This country-specific Q&A provides an overview to employment laws and regulations that may occur in Peru.
This Q&A is part of the global guide to Employment & Labour Law. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/employment-and-labour-law-3rd-edition/
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful in your jurisdiction?
Peruvian legislation states that individual employment relationships could terminate only upon the following causes:
- the worker’s death;
- expiration of the employment agreement’s term;
- mutual agreement;
- the worker’s permanent and absolute disability;
- retirement; and
- dismissal based on a serious misconduct. Regarding collective labour relationships, they could terminate only upon the existence of an objective cause (for example, the dissolution and liquidation of the company or due to economic, technological, structural or similar reasons).
Furthermore, the dismissal of a worker is legally accepted when there is a specific circumstance that justifies it. This is called: “justified cause” and its related, either to the worker’s capacity or misbehaviour.
Regarding the worker’s capacities Peruvian law establishes the following scenarios:
- Physical or mental deficiencies that impede the worker from performing his or her tasks. For this to be a valid cause for terminating the employment agreement, the employer must be able to demonstrate that, even after making reasonable adjustments, the worker is not able to perform his or her duties and that there is not another position vacant to which the worker can be transferred without involving a risk to his or her own health or to third parties.
- Poor performance in relation to the worker's capacity and average performance in work and under similar conditions.
Please bear in mind that this cause is not used by employers to terminate employment, considering the hard and complex work that the Peruvian Labour Authority demands in order to verify the validity of this termination.
- The unjustified refusal of the worker to undergo a medical examination previously agreed or established by law.
Regarding the worker’s misbehaviour, Peruvian law establishes the following scenarios:
- Criminal conviction of the worker for wilful crime by a final judicial decision.
- The worker’s disqualification by a judicial or administrative authority for the execution of the activity performed in the workplace, provided that such disqualification lasts for a period of three (3) months or more.
- Committing of a serious misconduct, which encloses the following situations:
Failure to comply with employment obligations, repeated opposition to work orders or failure to follow work-related or occupational safety or health regulations.
Other misconducts that are not specifically typified by Law may be included under this category. Nevertheless, it has to be relevant and severe enough to reasonably justify the termination of employment.
Deliberate and continuous decrease in work performance.
This cause has to be verified ex-ante by the Labour Authority. Therefore, due to the complexity in collecting evidence and verifying low performance, employers do not use this cause in practice.
Appropriation or attempted appropriation of goods or services of the employer, or for which the worker is responsible, or the unjustified retention or use of such goods or services.
The value of the goods is not relevant for this cause to be valid.
The use or handover to a third party of confidential information of the employer; the unauthorized subtraction or use of private documents and/or providing false information to the employer with the intention of causing harm or obtaining an advantage; as well as unfair competition.
The aim of advantage may be for the worker’s own benefit of or for a third party. Such advantage may be monetary or non-monetary.
Repeated attendance at work under the influence of alcohol or drugs.
The reiteration of such conduct will not be necessary in the cases in which, due to the nature of the worker’s duties, said situation may involve a serious risk to his or her co-workers and/or third parties.
Violent acts, serious breaches of discipline guidelines, and/or insults and disrespect to the employer’s representatives and co-workers, whether such acts take place inside or outside the workplace.
These acts may take place outside the workplace, but must materialize when the worker is rendering his/her services or fulfilling labour assignments.
Deliberate damage to the employer's property.
Please note that the employer cannot allege this cause if the damage is caused due to worker’s mere negligence (e.g. unintended, careless mistakes or minor negligence). In such cases, the employer could apply other sanctions different from dismissal.
Not showing up at the workplace for more than three (3) consecutive days, five (5) days within a period of thirty (30) calendar days, or more than fifteen (15) days within a period of 180 days.
The absences must be unjustified. In that regard, workers have a three (3) days period to justify any absence.
Repeated delays of the worker.
This cause is only applicable for workers that are subject to an effective control of their working time.
For this cause to be valid, the delays should have been brought to the worker's attention; and disciplinary actions, such as a written warnings, should have previously been applied to the worker.
The employer must previously comply with a specific procedure of investigation provided by Law.
In addition, workers can be dismissed within the trial period, when their performance is not in accordance with the needs of the company, as described in Question N° 7.
Finally, official precedence has established the possibility of dismissing personnel in management and/or trust positions by communicating them the withdrawal of trust. This is a subjective nature termination cause of the employment and therefore, the employer’s decision does not need to be justified. In this regard, management positions are those that:
- represent the employer before other employees or third parties;
- share administrative and control functions; or,
- those in whose activity and responsibility depend the results of the business; whilst trust positions are those who are in direct contact with the management personnel, having access to industrial, commercial or professional secrets and confidential information in general.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
Under Peruvian legislation, collective dismissals are only considered valid under the following scenarios:
a) Due to economic, technological, structural or similar reasons, which generally involves a situation in which the company has been having negative results in its operating profits or in which the continuity of the labor relationship with the workers entails a profit loss.
