The Labor Code of Panama outlines the legal framework for the termination of employment relationships, detailing the causes, procedures, and rights of both employers and employees. Below is an analysis of the key points, referencing specific articles of the said Code.
Causes of Termination (Article 210)
Article 210 specifies the primary causes for the termination of employment relationships, which include:
- Mutual Consent: Termination is valid if both parties agree in writing, provided it does not involve the waiver of employee rights.
- Expiration of Contract: The relationship ends when the agreed-upon term or project concludes.
- Death: The death of the worker or employer can terminate the contract, particularly if the employer’s death makes continuation impossible.
- Prolonged Suspension: If the suspension of the contract exceeds the maximum period allowed by law, the worker may request termination.
- Justified Dismissal or Resignation: Termination can occur due to justified reasons, such as disciplinary issues or voluntary resignation.
- Unilateral Employer Decision: Employers may terminate the relationship unilaterally, but only under the formalities and limitations established in this chapter.
Restrictions on Termination (Articles 211 and 212)
- Article 211: Employers cannot terminate indefinite contracts without a justified cause as defined by law and must adhere to the formalities required.
- Article 212: Exceptions to the above rule include specific categories of workers, such as:
- Workers with less than two years of continuous service.
- Domestic workers.
- Workers in small businesses (e.g., agricultural or manufacturing enterprises with a limited number of employees).
- Apprentices.
- Workers on international service vessels.
In these cases, employers must provide 30 days’ notice or pay the equivalent amount in lieu of notice. Additionally, unjustified dismissals in these cases do not result in back wages unless specific legal causes are invoked and not proven.
Justified Causes for Dismissal (Article 213)
Article 213 outlines the justified causes for dismissal, divided into three categories:
- Disciplinary Causes (Section A):
- Fraud or falsification of documents by the employee (e.g., Article 213.A.1).
- Acts of violence, threats, or insults against the employer, their family, or coworkers (e.g., Article 213.A.2 and A.3).
- Disclosure of confidential information without authorization (e.g., Article 213.A.4).
- Serious misconduct, dishonesty, or criminal acts against the employer’s property (e.g., Article 213.A.5).
- Repeated absenteeism or abandonment of work without justification (e.g., Article 213.A.11 and A.12).
- Non-Imputable Causes (Section B):
- Physical or mental incapacity of the worker that prevents them from fulfilling their contractual obligations (e.g., Article 213.B.4).
- Imprisonment or legal sentencing of the worker (e.g., Article 213.B.2).
- Retirement or permanent disability (e.g., Article 213.B.3).
- Economic Causes (Section C):
- Bankruptcy or closure of the employer’s business (e.g., Article 213.C.1).
- Reduction of operations due to economic hardship or technological changes (e.g., Article 213.C.3).
For economic dismissals, specific rules apply, such as prioritizing the retention of workers based on seniority, efficiency, and other factors (e.g., Article 213.C).
Employee Rights and Protections Under Panama’s Labor Law
- Notification Requirements (Article 214): Employers must notify employees in writing of the specific reasons and date of termination. Failure to do so invalidates the dismissal.
- Administrative Oversight (Article 215): For dismissals based on economic causes, employers must prove the justification to labor authorities. If the process is not followed, the dismissal is deemed unjustified.
- Reinstatement or Compensation (Article 218): Workers dismissed without cause may seek reinstatement or compensation through labor courts. If the employer cannot prove a justified cause, they must pay back wages and indemnification.
- Special Protections (Article 212): Vulnerable groups, such as pregnant women or unionized workers, are afforded additional protections to prevent discriminatory or unjust dismissals.
Employee-Initiated Termination (Articles 222 and 223)
- Voluntary Resignation (Article 222): Employees may terminate their contracts without cause by providing written notice (15 days for most workers, two months for technical workers). Failure to provide notice may result in a penalty equivalent to one week’s wages.
- Justified Resignation (Article 223): Employees may terminate their contracts with the right to indemnification if the employer:
- Fails to pay wages or alters working conditions unilaterally (e.g., Article 223.2 and 223.3).
- Engages in immoral or abusive behavior (e.g., Article 223.4 and 223.5).
- Violates safety, health, or hygiene regulations (e.g., Article 223.9).
Procedural Safeguards (Articles 216 and 217)
- Employer Obligations (Article 216): Employers must notify workers of dismissal requests and provide evidence to labor authorities. Workers have three days to present counter-evidence.
- Optional Pre-Authorization (Article 217): Employers may seek prior authorization from labor courts before dismissing workers for justified causes.
Conclusion
The legal framework for terminating employment relationships, as outlined in the provided articles, ensures a balance between the rights of employers and employees. By specifying justified causes, procedural requirements, and protections for vulnerable groups, the law aims to prevent arbitrary dismissals and promote fairness in the workplace. Employers and employees must adhere to these regulations to avoid disputes and ensure compliance with labor laws.
If you need the advice of an employment lawyer in Panama, please call us at +507 6290-3468 or send us a message at info@lawyerinpanama.com.