Newsletter

Labor Law

  1. General Principle.

Venezuelan employment legislation is a matter of public policy. Consequently, the Venezuelan Organic Labor and Workers Act (the “Labor Act”) provisions are deemed applicable to all individuals employed in Venezuela, regardless of their nationality, and may not be legally waived by them during the labor relationship.

The Labor Act came into effect in May 7, 2012, superseding the 1997 Organic Labor Act and reversing modifications made by such Act. The amendment of the law was long overdue, since the Fourth Transitory Provision of the 1999 Venezuelan Constitution mandated that within one year of the National Assembly’s creation, changes should be made regarding seniority payments and the decrease of the workday.

  1. Employment Contracts.

An employment contract comes into existence when the employee accepts the employer’s offer of employment. The contract does not need to be in writing in order to be valid. However, in the existence of an oral contract, the statements made by the employee are considered truthful unless otherwise proven. Employment contracts for fixed terms are exceptional and, according to the Labor Act, may only be validly entered into in specific instances, namely: (i) when so required by the nature of the service; (ii) when the purpose of the agreement is the lawful and temporary replacement of an employee; (iii) in the case of Venezuelan employees who are to render services abroad; and (iv) when the work for which the employee was hired, has not been finished, therefore his/her services are still required. If a fixed-term employment contract is used in any other situation, there is a risk of it being deemed an indefinite-term employment contract.

Fixed-term employment contracts end upon expiration of the term fixed at the time of their subscription. This term may not exceed one (1) year for workers and non-managerial office staff, as well as for employees at an executive, management or professional level. Such contracts may be extended once; if they are extended for a second time, they are deemed indefinite-term employment contracts for the entire duration of the labor relationship. Finally, if a fixed-term employment contract is justly terminated by the employee before the expiration of the fixed term, then the employer shall pay the employee all salaries due for the remainder of the original fixed term.

  1. Employment of foreign individuals.

When employing foreign individuals, employers should be aware that, by virtue of Article 3 of the Labor Act, Venezuelan courts may apply the Venezuelan labor legislation to any alien working in Venezuela. Also, according the decision number 122 issued in March 16, 2015 of the Venezuelan Supreme Court, the Venezuelan labor legislation will be applied only to the time of service rendered in Venezuela. This means that all the benefits provided under the Labor Act and its regulations will apply for that period, unless the foreign benefits are globally better than those established by Venezuelan law.

In Venezuela, companies employing ten (10) persons or more must have at least 90% Venezuelan employees. Additionally, compensation payable to foreign employees will be limited to no more than 20% of the total compensation payable to all employees.

  1. Labor Benefits.

Salary.

Although salaries may be freely agreed upon by the parties, they may never be set below the minimum monthly salary provisions established by the government on an annual basis. The current minimum wage, announced on April 27, 2020, is BsS. 400,000.00, per month for all employees.

Under the Labor Act, “salary” is defined in a very broad manner. In general, any payment made by the employer to the employee, connected in any way to the services rendered by the employee to the employer and paid on a regular basis (weekly, monthly, yearly, etc.), would be considered salary. In addition, benefits provided in kind by the employer to the employee and representing an economic value would also be considered to be a part of the employee’s salary. Salary, therefore, includes, but is not limited to, commissions, premiums, expense allowances, statutory and contractual profit sharing, bonuses, vacation bonuses, holidays and other overtime or nighttime shift payments, and any other kind of income received by the employee in consideration for his services.

The following items, however, are excluded from the salary concept by the Labor Act: (i) restaurant services, provision of meals and child care centers, (ii) reimbursement of medical, pharmaceutical and dental expenses; (iii) provision of working clothes; (iv) provision of school utensils and toys; (v) provision of scholarships and payment of training and specialization courses; and (vi) payment of funeral expenses.

Vacations and vacation bonuses.

All employees are allowed fifteen (15) working days of paid vacations upon completion of one (1) uninterrupted year of service, plus one (1) additional working day for each subsequent uninterrupted year for up to fifteen (15) additional working days. Annual vacations shall be taken within the three (3) months following the period in which the vacation was earned, and during the term mutually agreed upon by the employer and the employee. If the parties do not reach an agreement, the Labor Inspector must set the time for the vacation.

In addition, before taking their vacation, all employees are entitled to receive payment of fifteen (15) days of salary as a vacation bonus upon completion of the first continuous year of service, plus one (1) additional day for each subsequent year of continuous service, up to a maximum of thirty (30) days of salary.

Religious and National Holidays.

The Labor Act declares the following dates to be holidays: Sundays, January 1st, Mardi Gras, Maundy Thursday and Good Friday, May 1st and December 24th, 25th and 31st; the dates listed in the Law of National Holidays, including April 19th, June 24th, July 5th, July 24th and October 12th; and those other days declared holidays by either the National Executive or the State or Municipal authorities, up to a maximum of three (3) days per year. Weekly rest days and holidays are compensated by the payment of one day’s salary. If an employee works on his mandatory weekly rest day or holiday he is entitled to be paid for that day with a 50% surcharge.

Profit Sharing.

All employees are entitled to receive an annual payment representing their share in the employers’ net profits amounting to not less than thirty (30) days of salary and not more than four (4) months’ salary. The employer must distribute at least fifteen percent (15%) of its net profits for each fiscal year, computed on the basis of the employer’s income tax return. This benefit must be paid within two (2) months following the end of the company’s fiscal year. Employers are obligated to make an advance payment of the profit sharing benefits equivalent to at least thirty (30) days salary during the first fifteen (15) days of December of each year.

Overtime.

