Costa Rica

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KEY DEVELOPMENTS FOR 2022

Mandatory COVID-19 vaccinations in public and private sectors

The spread of the COVID-19 virus has impacted the national economy and, in particular, the operation of companies in the private sector who have had to close their workplaces, implement measures to prevent the spread among employees, and have seen the work of their employees constantly interrupted as a result of possible transmission of the virus.

The Government of Costa Rica has determined that the significant impact that the COVID-19 virus is having in the country is due to the abstinence of people to be vaccinated. According to data compiled by the Ministry of Health updated as of 27 August 2021, it was found that out of every 10,000 fully vaccinated people, only 8 require hospitalization and 2.3 die from the disease. In order to encourage people to get vaccinated, the Government decreed that the vaccine is mandatory for public sector employees and authorized employers in the private sector require their employees to be vaccinated as part of their internal guidelines.

Recently, Mr. Hernández Mussio filed an action of unconstitutionality against this decree, alleging that it violated the principles of equality, informational self-determination and reservation of law, among others. However, on January 5th, 2022, the Constitutional Chamber rejected this action through resolution 2022-00374, stating that the protection of public health and disease prevention is a constitutionally legitimate purpose that can justify the prevention of diseases.

On 12 October 2021, Executive Decree No. 43249-S was published, making official the decision of the National Vaccination and Epidemiology Commission to decree the COVID-19 vaccine mandatory for public sector employees and authorizing private sector employers to declare the COVID-19 vaccine mandatory in their respective workplaces.

Private sector employers who wish to incorporate mandatory vaccination in their workplaces must include it in their internal guidelines. As such, they must take the necessary actions to modify their internal regulations in order to apply this measure.

The Ministry of Labor published the "General Criteria on Mandatory Vaccination against COVID-19, DAJ-OF-132-2021", which indicated that employees who abstain from getting the vaccine may be dismissed without employer responsibility in accordance with the provisions of Article 81 paragraph h) of the Labor Code. However in order to apply this sanction, employers must:

• Include the vaccination requirement as part of the prevention measures applied in the workplace;
• Communicate the introduction of the measures to employees;
• Establish a mechanism to verify compliance with the measures to identify those who have not been vaccinated; and
• In the event that people have not been vaccinated, they should be warned of the potential repercussions so that they can amend their behaviour or, failing that, present proof that justifies their refusal to get vaccinated.

Only if the above provisions are complied with and the employee does not heed the warning, is it possible for an employer to proceed with the employee’s dismissal without responsibility.

Change to limits on working hours/days

Currently, the Labor Code establishes that the ordinary effective workday may not exceed eight hours during the day, six hours at night and forty-eight hours per week. Also, all employees have the right to enjoy a day of absolute rest after each week or every six days of work. Due to these limits imposed on ordinary working hours, labor legislation does not contemplate a true flexibilization of employment, to allow companies to establish flexible schedules that are both beneficial to employees and increase productivity.

In view of the foregoing, Bill No. 21,182, which proposes to reform national legislation to include two exceptional workdays, one of twelve hours and one annualized workday, is currently in the legislative process. In qualified exceptional cases, such as in those jobs that by their nature require continuous 24-hour work processes in order to guarantee business operations and in which the conditions of the work space do not threaten the health of the employees, an exceptional extended workday of 12 hours per day would be authorized up to a maximum of 4 days, followed by 3 consecutive days off, per week. The Bill also seeks to approve an annualized ordinary working day for seasonal, temporary and/or continuous process jobs and activities subject to qualified variations in market conditions.

Employers should continue to monitor the progress of the Bill through the legislative process.

Curtailment of early retirement right

In Costa Rica, it is a right of employees to be insured before the Caja Costarricense de Seguro Social (CCSS). This institution is responsible for providing both sickness and maternity insurance (SEM) and disability, old age and death insurance (IVM), through which employees who meet the established requirements can access a retirement pension.

Currently, employees acquire the right to their full pension when they reach 65 years of age, provided that they have contributed at least 300 quotas. If they have reached retirement age but do not have the requisite amount of quotas, they may access a proportional pension if they contributed at least 180 quotas. Employees were able to retire early if they had already paid their contributions, in the case of women, from the age of 59 years and 11 months if they had paid at least 450 quotas, and in the case of men, from the age of 61 years and 11 months if they had paid at least 462 quotas.

Due to Costa Rica's aging population and declining birth rate, the CCSS predicts that the reserves allocated to the IVM pension scheme will be depleted by 2037. In light of the threat of a depleted pension system, the CCSS has approved a series of adjustments to strengthen it. These adjustments maintain the right of both male and female employees to retire at the age of 65 years. However, the CCSS has eliminated the right of male employees to early retirement due to old age. Female employees have retained the right to early retirement, although the minimum age has been increased to 63 years and is conditional on the employee having paid at least 405 quotas. According to the CCSS, this change would have a significant impact on the sustainability of the IVM by extending the available funds for an additional 15 years.

Both employees and employers should be alert to the publication of the regulation that will contemplate these modifications. This is likely to be published in the next few months. Once the regulation is published, it will become effective 24 months later

KEY DEVELOPMENTS FOR 2021

Virtual hearings in Labour Law matters

On 4 May 2020, the Plenary Court approved the Protocol of Virtual Hearings in Labour Processes in Costa Rica, which regulates the development of hearings under virtual mode in labour processes.

