The Basics of Costa Rican Labor Law

The purpose of this document is to provide the reader with an overview of the basic provisions of Costa Rican labor law.  It has been presented as a guide that can be used by manufacturers, or other businesses, that have or will have operations in the country.  The format of this information is in question and answer style.  

General Considerations in Costa Rican Labor Law

1. What are the main obligations of the employer?

In an employment relationship, both worker and employer are subject to a series of obligations that are derived from both the law and from what the two parties agreed upon at the beginning of the employment relationship.

Employers are obliged to comply with various duties related to their workers.  An employer must:

• send basic information about the employee to the Costa Rican Ministry of Labor;
• maintain equal conditions for all workers;
• provide the necessary tools and resources so that employees can do the job that has been agreed upon;
• pay workers’ salaries in a timely manner;
• deduct duly authorized fees of any applicable union or association;
• allow time for the employee to exercise his or her democratic right to vote.

2.  What are the main obligations of the workers?

According to the Costa Rican labor law, workers are required to:

• comply with the direction of their employers in the manner, time, and place that were agreed upon;
• exercise the necessary care and effort that is required to perform the appointed task(s);
• keep employers’ supplies, equipment, and materials in good condition;
• keep technical, commercial, or manufacturing secrets;
• abide by hygiene and other measures that have been taken to ensure workplace safety;
• undergo a medical examination either when applying for a position or during designated working hours. Doing so is for the purpose of ascertaining whether or not the employee suffers from any occupational, incurable, or contagious disease.

3.  What is an internal labor regulation?

An internal labor regulation is a document that has been duly authorized by the Costa Rican Ministry of Labor prepared by the employer in order to specify the conditions to which the employer and employee must subject themselves to in order to execute the contract. Internal labor regulations in Costa Rican Labor Law also establishes the general rules for working conditions, technical measures, and disciplinary action.

4.  What are labor rights?

These are inalienable rights established by the Costa Rican Constitution, the country’s Labor Code, international agreements, and other legal provisions that apply to the employer/employee relationship.

5.  Under Costa Rican Labor Law, when can employees file grievances?

Employees can file grievances with the Costa Rican Ministry of Labor at any time during which they are in the employ of a company.  However, if the employer/employee relationship ends, the ex-employee has a six-month period during which he or she can file claims against the employer.  The right to file grievances ends after six months.

6.  What is the Role of the Ministry of Labor and Social Security?

According to the Costa Rican Labor Law, the role of the Ministry of Labor and  Social Security is to develop, improve, and apply all laws, decrees, agreements, and resolutions related to the law.  Action taken by the Ministry of Labor and Social Security is subject to judicial review.  The courts have the ability to sanction the Ministry of Labor and Social Security

7.  What can be done if an employer fails to comply with Costa Rican Labor Law?

The affected employee or employees can report the case to the Labor Inspection office.  The requirements for filing a complaint are:

• it must be in either verbal or written. In special cases, complaints can be made by telephone, fax, and traditional or electronic mail.  The person filing the complaint can ask that his or her information be kept confidential;
• In addition to the name of the claimant, the name of the company in question, or its representative must be included.
• The information sent to the Labor Inspection office must include details on what the company’s activities are, as well as how many persons are employed at the workplace.

Work Contracts in Costa Rican Labor Law

1.  When must a work contract be used?

Under Costa Rican Labor Law work contracts are needed in three circumstances:

• When personal service is being rendered. The agreed-upon service or services must be performed exclusively by the hired individual and not by another person;
• When there is a salary or remuneration;
• When the contracted worker is under the direction and supervision of an employer or the representative of an employer. This is referred to as legal subordination.

2.  What is legal subordination?

Under Costa Rican Labor Law, legal subordination is a situation in which a contracted individual is subordinate to the party that receives and pays for services rendered (the employer) in issues related to performing the duties that have been agreed upon.  Legal subordination gives the employer a general power of management over the contracted individual for everything related to the applicable work and business.  Legal subordination takes things like skills, strengths, and worker status into account.  The employer has the power of command as regards work orders and instruction, the worker has the duty of compliance, that is, he or she is obliged to comply with orders and instructions.  If he or she refuses to comply, employers have the right to apply corresponding sanctions.  The sanction applied will be commensurate with the offense committed.  Under Costa Rican Labor Law, this is referred to as the employer’s disciplinary power.

3.  Is there a significant difference between a contract for professional services and a contract of employment?

There is a significant difference as regards the element of legal subordination.  Only when there is legal subordination (power of directional and command, and duty of obedience) is there a work contract.  If this element is not present in the contractual relationship, then the contract is of another nature or is for professional services.

