Author/s:
Mariana Saban
Introduction
On June 5, 2009, the National Court of Appeals in Labor Matters, in an en banc decision (gathering of all the Divisions of the Court) and by a majority vote (12 to 7), ruled in
re: “Couto de Capa, Irene Marta c/ Areva S.A. s/ Ley 14.546” (“Couto de Capa”) that the second paragraph of Section 253 of the Employment Contract Law (“ECL”) is applicable if the employee continued to render services for the employer after obtaining his or her retirement benefit, without interruption.
Pursuant to the new criterion set forth by the Court of Appeals in
Couto de Capa, the seniority of a retired employee that continued to render services for his or her employer without interruption includes only the period worked after retirement and does not consider the previous years.
This decision implies that the continuation of the employment relationship after the employee, without interruption, has obtained a retirement benefit does not exclude the imitation on seniority set forth by the second paragraph of Section 253 of the ECL. Therefore, if the employer eventually decides to dismiss the retired employee that continued to render services, the calculation of his or her severance would be limited to the period post-retirement.
Background
Employee retirement is the normal or natural way in which employment contracts executed for an indefinite term conclude (Section 91 of the ECL). Pursuant to Section 253 of the ECL, upon dismissal without just cause of a retired employee that returned to render services for the same employer, his or her seniority would be computed only based on the period after his or her retirement. Therefore, the severance payments would be calculated without including the period prior to retirement.
In 1992, the Supreme Court of Justice established that Section 253 of the ECL is constitutional and that it is valid for the law to regulate the particular consequences that derive from the employee’s retirement and the rules that apply to the termination of the relationship in such a case.
The applicability of this principle (conclusion of the employment relationship upon retirement and limitation of the seniority to the period post-retirement) in cases where the
employee continued to render services after obtaining a retirement benefit was a matter of discussion in labor courts and in legal doctrine. The two major opinions in this regard can be summarized as follows:
- The seniority limitation established in the second paragraph of Section 253 of the ECL is not applicable if the retired employee continued to render services without interruption after obtaining the retirement benefit. For this position, the absence of an actual conclusion of the relationship due to the employee’s retirement excludes the application of the aforementioned rule.
- The fact that the employee continued to render services after obtaining the retirement benefit does not alter the fact that the employment relationship concluded upon retirement. Thus, for this position, the seniority limitation set forth in the second paragraph of Section 253 of the ECL applies in cases where (i) the employee retires and then returns to work for the same employer and (ii) the employee continues to render services for the same employer after obtaining the corresponding retirement benefit. The decision rendered by the Court of Appeals in Couto de Capa implies a solution to this discussion.
The Court of Appeal’s Ruling
As stated earlier, in
Couto de Capa, the Court of Appeals decided that the second paragraph of Section 253 of the ECL is applicable to the retired employee that continued to render services for the employer, without interruption, after obtaining his or her retirement benefit. The Court of Appeals established the following:
- Retirement inevitably concludes the employment relationship of the employee. Therefore, the relationship concludes when the employee obtains a retirement benefit; and if he or she continues to render services for the same employer, without any interruption whatsoever, it actually implies that the employee has returned after retirement (“reingreso del trabajador”), a situation specifically regulated by Section 253 of the ECL.
- The mere acknowledgment of the employee’s right to retire (according to the requirements set forth in the law) does not imply that the relationship automatically concludes; the termination occurs when the retirement benefit is effectively granted to the employee.
- The legislator’s intention in Section 253 of the ECL is to liberate the employer by creating an exception to the general rule set forth by Section 18 of the ECL (which establishes that the employee’s seniority with one employer is determined by computing any and all periods during which he or she rendered services for the same).
- The conclusion occurs when the employee obtains the retirement benefit, even if the employee immediately returns or continues to work, because such situation implies the employee’s return (“reingreso del trabajador”). Even if he or she directly continues to render services for the employer, the employee is deemed to have retired and, from a legal viewpoint, has returned (not continued).
- The legal situation is the same in the case of the retired employee that ceases to render services and in the case of the employee that continues to render services.
- The conclusion of the employment relationship, by virtue of law, operates upon receipt of the retirement benefit by the employee. From that point forward, a new employment contract begins and the relationship is governed by the specific rules applicable to retired employees. Under these premises, the employer may not be validly forced to pay severance from which it has already been liberated.
Conclusion
The decision in Couto de Capa has provided an important clarification to employers with employees close to retirement, as they may now safely continue to rehire such employees after they have retired, knowing with certainty that they will eventually be liable to pay only severance for the seniority accrued by the employees after their retirement.
Even when there is no difference between the employee’s factual situation before and after retirement, technically, there are two different and independent employment vontracts, with the first one concluding upon the receipt of retirement benefits by the employee and the second starting immediately thereafter.
The limitation on seniority set forth by the second paragraph of Section 253 of the ECL must apply when the employee returns to work for the same employer after retirement as well as when the employee continues to render services after obtaining such benefit, without interruption.
Finally, it is important to point out that the ruling established in Couto de Capa is mandatory for all Chambers of the Court of Appeals in Labor Matters and for all Lower Courts; therefore, the labor judges may not disregard the ruling when deciding on lawsuits in which they intervene.