limit is according to commercial establishments.

By mutual agreement of the parties, such limits may be exceeded respecting certain rules; for example, the 8-hours daily limit may be exceeded as long as the 44-hours weekly limit is not exceeded. That happens frequently in shops where the four hours of Saturday are distributed among the week (from Monday to Friday), or the five-day week regime, or the three-week cycle, expressly set forth in our legislation.

V) Overtime

Overtime is that period of time during which the worker worked exceeding the limit of his/ her working day.

The worker is not forced to work overtime; therefore, the company may not force him/her to work overtime.

Overtime takes place in those cases in which there is a legal or contractual limitation. For instance, in the event that an employee’s working day consists of six hours (it is below the eight-hour working day), the excess beyond those six working hours turns out to be extraordinary work, therefore, the worker is entitled to payment for overtime, since although he/she worked within the 8-hours limit, his/her daily timetable is of six hours under the contract. Besides, there are certain labour categories for which the law has expressly removed the limit of the working day, such as the case of the senior or hierarchical staff.

The value of overtime depends on when it was worked; if the employee worked overtime on a working day (or working holiday) it has a 100 % surcharge; whereas, if he/she worked overtime on a Sunday or on a non-working holiday, surcharge is 150 %.

Finally, our law establishes a maximum limit for the number of hours of overtime that a worker may work per week which amounts to eight hours of overtime per week. This limit may be exceeded as long as there is a prior and written agreement approved by the Ministry of Labour and Social Security.

VI) Weekly rest

The weekly rest is closely related to the limitation of the working day.

In industrial establishments there are two options: the worker may work from Monday to Saturday (48 hours) and rest on Sunday, or every five days of work the worker rests one day, where the rest day may logically be on Sunday.

On the other hand, in commercial establishments workers rest half of Saturday and the entire Sunday. The foregoing without prejudice that there may be an agreement whereby the worker doesn’t work on Saturday and the four hours corresponding to that day are distributed among the week (from Monday to Friday).

The aforementioned regime is general since there is a special regime for certain activities, such as banks, drugstores, etc.

However, in the event that the worker works on rest days, he/she may agree with the employer that such work is paid in cash or that a compensatory rest is granted instead.

VII) Holidays

A holiday is a day expressly set aside by law, on which normal activities, especially business or work, are generally suspended to allow individuals to celebrate or commemorate an event or tradition of cultural or religious significance.

In our law there are different types of holidays:

a) Common holidays:

Are those holidays in which work activities are usually suspended, but the worker is not entitled to additional payment if he/she actually works on that day. The matter is important for labourers, if the labourer doesn’t work on a common holiday he/she doesn’t generate the day’s wage, and if he/she works on that day he generates the regular day’s wage with no surcharge whatsoever.

b) Paid holidays:

These holidays must be paid although the worker doesn’t work on that day, and if he/she does so, they are paid double.

c) Non-working holiday:

The non-working holiday is the one expressly established as such by the legislator. It is a holiday intended for the worker not to work, such as, for example, the most common nonworking holiday is the date scheduled for the Population Census and 1st March of Presidential Inauguration Ceremony (every five years).

VIII) Paid annual holidays

Paid annual holidays, commonly called “leave,” is the annual rest period, in which the worker is entitled not to work and receive his/her wage anyway, as if he/she had actually worked.

The number of days of paid annual holidays is 20 as a minimum, per civil year actually worked (the civil year being understood as the one from 1st January to 31st December). Therefore, if a worker starts working half-way through the year, he/she will be entitled to a number of days of leave in proportion to the time worked between the date when he/she started working and 31st December of that year. Furthermore, the seniority in the company increases the number of days of leave that the worker will be entitled to enjoy (1 additional day every 4 years).

The leave is to be enjoyed during the civil year following that in which it was generated. The time of leave enjoyment must be during the civil year following that in which it was generated, and the date of the leave shall be set by mutual agreement between the company and the worker.