The daily workday is limited to ten (10) hours, including overtime. No one may work more than ten (10) hours of overtime weekly, or more than one hundred (100) hours in a year. Overtime work is compensated with a 50% surcharge. The Labor Inspector must authorize the performance of services during overtime. However, in practice this authorization is not requested by employers.

  1. Seniority Payments and Interest.

The Labor Act provides for a seniority benefit, which begins after one month of service. This benefit is equivalent to fifteen (15) days salary per quarter of service and two (2) additional days salary are added for each uninterrupted year of service after the first year is completed. The seniority payment is a vested right which must be credited on a quarterly basis for the employee’s benefit, as follows: (i) in a trust; (ii) in the National Seniority Payment Fund; or (iii) in the employer company’s books. The seniority payment cannot be handed directly to the employee until the labor relationship is terminated, and the sums deposited or credited in accordance with the above accrue interest.

Employees may request advances of up to 75% of the amount credited or deposited to meet obligations arising from: (i) the construction, purchase, improvement or repair of the family residence; (ii) the payment of mortgages or any other loans on the family residence; (iii) educational expenses; and (iv) medical and hospitalization expenses.

At the time the labor relationship ends, employers shall calculate the equivalent of thirty (30) days salary per year, upon the basis of the latest paid salary. Then, employers shall compare this amount to the amount that has already been deposited on a quarterly basis in a trust, in the company’s books or in the National Seniority Payment Fund. The employee will ultimate receive the highest amount.

  1. Dismissal.

Article 94 of the Labor Act establishes that employees covered by an inamovility decree can only be dismissed for a just cause. The justification of the dismissal by the Labor Inspector is a condition to implement it. Inamovility decrees have been issued annually since July 25, 2002. Up to 2011, the inamovility decrees only covered minimum wage workers. However, since Decree 8.732 of December 26, 2011, the inamovility was established in favor of all workers, regardless of their salaries, except for direction workers (i.e. managers). On December 28, 2015, the President issued Decree 2.158 extending the inamovility to all workers for the next three years. On December 28, 2018, pursuant to Decree 3,708, the inamovility to all workers was extended for two additional years. On March 23, 2020, pursuant to Decree 4,167, and due to Covid-19 pandemic, the inamobility was extended to all workers covered by labor stability, according to Article 87 of the Labor Act, up to December 31, 2020.

Due to the inamovility currently in effect, no unjustified dismissal can occur. Notwithstanding the above, employees which are not covered by the inamovility decree are covered by the labor stability which entitles them to receive notice of the employer’s intention to dismiss them unless they are guilty of serious misconduct, in which case the employer can dismiss them without notice, subject to a qualification of the dismissal by the labor court. If the labor court determines that the dismissal was unjustified, then the employer must reinstate the employee or in order to dismiss him, the employer must pay the indemnification provided in the Labor Act.

The amount of the indemnity for a termination benefit will depend on the employee’s seniority.

  1. Intellectual Property Rights.

An invention made by an employee will belong to his employer if it was made in the course of his duties to his employer. However, if an employer secures an outstanding benefit from an invention by an employee in his employment, the employee may claim compensation from the employer.

It is possible to impose restrictions on an employee’s conduct after the termination of employment to protect the employer against unfair competition. Such restrictions normally cover approaches to or dealing with the employer’s customers or other business contacts and competition with the employer.

  1. Change of Employer.

A change of employers takes place whenever the assets, title thereto or the operation of a company are transferred to another individual or company, for whatever reason, and the company’s activities continue to be carried out with the same personnel. The change of employers must be notified in writing to the employees and the Labor Inspector of the jurisdiction where they work. The notification can be made before or after the transfer of assets, but the change of employers shall not be effective against employees until they receive written notice thereof.

If the business is sold, the purchaser is deemed to be bound by all preexisting employment agreements by operation of law, and the seller remains jointly and severally liable under said agreements for a period of five (5) years from the date of the sale.

Even if the employees are notified of their transfer to the purchaser’s business, they retain the right to claim constructive termination and to receive severance benefits as though they had been unjustly dismissed, provided that the new employment relationship is “inconvenient” to their interest and certain other conditions are met.

  1. Paid Maternity and Paternity Leave.

Female employees are entitled to maternity leave of six (6) weeks prior to giving birth and twenty (20) weeks thereafter. In the event that the pre-natal leave is not fully utilized, the remaining portion is added to the post-natal leave. If the birth occurs after the expected date, the pre-natal leave period is extended to the date of birth, but the post-natal leave is not reduced. Male employees are entitled to paternity leave of fourteen (14) days computed from the birth of the child. In cases of multiple births, the license will be extended to twenty-one (21) days.

  1. Racial Discrimination.

According to the Organic Act against Racial Discrimination enacted on December 19, 2011, all employers shall promote training programs for their employees on the awareness of racial discrimination.

  1. Health and safety

The employer must provide a safe and hygienic environment for the employees to work in. Failure to comply with this requirement may result in sanctions such as fines and closure of the workplace.

Health and safety issues are regulated by the Prevention, Conditions and Work Environment Organic Act. This Act purports to promote health among employees and prevent work related diseases and accidents. It establishes the duty of employers to create health and safety committees in order to monitor the compliance of health and safety policies.

  1. Meals at work.

 

Pursuant to Decree 3,233 of December 31, 2017, employers have the obligation to grant one (1) balanced meal to each employee during working hours. This obligation may be satisfied by creating dining areas for the employees or by giving them coupons, tickets or electronic cards for the payment of meals. Exceptionally the benefit may be paid in cash. A new announcement was made on April 27, 2020, establishing that the minimum amount of this bonus is Bs. 400,000.00 per month.

May 7, 2020