Diario Financiero | The Supreme Court’s last line of defense against layoffs due to business needs

Jan 31, 2023

“The pronouncement of the Supreme Court establishes a more restricted scope with respect to the cause of dismissal due to the needs of the company,” emphasized our partner Jorge Arredondo.

Automation and business restructuring is not a valid reason for companies to dismiss workers under the grounds established in Article 161, paragraph 1 of the Labor Code, better known as dismissals due to business needs. This derives from a new decision of the Supreme Court, in which the highest judicial instance again limited the scope of this figure.

As described in the lawsuit filed by a female employee at the Labor Court of San Bernardo, the company explained in the dismissal letter that her dismissal was due to internal reorganization and readjustment processes, and that her position “has been subject to a process of rationalization and restructuring due to the structural changes experienced by the company”.

Considering these facts, the employee requested that her dismissal be classified as unjustified, since from her perspective, such cause can only be invoked by the employer based on external economic factors beyond its control.

The court in the first instance dismissed the claim, after which the affected woman appealed to the Court of Appeals, but the ruling was repeated. The woman escalated her dispute and obtained the support of the Supreme Court.

For experts, this is a pronouncement in which the justice system is reinforcing a position that could complicate the companies.

The Supreme Court once again ratified its position that the cause of the company’s needs must be based on reasons that are exogenous to the organization, that are permanent and that make it unfeasible to maintain the labor relationship”, points out Jorge Arredondo, partner of the azlabor group.

In his opinion, this pronouncement limits or establishes a more restricted scope with respect to the cause of dismissal due to business needs, “establishing in consequence that its motivations may derive from situations in which the employer has no type of incidence or decision“.

Source: Diario Financiero, January 31, 2023

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