Rules regarding the application of the Decree setting forth the one hundred Argentine pesos increase

As a result of the economic and social emergency, the Federal Government, in Decree No. 1,273/2002 (published in the Official Gazette on July 18, 2002 and commented on in Marval News #8 of July 2002), forced companies to increase wages by one hundred Argentine pesos ($100). By means of Decree No. 1,371/2002 (published in the Official Gazette on August 1, 2002), the Government issued rules regarding the application of this wage increase.

1.    Non-unionized employees

Employers are empowered to grant or extend the monthly unearned allowance to non-unionized employees, on the same terms and with the same scope set forth in Decree No. 1,273/02 for unionized employees. In addition, should the allowance be granted, the contributions and payments set forth in Section 4 of Decree No. 1,273/02 must be made (Social Security and Pensioners' social services entity).

2.    Public sector

It sets forth that the Decree will not be applicable to public sector employees, whatever their legal regime.

3.    Part-time employees

When the hours of service are less than the regular workday or those established in the collective bargaining agreement, the pro rata amount payable to the employee will be calculated on the basis of the unearned allowance corresponding to an employee working full regular workday or that established in the bargaining agreement with the same category or position. In addition it sets forth that if the collective bargaining agreement does not provide for these payment mechanisms, the criteria laid down in the Labor Contract Law will be applied.

4.    Pro-rata contributions

If the unearned allowance is less than one hundred Argentine pesos ($100), the contributions will be proportional to the amount actually paid.

5.    Variable remuneration

Decree No. 1,273/02 sets forth that workers whose earnings depend on, a variable remuneration or performance-linked or commission system, will perceive the allowance set forth in Section 1, or their pro rata share thereof, only when their average income during the first semester of 2002 has registered an increase of less than one hundred Argentine pesos ($100), as compared to the average for the last semester of 2001.

This Decree sets forth that when the employee has not rendered services during the full second semester of 2001, his/her average income will be determined according to the monthly average of the months actually worked.

If the employee has not worked during the second semester of 2001, a comparison will be made with the first and second quarters of 2002. If the increase perceived by the employee in the period under consideration were less than the amount of one hundred Argentine Pesos ($100), the employer shall cover the difference up to such amount.

6.    Pensioners

If the employee receiving the allowance is a pensioner, the contributions set forth in Decree No. 1,273/02 shall not be paid.

7.    Penalty

Any breach in the provisions of Decree No. 1,273/02 will be punished according to the General Penalty Regime for Labor Infractions, set forth in Exhibit II to the Federal Labor Pact.

In our opinion, penalties could be considered serious offenses. Fines ranging between $250 Argentine pesos and $1,000 Argentine pesos per worker affectedcould be applied.

8.    Authority enforcing application

It was established that the Ministry of Labor, Employment and Social Security will be the authority enforcing application and that the Secretary of Labor will be the authority empowered to issue supplementary and clarifying rules.