Moreover, in our law there are certain special leaves such as maternity, paternity, adoption, marriage, study leave, etc.

IX) Holiday pay

Also known as the amount for a better enjoyment of the leave, the holiday pay is the amount of money that the worker receives at the time of enjoying his/her leave and for a better enjoyment of the leave.

The amount of such holiday pay is that equivalent to 100 % of the net amount received by the worker as holiday pay and must be paid before the start of the employee’s holiday. Therefore, a worker who is entitled to enjoy a 20-day leave, in addition to collecting his/ her wage as every month, before going on leave, he/she shall receive the amount equivalent to 20 days of his/her net salary.

X) Thirteenth salary

The thirteenth salary, also called annual statutory bonus, is the right that the worker has to receive an amount of money equivalent to the twelfth part (1/12) of the total wages paid in cash, during the immediate twelve months prior to 1st December of each year.

The payment of the thirteenth salary is made in two payments: one in the month of June of each year (corresponding to a twelfth part of the amounts received as wages between December and May), and the other payment in the month of December of each year (corresponding a twelfth part of the amounts received as wages between June and November of such year).

XI) Severance pay

When the termination of the employment contract is caused, without just cause (flagrant misconduct), by the employer, the latter must pay to the worker the severance pay. In our labour system, there is no formality or notice of termination requirement for the employer to legitimately dismiss a worker.

The general principle is that any unilateral termination by the employer brings along the corresponding severance pay; that, unless a flagrant misconduct by the employee had existed.

The amount of the severance pay depends on the fact if the worker is a labourer or a monthly worker, that is, if his/her wage is paid on a monthly basis or by day (or hour) actually worked.

For the case of the monthly worker the sum of the severance pay amounts to the sum of the total remuneration corresponding to one month of work per each worked year or year fraction, with a maximum of six months. That is to say, the amount received by the worker on a monthly basis, either as wage or as a portion of the remaining wage items (overtime, rest time worked, leave, thirteenth salary, etc.) is calculated and such amount is multiplied by the worked years or year fraction with a maximum of 6 annual payments.

On the other hand, the labourer who did not work over 100 working days will not be entitled to collect the severance pay. For those labourers who worked over 100 working days, the calculation of the severance pay is more complex, but in general we may say that it is as follows: a) for each year having worked 240 working days, he/she will be entitled to 25 days wage; b) if in a certain year he/she doesn’t reach 240 working days but he/she reaches 250 annual working days on average, he/she shall be entitled to those 25 days wage of severance pay for each one of those years; and c) in the event that such average is not reached, he/she will be entitled to collect, every 25 working days, 2 days wage of severance pay. Just like the monthly worker we find a limit in connection with the amount of the severance pay, for the case of the labourer it is 150 days wage of severance pay.

XII) Special severance pay

There also is, under certain dismissal circumstances, the obligation to pay a special severance pay, which is expressly established by the Uruguayan law as follows:

1) Dismissal of a sick employee:

If the worker is dismissed while being on sick leave or within 30 days thereafter, due to the illness, the severance pay is double the regular severance pay.

2) Dismissal of a pregnant employee or a worker who has just given birth

The employer who dismisses a worker who is pregnant or on maternity leave must pay a severance pay equivalent to six months or the remaining amount to cover 6 months of wage. In this case the dismissal may be due to any reason. If the dismissal was without knowing the worker’s pregnancy, then the especial severance pay is not applicable.

3. Dismissal of an employee who had a workplace accident or suffers from work-related disease

In the event that a worker had a workplace accident or caught a work-related disease, the employer must take him/her up again once the worker is discharged, and if the employer fails to do so, he/she is forced to pay a special severance pay equivalent to three times the regular one.

Once the worker has been discharged and that the employer has taken him/her up again, the worker may not be dismissed until 180 days following his/her return have elapsed, and if the employer dismisses the worker within that period he/she must pay the remaining wages for completing 180 days.