This protocol was approved as a solution to the delays that the Judicial Branch was experiencing in scheduling hearings due to the COVID-19 emergency.

For a hearing to be held under this modality, the parties must give their express consent and have the technological means to participate. However, if any of the parties do not have internet access, the Judicial Branch will provide the "Virtual Hearing Stations" service through which any of the parties may go to the respective judicial office to participate in the hearing.

Reduction of work days

On 23 March 2020, Law No. 9832 or "Law authorizing the reduction of working hours" was approved. This law authorizes companies whose income has been reduced by the outbreak of the pandemic to reduce the working hours and wages of their workers in the same proportion, as long as they apply for and receive authorization from the Ministry of Labour.

This reduction of the working day was approved on a temporary basis as the law indicates that it shall only be established for a period of up to three months, extendable in two equal periods.

For companies that have applied this measure since April 2020, the term allowed by law expired in December 2020, so the Legislative Assembly introduced bill number 22,265 which added a transitory to the above mentioned law to authorize the extension of shift reductions for a single period equal to three months.

Once this project is approved, the Ministry of Labour will only authorize the new extension when the requirements of the law are met and it is demonstrated that the current conditions continue to affect the company.

The extension would mean that an employer will not be allowed to establish fractioned working hours for an individual who is subject to a reduction in their working day. Where the reduction of the working day is only applicable to a percentage of employees, an employer will not be allowed to pay its employees overtime, but will have to reintegrate the person with the reduced working day as required.

Increase of daily working hours and additional rest days

Bill number 21,182 was considered before the Legislative Assembly and sought to reform articles 136,142,144 and 145 of the Labour Code to authorize exceptional workdays that would allow the extension to a 12-hour workday and an annualized workday. The proposal was for the daily workday to be increased to 12 hours and the employee would then receive one or two additional rest days.

It was also proposed that an annualized working day would be designed so that the ordinary working day could be increased to 10 hours a day during peak periods, and then reduced to six hours a day during low periods. The wage amount may never be less than the minimum, regardless of the workday.

KEY DEVELOPMENTS FOR 2020

Implementation of telework as a measure to avoid the spread of
COVID-19

On 16 March 2020, the President of the Republic declared a state of emergency in the entire territory of the Republic of Costa Rica due to COVID-19. In light of the situation and as a way to avoid the spread of the virus, the Ministry of Health recommended that employers implement teleworking as much as possible.

One month extension to the BMC reduction

In March 2020, the Board of Directors of the Costa Rican Social Security Fund agreed to reduce the Minimum Contribution Base in health insurance and pensions to 25% up to June 2020. On 23 June 2020, the President of the Republic reported that the Board of Directors approved his request to extend the reduction of the Minimum Contribution Base for an additional month, which means that up to 31 July 2020, the Minimum Contribution Base is charged as follows:

• for employers, the temporary reduction of 75% to the Minimum Contribution base will be maintained; and
• for independent employees (individual and collective) and those who are voluntarily insured, the Minimum Contribution Base will be reduced by 25% by reference to the value of the Minimum Contribution Base in February 2020.

Suspension of employment contracts and reduction of working hours

The Executive Branch, along with the Ministry of Labor, has published new regulations which detail the steps employers should take to request the suspension of employment contracts before the Labor Inspection due to force majeure or other fortuitous event (such as the COVID-19 pandemic). Once the term in which the suspension was authorised has expired, the parties must resume the employment relationship as normal. During the suspension period, the employee must not render their services and the employer must not pay them any salary.

On 23 March 2020, the Legislative Assembly approved Law No. 9832, which authorizes the reduction of working hours by 50% if the company's income falls by 20%, or 75% if the company's income falls by 60%. The employees' salaries may be reduced accordingly, subject to approval from the Labour Inspection. The reduction of working hours is authorized for a set period of time, although companies may apply for an extension to this period if necessary.

KEY DEVELOPMENTS FOR 2019

Increase in minimum wage for private sector employees

From 1 January 2019, the minimum wage for private sector employees increased by 3%. The increase will also apply to employees who are paid above the minimum wage scale but have an agreement with their employers to receive the minimum salary increase.

KEY DEVELOPMENTS FOR 2018

Changes to Labour Code

On 25 July, 2017 Costa Rica’s Labour Code underwent its most significant amendment since 1943. Although the amendment’s primary focus is to reform and introduce new labor procedures, there are certain aspect of the day-to-day employment relationship that have experienced considerable variations. These changes include:

• a prohibition of discrimination in the workplace;
• the introduction of liability and personal responsibility for representatives that have the authority to make decisions on behalf of the company;
• equality of wages and benefits;
• Government sponsored counseling for employees whose compensation is not greater than ¢902,000 colones / $1,500; and
• the requirement for an employer to file a dismissal letter before the Ministry of Labor if the employee refuses to accept the letter. Whenever an employee is terminated for cause, the reason stated in the termination letter will be the only valid argument for the dismissal.

Protection for Vulnerable Workers

A fast-track procedure has been established in order to guarantee special protection to: civil service employees, pregnant or breastfeeding women, employees under the age of 18, union members, victims of sexual harassment and any other individual who has been granted special protection by law.

Labour Strikes

For a labor strike to be considered legal, the issues in dispute should be referred for conciliation or alternative dispute resolution.