For this to be a valid cause of termination, it must include at least 10% of the total number of workers in the company and be subject to a procedure before the Labour Authority for its prior approval, which involves:
- Negotiations with the union or worker’s representatives regarding the termination of the employment agreements and the measures that could be taken instead, in order to avoid such dismissal (for example, the suspension of activities or variation on working shifts);
- The filing -among other documentation- of a technical research executed by an auditing company that evidences the cause alleged by the employer for termination of employment; and,
- Conciliation meetings with the worker’s representatives before the Labour Authority.
As you may see from the above, applying the referred cause could be a rigorous procedure, reason why the Labour Authority has only approved three (3) collective dismissals under this modality in the last 14 years.
b) Due to a fortuitous event or force majeure that involves the total or partial disappearance of the workplace. Once again, the Labour Authority will carry out an inspection as described in section 2 (a) (ii) above, in order to approve the dismissals.
c) Due to the dissolution and liquidation of the company, in which the employer must communicate the workers, within a prior notice period of ten (10) calendar days, the date scheduled for the termination of employment.
d) Due to capital restructuring operations. This applies when the company is in a faces a bankruptcy situation.
Considering the difficulties engaged in collective terminations, employers find it more feasible to execute voluntary disengagement plans based on economic incentives, in order to achieve a valid termination of employment agreements with a group of workers. This requires, however, the written consent of worker and –in order to be an attractive alternative for the worker and a legitimate instrument for the employer- the granting of a package of benefits that are beyond the legal standards.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
The termination of employment based on the sale or transfer of business operations, is not legally permitted under Peruvian legislation. Therefore, if the employer seeks to terminate the labour relationship with the workers involved in such sale, the only alternative available to validly conclude the employment agreements and mitigate the risks of reinstatement and/or indemnifications is to execute a voluntary disengagement with each employee, as previously mentioned.
In that regard, it is important to note that the business sale –from a legal perspective- would not affect or modify the labor relationship of said workers, as in such scenario they would become workers of the acquiring company, taking place a figure known as “succession of employers”.
What, if any, is the minimum notice period to terminate employment?
In the case of a dismissal procedure based on the commission of a serious or severe misconduct, employers are obliged to grant the worker a minimum of six (6) calendar days in order to let him or her advocate their selves -by written statement- from the accusation. Once expired, the employer may decide to dismiss the worker or to maintain the employment relationship with him or her.
However, the aforementioned term does not apply in the cases where the misconduct is flagrant or in a withdrawal of trust scenario, as described in Question N° 1.
On the other hand, in the event the worker aimed to quit his or her job, our legislation states a prior notice period of thirty (30) days in order to inform the employer such decision. The employer can exonerate the worker from said term by own initiative or at the worker’s request. In the latter case, the request will be deemed approved if it is not rejected by the employer within the third (3) day in which it was issued.
Furthermore, there is no legal notice period foreseen for the cases of voluntary disengagement with economic incentives plans and dismissals during trial period.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
Yes. It is possible but only in a direct negotiation with the employee when terminating its employment agreement or within a collective voluntary disengagement plan. Regarding the latter, the employer may offer economic incentives to their workers in order to terminate the employment relationship, not requiring for said negotiation a prior notice period.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?
Yes, in the case of a dismissal procedure based on the commission of a severe misconduct, the employer is entitled to exonerate the worker from attending work and performing his or her duties until the conclusion of the procedure, period during which the worker will be on a paid leave. However, the employer must ensure the worker the access to all information required for his or her defence in connection with the dismissal procedure.
Nevertheless, if before beginning said dismissal procedure (for example, during the investigation process) the employer requests the worker to stay at home, the employer could grant said worker a paid leave.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.
Yes, under a regular dismissal procedure, employers must comply with the following steps:
Once the employer acknowledges the commission of the severe misconduct, the employer shall verify all the facts involved and evaluate whether such conduct reasonably justifies the termination of employment.
If the commission of the misconduct is determined by the employer, the employer must deliver the worker a letter informing him or her of the imputation of the misconduct, the facts that caused the commission of said misconduct and its severity. This requirement will not be considered fulfilled if the letter contains the imputation under generic terms.
Moreover, the employer must grant the worker a minimum of six (6) calendar day period in order for him or her to present a written defence of the accusations. Said term will not apply in the cases where the misconduct is flagrant.
