Chilean Labor Code: Contract Termination Grounds
Grounds for Termination of a Contract
The employment contract can only end in a legal case. Legal causes are contained in Articles 159, 160, and 161 of the Labour Code. The grounds for termination of contract operate ipso facto, that is, immediately. This means that the causal set will proceed to complete the contract and not expand it over time.
Causes of Article 159 of the Labour Code
- Mutual agreement between the parties. This cause is appropriate when the worker and employer agree to voluntarily terminate the employment contract that binds them. Under Article 177, for mutual agreement, resignation, and termination to be valid, they must be in writing and signed by the individual and the union president or staff representative. This mutual agreement should be ratified before the Labour Inspector.
- Waiver of the worker, upon notice to the employer with at least 30 days’ notice. Resignation is a solemn act by which the worker expresses their will not to continue serving the employer. Under Article 177, for mutual agreement, resignation, and termination to be valid, they must be in writing and signed by the individual and the union president or staff representative. A waiver that does not meet the specified requirements cannot be legally invoked.
- Death of Worker. The worker’s death terminates the employment contract. The legislature highlighted this fact because the employer’s death does not end the contract. Certain obligations continue with the heirs unless they determine the contract’s term based on a legal cause. Upon the worker’s death, outstanding rights are generally regulated in Article 60 of the Labour Code.
- Deadline agreed in the contract. This applies to fixed-term contracts not exceeding one year. A worker who has served under two or more discontinuous contracts for twelve months or more in fifteen months from the first contract is legally presumed to have been hired for an indefinite period. For managers or those with a professional or technical degree granted by a recognized higher education institution, the contract duration may not exceed two years. Continuing to provide services after the term expires converts the contract to a permanent one. The second renewal of a fixed-term contract has the same effect.
- Conclusion of the work or service which gave rise to the contract. Where the parties are unsure of the precise termination moment, the law allows them to set the contract’s duration to the conclusion of the work or service.
- Unforeseeable circumstances or force majeure. This involves an unexpected, insurmountable, and overwhelming event outside the control of the person invoking it. The event must be of such magnitude that it makes fulfilling major contractual obligations impossible. Partial inability may suspend, interrupt, or limit the contract but will not lead to its extinction. The impossibility of fulfilling obligations must be total or absolute.
Causes of Section 160
Section 160 lists grounds for revocation or subjective dismissal, depending on a worker’s conduct. Termination for these causes is not eligible for legal compensation.
- Misconduct of a serious nature, duly verified:
- Lack of honesty of the employee in the performance of their duties;
- Conduct of sexual harassment;
- Ways in fact exercised by the employee against the employer or an employee serving in the same company;
- Insults hurled by the worker to the employer;
- Immoral conduct of the employee relating to the company where they work.
Honesty is rectitude and integrity in action. Lack of probity is the absence of righteousness, honesty, and integrity in a person’s conduct while performing their duties.
Ways of doing things relate to any act of force or violence a person performs against another without legal justification.
Insults hurled by the worker to the employer, as stipulated by law, are sufficient to justify dismissal but are not the same as defamation under the Penal Code.
Article 60 N° 2
Negotiations to run the worker in the course of business had been prohibited in the contract by the employer. To invoke this ground, it is essential to implement the ban on negotiations within the line of business in writing in the employment contract. If this prohibition is not in writing, dismissal based on such negotiations is not justified. When the ban is in the contract, it takes effect both inside and outside the company. If the ban is only in the Rules of Procedure, its scope is smaller, affecting only within the company.