Harris Gomez Group has previously provided an overview of the labour reform bill that addressed the more significant changes and outlined the true implications from a legal perspective. It can be found here.

A landmark labour reform bill in Chile is facing a last minute hurdle after a top court ruled that certain parts of the reform were unconstitutional, sending them back to Congress for discussion despite passing through both houses of Congress recently. We summarise, some of the most relevant amendments made by the Executive here.

Update on the Chilean Labour Reform

The labour reform is essentially a new regulation on Collective Bargaining, a matter that has not been touched for more than 30 years. New regulation has long been pursued by unions but until recently lacked acceptance from a significant amount of employers.

The core goal of the labour reform is to encourage the growth of unions. Currently, only 8% of the workforces in Chile are considered unionized workers. A figure that seems rather low compared to other countries of the region as well as other OECD countries.

Unfortunately, there are other issues related to labour flexibility that have been left out of the latest reform, even though it could be argued that there is plenty to do in this regard.

Below you may find a summary of the main issues covered by the Labour Reform, many of which were incorporated recently in the Senate.

Exceptional Shift Days:

The Labour Office currently can grant exceptional shift working day schedule permissions for up to 4 years. All mining companies work under this regime. The amount of years will be reduced to 3 years. The new regulations will apply for permissions granted to companies after the law enters into force.

Workers Not Entitled to Collective Bargaining:

Previously, employees who have powers to represent the employer and are granted with general powers of administration are not entitled to collective bargaining. The terminology currently used is quite vague leaving it open to interpretation. This privilege will be now only limited to high management positions that have explicit powers to represent the employer.

Right to Information:

Currently, unions have the right to be informed about the financial situation of the company along with compensation plans that the employees may receive. The reform expands this right; ensuring unions are informed on a regular basis pursuant to the unions’ requirements unless it is confidential and strategic information.

Minimum ground for Negotiation:

The project incorporates the concept of a “trading floor”, which will be the basis ground of negotiation and will be assumed to be the conditions of the last collective bargaining agreement. If there has never been a collective bargaining contract or covenant, the benefits granted on a regular basis to workers will be deemed as the minimum ground of negotiation.

Right to Strike:

Replacement of workers during strike was something allowed under the Chilean Collective Bargaining system, although particularly criticized by the International Labour Organization (ILO), among other relevant labour organizations such as the Chilean CUT (Central Unitaria de Trabajadores).

This is now forbidden and it may be one of the most relevant transformations of the bill. The reform proposes that employers may change shifts, work schedules or work resources but are limited to only “necessary adjustments” that will allow workers not involved in the strike the ability to perform their working duties.

Qualification of the Minimum Work Force and Emergency Services during Strike:

The Minimum Work Force and Emergency Services available during strike must be recognized before the beginning of collective bargaining. If the parties (union and employer) fail to establish which one necessary, the Labour office will rule so.

If the union does not provide the necessary working force for emergency cases, the company may take all necessary measures, including subcontracting these services.

Individual Worker Reinstatement:

Employees that participate in the strike are entitled to individually return to work as long as the employer’s final offer meets certain requirements indicated in the law. The reestablishment to work may be done from the 16^th day of strike in big and middle size companies and from the 6^th in small ones.

The exercise of this right shall not affect the right to strike of other workers.

Subcontracting:

Collective bargaining that takes place in a contractor or subcontractor company shall not affect the powers of administration of the parent company. In case the work or outsourced service stops due to the strike the mandate may carry on directly or through a third party the rendering of those lost services.

Direct or indirect employment of striking workers of the contractor or subcontractor will be deemed as “prejudicial union practice”.

Unions of Inter-Companies:

The intercompany collective bargaining will be voluntary for micro and small companies and mandatory for large and medium-sized ones. However, for the latter, certain conditions will have to be met so inter-company negotiations will only be an exception.

Covenants Approving Special Working Conditions:

This is one of the few norms that bring certain flexibility to the employment relationship. Such agreements may be agreed directly between the employer and the union provided that the union membership representation is equal or more to 30% of all company´s employees.

The covenants may agree on the following areas: exceptional working hours and break shifts, overtime, agreements on passive work distribution, special time shifts for workers with family responsibilities and distributions of working days per week. The maximum extent for such agreements will be 3 years.

This norm will be applied gradually. During the first 2 years of enactment of this law, only companies where union membership is equal to or beyond a 50% of the work force may agree on one.

Extent of Collective Instruments/Contracts:

Currently, a Collective Bargaining Contract or Covenant may last a maximum period of 4 years and then the parties must negotiate new conditions all over again. This lapse will be reduced to a 3-year term.

Title to Negotiate:

This has been one of the most controversial issues of the Tax Reform and one of the matters that was recently declared as “Unconstitutional” by the Constitutional Court.

The bill tried to resolve that only Unions would be entitled of Collective Bargaining with the employer. The Constitutional Court settled that all workers, either represented by a “group of workers” or by the unions could be part on a collective bargaining process.

Entry into Force of Law:

The law will become effective 6 months after its publication in the Official Journal month. The law is expected to be published shortly, however, the Administration is currently studying the possibility of a veto in order to re-establish some key issues that were disregarded by the Constitutional Court.

Article by Miguel Guerrero Fuentealba of Harris Gomez Group