Once said period expires, the employer –with or without the worker’s written defence- shall decide whether it is reasonable to terminate the labour relationship executing the dismissal. The dismissal must be noticed to the worker through a letter informing the worker –in a detailed manner- the cause of the dismissal (which must not include other than the one(s) contained in the first letter) and the effective date of termination of employment.
It is important to note that during the legal procedure for dismissal, all employers must consider that:
- the accusation is noticed to the worker within a reasonable time from the date in which the employer acknowledged the misconduct;
- the misconduct is foreseen in the legal causes described in Question N° 1; and,
- the dismissal is a proportional measure considering the severity of the misconduct, the worker’s category, seniority and background.
On the other hand, to withdraw trust from a worker in a management or trust position, it is only necessary for the employer to inform such decision to the worker by written notice.
Now, it is important to mention that Peruvian legislation has established a trial period of three (3) months, term in which the employer can evaluate if the worker’s performance is in accordance with the needs of the company and during which the employer can terminate the employment relationship without cause or prior notice.
Therefore, if the employee is dismissed during this period, he or she will not be entitled to claim an indemnification for unfair dismissal nor a reinstatement in the workplace.
Said trial period could be extended for a maximum of twelve (12) months, in the case of management positions, and for a maximum period of six (6) months in the case of trust positions or when the work to be performed requires a longer period of training or adaptation.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
Workers dismissed without a legal cause become entitled to judicially claim any of the following requests:
- Payment of an indemnification for unfair dismissal, which would equivalent to:
- 1.5 monthly salaries per year of salaries per year of services, up to a maximum of twelve (12) salaries, for employees who have an indefinite term employment agreement.
- 1.5 monthly salaries per months that will not be worked, up to a maximum of twelve (12) salaries, in the case of an anticipated termination of a fixed-term employment agreement.
- His or her reinstatement in the workplace. In this case, the worker could as well claim an indemnification for loss of profit during the period such person was dismissed.
- Moral damage caused by the unfair dismissal.
On the other hand, workers dismissed with a legal cause but through an incomplete or irregular dismissal procedure, according to law, would only be entitled to claim through a judicial process the indemnification for unfair dismissal.
Furthermore, if it is determined that the dismissal is void (forbidden cause) or fraudulent (when the worker is dismissed by the employer’s bad faith, for non-existent events or under false evidence), the worker would be entitle to request his or her reinstatement in the workplace, along with the payment of labor benefits accrued and indemnification for moral damages.
Please bear in mind that the above mentioned is not applicable to employees in a trust and/or management position, since, according to the latest criteria applied by the Supreme Court (highest instance), they are not entitled to receive any indemnification payment for unfair dismissal, nor reinstatement, in the cases in which they have held such position since the beginning of their services.
How, if at all, are collective agreements relevant to the termination of employment?
Collective agreements would only be relevant in case they include special protection clauses on behalf of the workers in case of termination of the employment; for example, specific benefits such as a compensations greater that the indemnification for unfair dismissal provided by law.
Does the employer have to obtain the permission of or inform a third party (e.g local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
Under Peruvian legislation, the only cases in which the employer must previously obtain the Labor Authority’s approval is for collective termination of employment, as described in Question N° 2. If the employer does not comply with such obligation, the request for collective termination will be denied by the Labour Authority; therefore, the procedure for termination of employment will be considered invalid.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
In the cases in which there is evidence that the termination of employment is based on discrimination or harassment motives, said termination will be considered void and, therefore, the worker would be entitled to return to his or her workplace, jointly with the payment of all salaries and social benefits (mandatory and conventional) accrued during the time this person was considered dismissed.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
The employee could file a lawsuit against the employer claiming the annulment of his or her dismissal and requesting the rights mentioned in the preceding answer (reinstatement at work and accrued social benefits).
Please note that the discrimination criteria is also applicable to HVI patients and/or people with disabilities.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
Yes. Our legislation gives special protection for termination of employment to workers that qualify under the following categories:
- Workers who have recently joined a union or that have participated in union activities, within the thirty (30) days prior to the completion of the electoral process and up to thirty (30) days after its conclusion.
- Workers who are candidate as workers' representative or act or have acted as such, for a period of up to ninety (90) days after leaving said position.
- Workers who have filed a complaint or participated in proceedings against the employer before the competent authorities.
- Pregnant and nursing women workers, if the dismissal occurs during the pregnancy or during the period established for breastfeeding, which concludes when the newborn turns one year old.
If there was not a legal cause for the termination of employment in any of the aforementioned cases, the dismissal could be declared void by a judicial authority and, therefore, the workers would be entitled to the rights and benefits described in Question N° 11 (reinstatement at work and accrued social benefits).