4.  Is it necessary for a contract to be written?

Under Costa Rican Labor Law, a written contract is not a necessity.  The law allows for oral contracts that have the same effects on the rights and obligations of the parties.

5.  If a labor contract is not written, how is it proven to exist?

Labor contracts that are not written are verified by testimonial evidence.  In the case of witnesses in the service of the same employer, it is required that three individuals are fully aware of the essential points of the contract.  However, if the employer employs four or fewer workers, it is sufficient that only two give testimony as regards the existence of a labor contract.

6.  Under Costa Rican Labor Law, how are work contracts classified?

The work contract can be classified according to different criteria or factors.  If a single worker is hired, it is called an individual contract. The most important classification for contracts, however, concerns its duration.  Contracts can be:

• A fixed-term contract. This is an agreement that has specified a termination date in advance;
• A contract of indefinite or indeterminate time.

Another agreement that an employer may extend to a worker under Costa Rican Labor Law is one in which services are contracted for the performance of specific work or tasks.

7.  What are the reasons for the termination of an employment contract?

There are several circumstances in which employment contracts can be terminated in order to end a working relationship between an employer and an employee.  Agreements can be ended when:

• The term of the work contract has expired;
• The employee has retired or is deceased;
• There is a mutual agreement to end the working relationship;
• the worker resigns;
• There is a dismissal by the employer, whether with employer responsibility or without it.

8.  Under Costa Rican Labor Law when can employers dismiss employees without cause?

An employer can dismiss an employee without cause when:

• The employee has not told the truth about his aptitudes and abilities to perform the job for which he or she was hired to do
• The worker engages in immoral acts, violence, insults, or mistreatment against his or her employer, managerial staff, or co-workers in the place of employment provided that it has not been provoked.
• The worker commits an immoral or criminal act.
• When the contracted individual reveals technical or trade secrets belonging to the employer;
• The employee refuses to take prescribed preventative safety measures;
• When the worker compromises the safety of his or herself, or others, in the workplace.
• He or she absent for two consecutive days without notice;
• When the worker commits an act of serious misconduct.

Under Costa Rican Labor Law when can a worker terminate his or her work relationship with the responsibility of the employer? Employees may terminate when:

• There is a lack of payment in the amount, date, and place that is customary or has been agreed upon.
• The employer or its representatives act against morality, or commit slander, insult or violence against the worker, or maliciously damage the worker’s tools;
• The health of the worker or his or her family is endangered due to a lack of hygiene or unhealthy conditions in the workplace.;
• When the employer fails to comply with legally mandated safety and preventive security measures mandated by law.

9.  Is it obligatory for employers to present their employees with letters of dismissal?

Under Costa Rican Labor Law, and in accordance with Article 35, of the Labor Code, it is the obligation of the employer to grant workers’ requests for a certificate or letter of termination of the work contract.  This is applicable regardless of the cause of the cessation of the relationship (dismissal or resignation).

10.  What should be done when an employer refuses to give a dismissal letter?

In light of this refusal and before two consecutive days of non-employment have elapsed, the worker must go to the nearest Labor Inspection Office.  This is to obtain a “certificate’ that is to be delivered to the employer that mandates that the employer must provide a letter of dismissal to the affected employee.  In special cases, a representative of the Labor Inspection Office will accompany the worker to the employer’s place of business in order to confirm the employer’s refusal to comply.

11. In cases of dismissal, what should be paid to the worker?

Only indefinite contracts give the right to the payment of unemployment benefits, as well as the right to payment of holidays and proportional bonuses.  These items are paid in cases of unjustified dismissal.

12.  When workers choose to resign what are their obligations?

When workers resign, they must give notice.  The period of time for which workers must notify employers of their intention to end the working relationship is:

• One week, if the time worked is more than three months, but less than or equal to six months;
• Fifteen days if work time is more than six months but less than one year;
• One month after one year of work or more.

13.  When is the advance notice paid and how is the payment calculated?

The notice must be paid when no advance notice is given regarding the term of the contract.  The payment that is made is calculated by taking an average of the ordinary and extraordinary payments made to the employee during the last six months of employment.  For this calculation, the time that the worker may have been incapacitated by illness is not taken into account.  In this situation, the period prior to the illness and after the incapacitation is added until six month’s salary is calculated.  When it comes to maternity leave, four months of maternity leave are added to the computation that is indicated by Article 95 of the Costa Rican Labor Code.

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Should you require assistance in navigating Costa Rican Labor Law, contact the Central American Group.