Indirect Dismissal – Duplication of indemnifications

On March 1, 2006, the Court of Appeals in Labor Matters decided, in Plenary Decision No 310 in the case "Ruiz, Víctor H. vs. Universidad Argentina de la Empresa U.A.D.E. et al in re: dismissal”, that the duplication of the indemnification set out in article 16 of the Law No 25,561 is applicable in cases of indirect dismissal.

In practice this means that employees who might have been considered dismissed since the approval of Law No 25,561, could demand the increased indemnification payment determined by such law, just like employees who have been directly dismissed by their employer. 

The Public Emergency and Exchange Regime Amendment Law No 25,561, section 16, established the suspension of the dismissals without justified cause for an initial period of 180 days successively prorogated. Additionally, it established a sanction to the employers who infringe the norm with the payment of the “double of the corresponding indemnification”. On the other hand, Law of Employment Contract No 20,744 regulates, among the different ways of terminating the labor contract, the direct dismissal stated exclusively by the employer, set out in article 245, and the indirect dismissal of the worker who reports the labor contract and considers him or herself dismissed (articles 242 and 246).

Until the Plenary Decision was passed, the different Rooms of the Court of Appeals had differing positions in relation to the applicability of the duplicated indemnification set out in article 16 of the Law No 25,561 in the cases of indirect dismissal.

A majority position held that the termination of labor contract by the worker on the grounds of justified cause had the same effects and consequences as a direct dismissal stated by the employer. To this position, notwithstanding that the article 16 of Law No 25,561 refers to the suspension of the dismissals without justified cause setting out a sanction to the employers who behave in a contrary sense, when the employer offends the employee, the former is also establishing the termination of the contract.

Other minority criteria held that the dismissal refers solely to the report of the labor contract by the employer, for the reason that the norm which suspended the dismissals was established for employers and not for employees. This position understands that the mere offence of the employer does not set the employee in a dismissal situation. In this sense, only the employee, subject to their own convenience, may decide the termination and communicate it to the employer.

In the decision under consideration, the Attorney General and the majority opinion adhere to the first position. Among the legal grounds held by the Attorney General’s office can be found that referring to the fact that the regulation equalizes the direct and indirect dismissal costs, and mentions that case law admitted the right to collect special indemnifications in cases of rescission related to maternity, marriage, or the trade union activities, even in the case of indirect dismissal.

Moreover, the decision mentions that in other decisions of the Court of Appeals in Labor Matters underlined that the employer might intend to offend the employee who is supposed to be dismissed in order to generate an indirect termination, saving costs and to infringe the principles of Law No 25,561. The Court of Appeals understood that is not the intention of the legal authors of the regulation to exclude the case of employees who disposed the termination of the labor contract with justified cause, or else the regulation would have been expressed in such way.

The plenary decision has set down mandatory doctrine for the judges of Labor Courts in the sense that the duplicated indemnification established under the article 16 of the Law No 25,561 in cases of indirect dismissal is to be accepted.