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Whistleblowers –as such- are not considered as a special protection category. However, as mentioned in the preceding answer, workers who have filed a complaint or participated in proceedings against the employer before the competent authorities do have special protection against termination of employment, as described in Question N° 11.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
As previously mentioned, in order to terminate the employment relationship with a worker without a justified cause, the only alternative available for the employer would be to enter with the worker into a mutual termination agreement. In this case, the employment relationship is validly terminated without the risk of a later worker’s reinstatement or payment of indemnifications.
However, this usually implies granting of certain economic incentives (for example health insurance, an amount for the worker’s pension fund or outplacement facilities), under which the employer can negotiate directly with the worker the structure and amount of compensations, which should be at least equivalent to the indemnification for unfair dismissal.
In case there is not an agreement for a mutual termination, the worker could claim through a judicial process any of the following requirements:
- An indemnification for unfair dismissal, as detailed in Question N° 8.
- An indemnification for loss of profit, which would be calculated taking in consideration the worker’s last salary and the amount would be equal to the total of all salaries and economic benefits unpaid during the dismissal period accrued. This would apply in the cases in which the worker has claimed his or her reinstatement in the workplace.
- An indemnification for the moral damage caused by an unfair dismissal, which amount would be discretionally determined by a judge within a labour process. Certainly, this concept is already considered as an associated cost to unfair dismissals.
As previously indicated, workers with a trust and/or management position since the beginning of their services, would not be entitled to the payment of an indemnification for unfair dismissal in the cases of termination of employment for withdrawal of trust. However, as this is based on a criteria applied by the Supreme Court that could vary in time, we always recommend paying such worker the equivalent to the indemnification for unfair dismissal.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
It is possible, but it would be subject to the following limitations:
- The waiver of rights would be narrowed down to the possibility of claiming a compensation for occupational accidents or diseases, provided that the amount agreed and paid were reasonable.
- The agreement could not include social benefits whose amount is set out by law. Therefore, in case the agreed amount of said benefits were minor than the legal amount, the agreement would be invalid.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
Yes, it is possible through an agreement with the worker. However, although this is not regulated by law, our labour practice coincides that a correct used of said restriction would be subject to the following:
- It must be reasonable considering the person and his or her job position.
- It shall last for a reasonable period of time, for example two (2) or three (3) years maximum.v
- It has an economic compensation in return. In this regard, we must note that our legislation has not established a legal minimum.
- The scope of the restriction must be clearly established at the beginning or at the end of the employment relationship.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Yes. Nevertheless, despite the fact that -as in the case of the previous answer- said agreement has not been regulated nor proscribed by law, in order to be considered as a valid obligation for the worker, it must be subject to the following:
- The confidentiality obligation must be in written document signed by the worker in sign of consent. It is common to include said obligation as a special clause in the employment agreement.
- Commercial or economic interest is accredited regarding the privacy and confidentiality of the information involved.
Are employers obliged to provide references to new employers if these are requested?
Although employers are not obliged to provide reference, it is a common practice within the Peruvian labour market.
Now, when finalizing the employment agreement, employers must deliver to the employee a work certificate, document in which the employer could include (it is not mandatory) a note about the worker’s performance during his or her time of services in the company.
What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?
Our practice has revealed that dismissal procedures executed by employers often fail to comply with the requirements foreseen for their validity, which leads the worker to challenge his or her dismissal through a judicial process, resulting -in most cases- that the courts declare invalid the dismissals and order the worker’s reinstatement at work or the payment of indemnifications.
Therefore, it is of the utmost importance that, prior to the initiation of a dismissal procedure, the employer carries out an exhaustive and timely investigation of the facts and events related to the worker’s misconduct, in order to adequately qualify such misbehavior as severe and reasonably enough for a valid dismissal.
On the other hand, one problematic that companies commonly face is that the termination of employment based on the closure of business due to low productivity and/or profitability indicators, as well as for the sale or transfer of business operations, is not legally permitted under Peruvian legislation. Therefore, the only alternative available for employees in order to carry out a valid termination of the employment agreements with a group of workers and mitigate the risks of reinstatement and/or indemnifications is to execute a voluntary disengagement plan based on economic incentives to achieve a mutual termination of employment or voluntary resignation.
Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?
Peruvian government is currently evaluating the possibility of increasing the indemnification for unfair dismissal from twelve (12) to a maximum of twenty four (24) salaries, with the purpose of conditioning such payment to the impossibility of the worker to claim his or her reinstatement at work.
Such increase would –therefore- limit the cases in which the worker is entitled to request his or her reinstatement at work, being able to request it only in the case of a void dismissal (as described in Question N° 13). This would definitely impact how employers manage dismissal procedures, making it a more attractive alternative considering that the reinstatement of a worker entails higher labour costs.