International Challenges to Dismissing Employees During the COVID-19 Pandemic
Outside of the United States, terminating employees can be difficult even in “normal” times. The concept of “at-will” employment is uniquely American, and generally, employers in non-US jurisdictions only may terminate employment for “cause” or for other statutorily permitted reasons. Moreover, terminated employees in many countries are entitled to statutory notice, severance and other benefits, which is far more the exception than the rule for US employees.
Because of the COVID-19 pandemic, many countries have increased employee job protections even further, making terminations – even for serious underperformers – ever more difficult, if not impossible. Argentina and Luxembourg illustrate the challenges that international employers may face in dismissing non-US employees during the current crisis.
Since March 31, 2020, employers in Argentina have been prohibited from dismissing employees without cause. Although the restriction is set to be lifted on September 26, 2020, the expectation is that the ban will be extended. To deal with this constraint, employers may choose to follow the country’s two-step approval process for termination upon mutual agreement of the parties. Under the procedure, employers approach an employee with a termination proposal, which the employee may accept, thereby consenting to the termination of employment. Then, if accepted, execution of a preliminary termination agreement must be witnessed at the Labor Ministry, employment courts or in the presence of a notary who will issue a notary deed that confirms the termination. Most mutual agreements are being executed by way of notary deeds because the pandemic has closed the courts and hearings before the Labor Ministry are being scheduled months in advance. After the parties agree upon the economic terms, a formal termination document must be executed before a notary. This last step usually can be done immediately, as the parties need only coordinate a day and time to execute the agreement before the notary.
In considering termination upon mutual consent, Argentina employers need to take the country’s mandated severance into account, which applies to employees who have completed a three-month “trial period.” Emergency Decree 34/2019, enacted on December 13, 2019, doubled the amount of required severance that must be paid to terminating employees. The decree, which has been extended once, currently is set to expire on December 7, 2020. Thus, to accomplish a termination upon mutual consent, it is likely that employees will insist upon severance in excess of the double amount currently in effect.
Of note, the double severance requirement, does not apply to employees hired after the enactment of Emergency Decree 34/2019 (i.e., after December 13, 2019). Employees hired after December 13, 2019 but before July 29, 2020, are protected by the without cause dismissal prohibition. Employees hired after July 29, 2020 may be dismissed without cause and without severance, as long as they are in their trial period (i.e., first three months of employment) and provided that they have been provided with 15 days’ notice.
Since before the COVID-19 pandemic, Luxembourg employees absent from work because of incapacity, have been protected from dismissal for up to 26-weeks. During this “sickness period,” employers are prohibited from classifying the absence as “unjustified” and from deducting the absences from employees’ annual holiday allowance, provided the employee has followed required notification and documentation procedures.
The COVID-19 pandemic has expanded this protection. Now, employers are prohibited from counting sick time between March 18, 2020 and June 24, 2020 as part of the 26-week protected period. In addition, the law protects Luxembourg employees from dismissal beyond the 26th week until their sickness is over.
In sum, multinational employers must be aware of newly enacted regulations and guidance that may restrict their ability to terminate employees during the COVID-19 pandemic and that increase termination benefits owed to employees. Although employers should always carefully consider any termination prior to taking dismissal action, they should be particularly vigilant and should consult with legal counsel prior to dismissing employees during the ongoing COVID-19 crisis.