Chile Employment Law Dismissal Letters And Their Importance
Recently, the Supreme Court enacted an important ruling (Rol 47.874-2016) in regards to the dismissal letter that is given to employees informing the cause of their termination.
Companies often overlook the dismissal letter and its importance. In many cases, the letters are drafted by managers and not lawyers. They often lack the legal ground to properly sustain and explain the cause of dismissal in the case the matter goes to court.
We have seen in many cases that the cause of dismissal is wrongly applied to the specific case at hand and they tend to indicate only in a broad general manner the cause of termination. In other occasions, although a valid legal cause, it is hard to prove the legal cause in court, leaving lawyers with an up hill battle if the employee decides to take the case to court.
In order to legally dismiss an employee, the employer must comply with several basic steps, which we summarize as follows:
The termination of the work contract may only be realized pursuant to some of the legal causes that the Chilean labour Code provides (e.g. serious breach of contract, "business need" duly qualified, non-attendance, death, etc.). In Chile, there is no termination at will. The employer must provide a written letter stating the cause of dismissal. A copy must be handed to the employee and another sent to the Labour Office (Dirección del Trabajo). This has to be done the moment the employee is removed from the work place and no later then 3 days. A " Finiquito" or a termination release agreement must be drafted according to legal standards, providing all the severance compensations that the employee has the right to. This document indicates the amount of severance the employee is entitled to receive. All social security contributions must be duly paid. Otherwise, the termination may be annulled or voided by a labour judge. All severance must be duly paid no later than 10 days counted from the date of removal. The employee can agree to having severance payments made in instalments, otherwise, the severance must be paid in a lump sum within the 10 days. In Chile, taking legal action is more common that one would think, as employees are often incentivised to do so. For example, severance may be increased by anywhere from 50% to a 100%...
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