Colombia: Labour reform Bill and its potential impact on the business model
On 16th March this year, the national government filed a bill proposal regarding the labour reform, which seeks to guarantee and improve the rights of Colombian workers.
Colombia will have a new labour system through a labour reform of 76 articles, which substantially modifies the Substantive Labour Code and aims to change matters such as: reinforce job stability (limits on termination of employment contracts), limits on outsourcing and extension of benefits to contractors, industry-level collective bargaining among many other changes.
Among the changes brought by the labour reform, the following stand out:
1. REINFORCE JOB STABILITY AND RECRUITMENT PROCESS:
Indefinite term contract shall be the one to be used with exceptional cases fixed term contracts, modification of the duration of fixed-term contracts, which may be up to two years; the possible beneficiaries of reinforced employment stability are determined, a measure that establishes that certain population groups, such as pre-pensioners, pregnant women, or people with disabilities, may only be dismissed with just cause or with a legal cause, in addition to an administrative or judicial authorization. There was also mention about workers “covered by the trade union privilege”, and also those “covered by the health privilege”. Furthermore, changes in relation to compensation for unfair dismissals were included as well. Thus, in indefinite term contracts, a compensation of 45 days’ salary will be paid when the worker has worked for no more than one year, and in cases where the worker has worked for more than one year of continuous services, “an additional 45 days’ salary will be paid on top of the 45 basic days of the previous year compensation, and 45 additonal day for each of the years of service subsequent to the first, and proportionally for each fraction”. The reform establishes compensation for non-payment at the end of the contracts in terms of compensation.
2. INCREASE IN ECONOMIC BENEFITS:
Reduction of working time: Starting from July 15th of 2023 will start the progressive implementation of the maximum working time to 42 hours per week and 8 hours per day, as follows: Year 2023: 47 working hours per week; year 2024: 46 working hours per week, year 2025: 44 working hours per week and Year 2026: 42 working hours per week. In addition, the daytime working day is determined from 6:00 am to 6:00 pm, and night work from 6:00 pm to 6:00 m of the following day and regarding Sunday and holidays surcharges, there will be an increase in the percentage of Sunday surcharge on ordinary salary of 25%, meaning it will change from 75% to 100%, during daytime, night time will change from 110% to 135%; daytime supplementary Sunday surcharge from 100% to 125% and night time supplementary will change from 150% to 175%.\
3. REGULATION OF DELIVERY TECHNOLOGY PLATFORMS
Another key element of the bill is the regulation of work in technological delivery platforms, which not only defines which activities are classified as such, but also determines, in terms of labour relations, that the platforms must bind these workers with an employment contract, and that they must also affiliate their workers to social security.
4. COLLECTIVE BARGAINING PROCESS MODIFICATION
New protectionist rules on the right of association that would seek to eliminate the possibility of collective agreements with non-unionised workers and additional new regulation for sectoral or industry level bargaining, besides by enterprise. Regulation for indefinite and partial strikes in the enterprises. Those are overall the main changes to be expected with the labour reform that is currently being debated in Congress.
Key Action Points for Human-Resources and In-House Counsel.
In terms or potential impact to companies and the enterprises in Colombia, the business model is expected to suffer serious effects in structural, individual, and collective matters.
Regarding structural effects, it is important to highlight the stricter test loads for employers on terminations, increased cost for the replacement of staff for the sole needs of the employer, temporary term of contract without utility or consequences for non-compliance. Moreover, related to reinforce job stability, we are expecting the creation of a new health jurisdiction, new rules for pre-pension, in consequence of an exponential increase in claims for reinstatement in the labour and constitutional courts, stricter burdens of proof for the employer and the need to provide more resources for payroll regarding the increase in costs of social benefits and social security contributions.
Now, regarding individual labour matters and its effects, there will likely be an increase in labour lawsuits requesting the judicial determination of an indefinite term employment contract, increased barriers to contractors that require seamless operation and also increasing the value of costs for low value-added sectors, new leaves to be included as well as the paternity leave to be increased up to 12 weeks.
And lastly, regarding collective matters, we are expecting an artificial growth of unionisation rates, exponential increase in the strike action and duration of strikes, reduction of effective working hours, as well as possibility of upcoming legal claims to obtain benefits through tutela actions.
Employers are encouraged to remain at disposal on new employment and labour law regulations, according to the new Government objectives, if implemented, may need to be undertaken in the workplace.
