Chile: Supreme Court sets criteria in a ruling regarding dismissal cause of “company needs”

On January 17th, 2023, the Supreme Court issued a ruling that the business termination cause (“company needs”) is applicable should certain technical or economic aspects concur. The Court continues declaring that due to its objective nature, the dismissal ground cannot be based on the simple will of the employer. It requires to be based on serious situations that show that it was necessary to adopt modernization or rationalization processes in the operation of the company, in adverse economic circumstances, such as low productivity or changes in market conditions.

The criteria of the Supreme Court refers that the simple decision of the employer is not enough to justify the dismissal of an employee on the grounds of “business needs”. In additional, the cause needs to be serious and external reason.

Under Chilean law this decision is not binding precedent. However, through it the Supreme Court sends a decisive message on its view on the matter.

Bullet-point one sentence summary
“The criteria of the Supreme Court refers that the simple decision of the employer is not enough to justify the dismissal of an employee on the grounds of “business needs”. In additional, the cause needs to be serious and external reason”.

Key Action Point
Under this decision the Supreme Court rationale is that the simple decision of the employer is not enough to justify the dismissal of an employee on the grounds of “business needs”. In additional, the cause needs to be serious and external reason.