In Argentina, an appeals court suspended the labor reform contained in President Javier Milei’s decree of necessity and urgency (DNU) No. 70/2023. While the government prepares to appeal the decision, the execution of measures related to the labor aspect included in the decree is temporarily halted.

The Labor Appeals Chamber considered that “the ‘necessity’ of adopting so many measures would not be objectively evident,” according to the document signed by two judges of the Chamber, José Alejandro Sudera and Andrea García Vior. A third magistrate, María Dora González, dissented, stating that the court does not have jurisdiction, and the case should be transferred to the administrative litigation court.

The ruling states that there are no reasons alleged that constitute an urgency “to avoid the proper intervention of the Legislative Power regarding substantive legislation.” The tribunal cited the Constitution emphatically: “The National Constitution does not allow choosing discretionary between passing a law or imposing certain material contents more quickly through a decree.”

Now, what does the labor chapter of DNU 70/2023, currently suspended by the justice, establish? Regarding this, there are two main issues that have generated controversy:

• 8-month probation period The DNU extends the probationary period in an indefinite-term employment contract from 3 to 8 months, stating that “it will be considered probationary during the first 8 months of validity.” Additionally, the decree states that “either party may terminate the relationship during that period, without cause and without the right to compensation.”

Labor lawyer Alexander Rodríguez sees this point of the decree as a solution that “should be positive, as it encourages the entry of workers.” According to him, “companies do not hire personnel justifying that labor law is too demanding. So, instead of facilitating the entry of workers, their exit is facilitated. If the probation period is extended, there would be no fines for undeclared work or withheld contributions. Therefore, if you want more staff, you should facilitate entry, not exit.”

In contrast, labor lawyer Leandro Recalde argues that “the probationary period is a time granted to the employer to assess the suitability of the employee and gives them the possibility to terminate the employment relationship once that period is over, without the possibility of paying compensation.” Recalde asks, “How much time is really necessary to assess the employee’s suitability? What they are trying to do with this decree is distort that probationary period to eliminate or degrade the compensatory institute.”

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• Severance pay Milei’s DNU states: “In cases of dismissal without just cause by the employer, with or without prior notice, and after the probationary period has elapsed, the employer must pay the worker severance pay equivalent to one month’s salary for each year of service or fraction exceeding 3 months, taking as a basis for calculation the best monthly, normal, and habitual remuneration earned during the last year or during the time of service if less.”

In this regard, Recalde considers that the basic objective of the DNU is to “lower the amount of severance pay.” In this aspect, he emphasized: “The DNU reduces the compensation by attacking how the remuneration or the calculation base for compensation is calculated. That is, if the Labor Contract Law took the best monthly, normal, and habitual remuneration, the DNU excludes the Christmas bonus, semi-annual and annual bonuses, and, in the case of variable remuneration, the best remuneration is not taken, but an average.”

Labor Secretary Omar Yasin declared weeks ago on the news channel La Nación + (LN+) that the DNU “is truly an instrument to generate employment” and that “it does not reduce any worker’s rights.” Regarding severance pay, Yasin argued that the DNU includes “an objective cause for dismissal, which is participating in a block against an employer, causing damage to the employer, the company, or third parties, and, fundamentally, preventing a worker from going to his workplace and not adhering to the strike.”

A topic that has generated controversies and disagreements among different representatives of labor law has to do with the unemployment fund. In statements to LN+, Yasin stated that “another positive aspect of the DNU is the possibility of creating an unemployment fund or termination fund.” As the head of the Labor Secretary established, the termination fund is created by collective agreement. The worker will turn to that fund if dismissed to immediately collect compensation without delay.

“The most serious thing that the decree provides is the possibility that through collective bargaining, unions and business chambers can repeal the compensation system and create series funds that do not adequately protect against dismissal,” argues Recalde. From another perspective, labor lawyer Alexander Rossi maintains that the indemnity resolution by collective agreement “does not make sense” because each business and union sector will have its own agreement.

Yasin also stated that the new DNU generates compensation for discriminatory dismissal, considering sexual, ethnic, or religious orientation. In this regard, the head of the Labor Secretary argued that, in these cases, compensations increase by 50% or 100%, according to judges.

Hours after the news of the suspension of the labor reform included in the DNU became known, it was reported that the State would appeal the precautionary measure. According to a source from the Ministry of Justice of the Nation, the presentation was being prepared by the Treasury Solicitor’s Office of the Nation, led by Rodolfo Barra, a former judge of the Supreme Court. In this regard, the Ministry argues: “They are ignoring the criterion adopted by all other courts in the country, both in the city and in the interior, which sent the case to the natural and universal judge.”

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Barra said this Wednesday in an interview on Radio con vos that “the National Labor Appeals Chamber has a bias identified with some sectors that could have been affected by the DNU, which acted outside its jurisdiction.” The Treasury Solicitor anticipated that they will take the discussion first “in the administrative litigation court,” and if they are not successful, they will go to the Supreme Court.

Now, is the precautionary measure annulled with the appeal? For labor law specialist Jorge Fontán, the State required a “reconsideration appeal” for the same appeals chamber to review the precautionary measure. In this way, Fontán explained, “After the review, that appeal goes to the Supreme Court.” The Supreme Court will deal with all precautionary measures, but when the judicial recess or vacation, during which judicial activities cease between January 1 and 31 in Argentina, ends. In fact, the court that granted the precautionary measure is a holiday court. So, as Fontán said, the Supreme Court will deal with all precautionary measures when the judicial recess ends. In this way, given that the precautionary measure does not have a suspensive effect, it remains in force according to Fontán.

For labor lawyer Alexander Rodríguez, there are two scenarios: on the one hand, the decree remains suspended until the Supreme Court says otherwise. On the other hand, “A direct presentation of the Executive Power to the Supreme Court is possible, to immediately resolve the issue due to institutional gravity.”