4. Unfair dismissal

The unfair dismissal is an unlawful dismissal due to the manner, reason or unlawful purpose causing or pursuing the dismissal. Typical examples of unfair dismissal may be those related to trade-union, religious, political or racial reasons, etc.

There is no rule establishing the amount of the indemnity corresponding to unfair dismissal, but our courts estimate that the value of the indemnity for unfair dismissal may be equivalent to one, two or up to three regular severance pays.

XIII) Dismissal for flagrant misconduct

There are cases in which the employee’s misconduct may lead the employer to dismiss the worker without having to pay the severance pay.

The concept of flagrant misconduct has not been defined by law, therefore, books of authority and caselaw conceptualized the same. In that sense, it is understood that a flagrant misconduct has occurred when there is a serious misconduct by the worker who makes it blatant, or the series of minor misconducts which make them notorious.

For the case of a series of minor misconducts, the employer must have penalized the worker for each one of them, and punishments are to be harsher as misconducts happen, the first one being a reprimand, then lay off and afterwards the dismissal with no right to collect any indemnification whatsoever.

Just like the unfair dismissal, a doctrinal and caselaw interpretation, guidance or parameters may be given for determining its occurrence, but in order to be able to know if flagrant misconduct has occurred, the particular case must be analyzed. Then, it may be noticed that the employer’s decision to dismiss the worker for flagrant misconduct is a decision which may be reviewed in court; this means that in the event of a lawsuit, the judge will be the one who will definitely establish wheter flagrant misconduct has occurred or not, and the corresponding indemnification or not.

XIV) Contracts in which no severance pay is to be paid

It is important to note that there are some special employment contracts in which, given their characteristics, their termination does not lead to an obligation to pay for the same.

Among those exceptions we may find the probationary employment contract (or on a trial basis) which is the one entered into by the parties with a certain trial period, where the employer, on the one hand, will examine the abilities and skills of the worker, and the employee, on the other hand, will examine if work conditions meet his/her expectations. Therefore, within the trial period agreed by the parties, any of them may terminate the contract without any liability whatsoever.

As a sub-model of the fixed-term employment contract, we may also find the contract for specific work, where a person is engaged to carry out a specific work; once the same has been finished, the contract is terminated with no liability whatsoever.

There are also other contracts which have the same regime, such as seasonal employment contracts, apprenticeship agreements or work experience agreement, substitution agreements, that is, any contract having a temporary nature.

It is important to highlight that caselaw understands that the repetition or constant succession of this type of temporary contract turns the relationship into a permanent and indefinite one, and the termination of such relationship by the employer, leads to the obligation to pay the severance pay.

XV) Extinguishment of labour credits due to the passing of time

At present, every worker has a term of one year from the termination of the employment relationship to file a claim for labour reasons. In addition to this, the worker may claim labour credits of up to five years back.

Therefore, once the employment relationship has been extinguished, the worker has a term of one year to file a claim and may claim labour debts of up to five years back.

XVI) Labour Justice

In relation to Labour Justice, in our country, Labour Courts in Montevideo and Firstinstance courts in the remaining departments are competent for hearing labour matters; in second instance, Labour Appeal Courts are competent.

With regard to the structure of proceedings, there are two types of proceedings depending on the claimed amount: the summary proceedings and the ordinary proceedings; each one of them has its speciality.

XVII) Social security contributions and others

Every employment relationship has certain inherent expenses which are set forth below.

On the one hand, there is the occupational disease and workplace accident insurance policy, which must be mandatorily hired at the “Banco de Seguros del Estado” (State Insurance Bank).

On the other hand, there are social security contributions, which comprise the payment of health insurance (medical aid) and nowadays –from 1996– our pension plan is a mixed system, where solidarity between generations and individual capitalization are combined.

Finally, since 2007, after the tax reform, income received by the worker is subject to the Individual Income Tax (Spanish acronym: IRPF). Page