Grounds for Termination
In Colombia, employment contracts may be terminated by any of the parties at any moment with immediate effects (as a period of notice is only needed for fixed-term contracts when ended by the expiration date) and without it being necessary to mention the reasons that led to the termination, unless a fair cause is alleged for the dismissal. Grounds for termination in Colombian legislation can be divided into three categories: (i) Legal grounds. (ii) Termination with a fair cause. (iii) Termination without a fair cause.
On legal grounds one can find those termination grounds which are unrelated to the behavior of the employee, but rather the operation of the law that mandates the termination of the contract. In this case one can find the death of the employee, the expiration date of the term initially agreed in a fixed-term contract and/or the meeting of the condition or culmination of the task in the employment contracts by a definite task. In this case, as the employment contract ends because of the operation of the law, the employee or his survivors are not entitled to a severance payment.
The termination with a fair cause refers normally to situations related to gross misconduct by the employee, with the exception of the recognition of the invalidity or old age pension. These fair cause grounds are defined explicitly by law and the parties cannot add supplementary grounds as a basis for the contract to be terminated. However, the parties do have the possibility, through the contract or the company manual, to define situations that by their nature can be considered as serious misconduct.
The termination without a cause includes all situations that are not considered as a legal cause or a fair cause. Only in the termination of an employment contract considered as without a cause, is the employee entitled to a severance payment in accordance with the law.
The termination without a cause does not require a period of notice, but finds limitations for its use in situations that might be considered arbitrary or infringes upon a superior hierarchical right normally related to employees under special protection (i.e. Union representatives, pregnant employees, disabled persons). A termination in these situations can be considered void; and therefore, the consequence might not be the recognition of a severance payment, but the reinstatement of the employee.
As mentioned before, employees are also entitled to terminate the employment contract at any moment, for any reason, or alleging a fair cause. In case the employee opts to terminate his employment contract, alleging a breach by the employer (fair cause), the Labour Code mandates the obligation to pay a severance payment as if the contract were terminated without a fair cause.
The 50 Act of 1990 establishes the requirements for a collective dismissal, which in Colombia, applies to a dismissal that affects, in a period of six months, a number of employees equal to: (i) 30% of the total employees in companies with a total share of employees higher than 10 but lower than 50; (ii) 20% of the total employees in companies with a total share of employees higher than 50 but lower than 100; (iii) 15% of the total employees in companies with a total share of employees higher than 100 but lower than 200; (iv) 9% of the total employees in companies with a total share of employees higher than 200 but lower than 500; (v) 7% of the total employees in companies with a total share of employees higher than 500 but lower than 1000 and; (vi) 5% of the total employees in companies with a total share of employees higher than 1000.
The percentages mentioned above are only calculated when considering terminations without a fair cause, not those alleging a legal ground or a fair cause.
For a company to proceed with a collective dismissal, it needs, beforehand, to receive authorisation from the Ministry of Labour.
Individual dismissals, unlike the collective dismissals, do not require a previous authorisation by any authority, as the employer is free to terminate the employment contract at any time. However, for the dismissal of an employee under some types of special protection, an authorisation from the labour inspectorate is needed (pregnant women, disabled employees). In the case of employees under special protection for their unionised condition (“fuero sindical”) a previous authorisation is required by the labour judge. A termination with or without cause should be communicated to the other party in writing and entitle the employee to the payment of his salary and social benefits until his last day of work, and depending on his termination grounds, a severance payment might be paid.
Is Severance Pay Required?
Only for a dismissal without a cause. The amount of the severance payment differs in several factors such as seniority, type of contract and amount of the salary. Severance payment in Colombia does not have a limitation in the amount to be recognised by the employer. The severance payment for employees with a definite period contract is equal to the salary of the time remaining for the expiration date, disregarding the employee’s seniority or salary. In case of an employee with an indefinite period contract, there are currently three systems applicable, depending on his seniority in the company:
For employees hired before 1 January 1981 the system applicable is the 2351 Presidential Decree of 1965: these employees have a special stability regime which excludes the possibility of termination without cause. Nevertheless, in exceptional cases whenever this termination is applicable, the severance payment corresponds to 45 days of salary for the first year of service and 30 days of salary for each subsequent year of service or pro rata.
For employees hired before 28 1992 the system applicable is the 50 Act of 1990: in this regime, severance payments correspond to 45 days of salary for the first year of service and 40 days for each subsequent year of service or pro rata.
For employees hired after 28 December 1992 the system applicable is the 789 Act of 2002: in this regime, the severance payment formula depends on the employee’s salary amount. For employees that earn less than ten (10) times the minimum wage, the severance payment corresponds to 30 days of salary for the first year of service and 20 days for each subsequent year of service or pro rata. For employees that earn ten (10) times the minimum wage or more, severance payments correspond to 20 days of salary for the first year of service and 15 days for each subsequent year of service or pro rata.
The reference to calculate the severance payment must take into account the last fixed salary. In case of variable salary, the reference would be the average of the salaries earned in the last twelve months. Colombian legislation provides a fixed system of calculation for the severance payment. Nonetheless, employees can claim moral damages in addition to the severance payment provided by law.
Is a Separation Agreement required or considered best practice?
Colombian labour law does not require a separation agreement to terminate a contract. Nevertheless, it allows its application. These kinds of agreements are not only widespread in the labour market, but are generally recommended to terminate the contract of high executives and employees under special protection.
Separation agreements are binding for the parties in those rights which are not considered as “true and certain” as these rights are neither renounceable nor negotiable by the employee. For example, an employer can negotiate, in a separation agreement, the damages caused from a late payment of salaries and/or social benefits to his employees, but cannot sign a separation agreement to renounce his obligations with regards to the mandatory contributions he must pay, for an employee, to the social security system.
What are the standard provisions of a Separation Agreement?
The standard provisions are: (a) A clause where the employee grants general release to the employer, his subsidiaries and/or headquarters from any claim that might arise from the employment contract with the company and specifically the situation in discussion; (b) In order for the agreement to have a res judicata effect, mutual concessions must be made between the parties, which normally means a clause acknowledging an amount of money to be recognised to the employee, its form of payment and instalments (if applicable).
Does the age of the employee make a difference?
Are there additional provisions to consider?
If the intention, through the Separation Agreement, is for such document to have a res judicata effect, the agreement must be made by a “transacción” contract or a “conciliación” contract; both require mutual concessions by the parties.
In the case of the “transacción” contract, the subscription is made only by the parties. On the other hand, the “conciliación” contract requires, for its validity, to be approved and signed, in addition, by the labour judge or the labour inspectorate.
Remedies for Employee Seeking to Challenge Wrongful Termination
Wrongful termination claims are analysed by the judge as the competent authority. Wrongful termination based on a legal ground (i.e. alleging the absence of a cause for the termination) leads to the recognition of the severance payment the employee would be entitled to if his contract would be terminated without a cause.
Wrongful termination based on the breach of a fundamental right (i.e. discrimination grounds and/or harassment) might lead to the reinstatement of the employee in the position he was in before being dismissed, or an equivalent one, plus the payment of the salaries and benefits for the period he remained dismissed, because of the employer’s wrongful termination.
Colombian labour law does not include any special provisions or protections for whistleblowers. However, employees who served as witnesses in a claim of harassment cannot be dismissed without a fair cause in the following six months after the formal complaint, as long as the claimant is effectively considered a victim of harassment.