In the last couple of days, different branches of the Government have elaborated a set of policies in order to reduce the damage to the economy caused by the quarantine decreed on March 20th in the context of COVID-19. At Lerman & Szlak we consider it necessary to keep the community informed about the actions taken by the authority and their impact.
Decree N° 329/2020:
1) Worker´s firing and layoffs based on reduction of activity or force majeure and firings without expression of cause are banned until April 31st. If any of this happens they would be invalid.
2) Firings based on justified causes (Articles 242 throughout 244 of the labor law) and layoffs based on discipline measures (Articles 67, 68, 218 and 220 of the law) are still allowed. Arrangements between employers and employees regarding the conclusion of the contract by mutual consent (Article 241 of the law) are also allowed.
3) Layoffs based on Article 223 bis of the labor law are also available, needing and an agreement between employer and employee ‑or between an employer and the corresponding union- to replace the worker´s salary with a special money grant for as long as the reduction of activity or force majeure continues. Nevertheless, the employer must keep paying the contributions to the social security established by laws N° 23.660 and 23.661.
4) In order to apply the layoffs based on Article 223 bis of the labor law to 15% of the registered workers (in companies with less than 400 employees), 10% (between 400 and 1.000 employees) and 5% (more than 1.000 employees), the company first needs to enter a special “Preventive Crisis Procedure” at the Labor Ministry. However, the Ministry remains close due to the isolation policies taken by the Government. In consequence, layoffs above the given percentages of the total workers are not possible by the time being.
Decree N° 332/2020:
1) The decree sanctions the “Emergency Assistance Program to Jobs and Industry”. This program grants a series of benefits to businesses that comply with at least one of the following:
- Perform activities damaged by the quarantine.
- Have an important amount of employees infected with COVID-19, in quarantine or not currently working due to being in a risk group or taking care of a relative due to COVID-19.
- Have an important reduction in their sales since March 20th.
Businesses excluded from the program include those which perform activities that continue in spite of the quarantine and the ones that aren´t able to probe an important reduction in their activities.
2) Businesses will apply to the program online. The decree allows the Chief of Staff to establish criteria to be met in order to access the benefits of the program.
3) Those businesses will be able to choose between one of the following benefits:
- Postpone social security payments corresponding to March and April until a future date fixed by the revenue service.
- Reduction of the social security payments corresponding to April, only for companies with up to 60 employees. The Chief of Staff will be in charge of fixing the amount of that reduction.
4) A “Compensatory Salary Allowance” (CSA) will be available to companies accepted into the program with up to 100 employees. The CSA is an amount that Government will pay to each worker of the company. However –if it´s lower than the employee’s salary- the company must pay the difference. The CSA varies depending on the amount of workers of the company:
- Up to 25 workers: 1 minimum wage (AR$16.875)
- Between 26 and 60 workers: 75% of the minimum wage (AR$12.656,25)
- Between 61 and 100 workers: 50% of the minimum wage (AR$8.437,50)
If the company applies layoffs based on Article 223 bis of the labor law, the CSA could be taken as part of the special money grant paid as a replacement of the salary. In this scenario, the amount of the CSA would be reduced by 25%.
5) Companies with more than 100 employees will be able to Access the program “REPRO Assistance due to Sanitary Emergency”. Workers of the companies within this program will receive a special money grant between AR$6.000 and AR$10.000. Their employers must pay the difference between that amount and the corresponding salary.
Decree N° 333/2020: The custom duty for importation of several medical and sanitary elements is reduced to 0.
Extraordinary recess in Government agencies: All legal and regulatory deadlines are suspended until April 12th in National Institute on Industrial Property (INPI) and the General Inspection of Justice (IGJ).
Although the ban on firings and layoffs deepens the difficulties in businesses affected by the slowdown of the economy, the Emergency Assistance Program to Jobs and Industry could mean an important aid to soften the damage caused to companies. In order to assure that the program would really help small and medium businesses, first we should wait for the criteria that the Government will establish to access the benefits mentioned in this post.