The effects of the commencement of reorganization proceedings on special labor regimes ("professional statutes”) - The “Editorial Perfil” case

In June 2002, based on Section 20 of Bankruptcy Law No 24,522 (“BL”), Commercial Court No 17 suspended the effects of Laws No 12,908 and 12,921 (the “Journalists’ Labor Regime”) due to the commencement of the reorganization proceedings of Editorial Perfil S.A.

Section 20 of Bankruptcy Law (“BL”) provides that “The opening of reorganization proceedings suspends the effects of collective bargain agreements for three years, or for the term it takes to perform the composition, whichever is shorter”.

This rule does not refer to the suspension of the “professional statutes”. Nevertheless, the Court considered that Section 20 of BL suspended not only the effects of collective bargain agreement No 301/75 but also the effects of the “Journalists’ Labor Regime” (which is a “professional statute”).

In economic terms, the issue was by no means minor. The “Journalists’ Labor Regime” provides higher severance compensations and establishes a special compensation equal to 6 months salary in case of dismissal without justified cause. The suspension of its effects would allow companies under reorganization proceedings to dismiss their employees at a considerably lower cost.

In its decision, Tribunal D of the Labor Court of Appeals held that the lack of reference to the “professional statutes” in Section 20 BL could only be considered as an intended legal omission made with the purpose of preserving the “professional statutes” effects even after reorganization proceedings are opened.

The Labor Court of Appeals highlighted that, since the “professional statutes” are laws, its effects could only be suspended by another law. Therefore, and since Section 20 BL does not provide so, the suspension of effects could not be extended to the “professional statutes”.

With this decision, the Labor Court of Appeals reversed Commercial Court No 17’s decision, and made it clear that the commencement of reorganization proceedings does not suspend the effects of “professional statutes”.