As a consequence of the situation we are experiencing related to COVID-19, companies have taken a series of measures to try to avoid definitive dismissal of employees or even the complete cessation of operations. Among those measures is the suspension of employment contracts. Below we present in question and answer format, the most important issues related to the suspension of employment contracts under Costa Rican law.

Q: What is the suspension of contracts?

A: It is a procedure that enables the requesting employer the option to cease the work of your company, without the payment of wages.

Q: In which cases can it be requested?

A: The suspension of contracts can be requested by the employer before the Labor Inspection Directorate of the Ministry of Labor and Social Security. For the request to be approved, the employer must demonstrate a situation of force majeure that makes it impossible for him to continue to operate in part or throughout the organization. Cases of force majeure will depend on each situation (lack of raw materials, sanitary closure order by the Ministry of Health, lack of spare parts that affect the operation of equipment, serious damage from a financial perspective, etc.)

Q: How is it regulated?

A: It is regulated in article 73 and ensuing provisions of the Labor Code

Q: How does the suspension of contracts differ from work termination?

A: Suspension of contracts is different from the termination of the employment relationship. The suspension maintains the seniority and the accumulated rights, to be resumed when they return to work.

Q: What kind of contracts can be suspended?

A: All types of employment contracts and with any worker can be suspended, regardless of the position held within the company.

Q: Does this process also apply to professional services?

A: No. It only applies to persons who are direct employees of the employer.

Q: What happens if there are no written contracts, does the same suspension apply?

A: The suspension of the “reality contract” still applies.

Q: Can the employer declare a contract suspended without authorization from the Ministry of Labor and Social Security (MTSS)?

A: Legally, such suspension requires MTSS approval. An employer who makes an unauthorized suspension is exposed to being sued in court.

Q: What is the term of the suspension?

A: No specific term is stipulated in the law;  it is determined according to each particular case.

Q: Does the suspension affect the Christmas bonus and the holidays?

A: Yes. The time of the suspension affects the amount of an employee’s Christmas bonus since no salary is received, and vacation is also affected if the worker does not perform work sufficient to accumulate the right to rest.

Q: During the suspension, is the employee still covered by the CCSS?

A: Yes.

Q: During the suspension, is the employee still covered by occupational risk insurance?

A: No, since the employee is not working.

Q: Once the suspension is over, can the employee collect any retroactive amount of unpaid wages?

A: No retroactive amount can be collected, as long as the company has complied with the MTSS process.

Q: During the suspension, can the employer give the employee any amount of money as help or free?

A: Yes. The amount would not qualify as salary for Social Security purposes.

Q: Could a disciplinary sanction be applied during a contract suspension?

A: Yes, since during the suspension all the rights and duties of employees are maintained.

Q: How long does an employee have to return to work after the suspension period has ended?

A: Any employee must return to work within a maximum period of 15 days after the suspension is lifted; otherwise, dismissal may proceed without employer liability.

Q: Could suspension by the MTSS be retroactively decreed to cover the first day the company closed?

A: Yes. For this the employer must request the suspension within three days, citing the issue of force majeure that generated the request for suspension.

Q: Can I be fired with employer responsibility during the suspension period?

A: Yes.

Q: Do I have to pay social security charges during the suspension of a contract?

A: No, since social security charges are applied to wages paid and no wages are paid during the suspension.

Q: Are benefits such as company car, car allowance, housing payment, etc., stopped in case of suspension of the employment contract?

A: The payment of such salary benefits may be suspended unless the company decides to continue to provide them.

BLP is at your availability through its Help Desk for any inquiry related about this topic and others and how Coronavirus can affect your company. Contact us at [email protected]