Economic Crimes Act: the unknown labor side of the rule that increases employers’ liability

The Law on Economic Crimes and Attacks against the Environment, which a few days ago was promulgated by the President of the Republic, Gabriel Boric, has generated intense debate in the political and business world.

Even from the business side, the need for modifications has been raised to clarify the scope of the law, which aims to prevent transgressions through the imposition of greater requirements to legal entities and their internal compliance systems, including the directors and managers of the companies.

However, as the days have gone by, other axes have been added that have begun to arouse the interest and concern of the actors due to their lack of knowledge, such as the labor aspect of the law, with respect to which lawyers have begun to clarify its scope.

1 Contributions

According to a guide of the law firm Guerrero Olivos, the new legislation punishes the appropriation or distraction of money from social security contributions.

In detail, it adds the crime committed by the employer who, without the consent of the worker, omits to withhold or pay the social security contributions of a worker or declares to the social security institutions to pay him/her a taxable or gross income lower than the real one.

An example of this, according to Albagli Zaliasnik (az), is when, for example, the area in charge of the remuneration of the company’s employees diverts part of the funds collected for social security contributions, generating a loss in the remuneration of the employees.

In view of these facts, the new regulation contemplates that the penalties applicable for the commission of this crime will be calculated according to the amount defrauded, which can range from 1 UTM to more than 40 UTM. Thus, the applicable penalties are from minimum to maximum imprisonment (61 days to 5 years) and fines ranging from 5 UTM to 15 UTM.

Fernanda Espinosa, partner of Barros & Errázuriz Abogados, adds that in this matter there are a series of crimes that already existed in other bodies of law, especially in the area of social security contributions, such as the appropriation or diversion of money from social security contributions, but that with the new law “will have the character of economic crimes and for which the company may also be liable”.

2 Wages and workers’ health

Another crime introduced by the new legislation is related to the payment of “manifestly disproportionate” remunerations and lower than the minimum monthly income, “seriously abusing the situation of need, the inexperience or the inability to discern of the worker”.

An example of this, according to lawyers, is when a company hires foreign workers who do not speak Spanish, paying them a salary lower than the legal minimum, in a manifestly disproportionate manner to the salary paid to Chilean workers performing the same activity.

According to az, in this matter, penalties of imprisonment in any of its degrees (61 days to 5 years) are established, without prejudice that penalties higher by one degree may be imposed when the damage exceeds 800,000 UTM or affects a considerable number of people.

Rocío García, partner at Guerrero Olivos, comments that those related to negligence against people are also incorporated as economic crimes. “That is to say, those committed by recklessness or culpable negligence. Although these types of crimes were already regulated, the novelty is that they will now also be considered as economic crimes.

Given the above, Espinoza points out that the new regulation will also have implications in the area of occupational safety, since occupational accidents could eventually also be considered economic crimes if it is proven that there was a breach of duty of care and/or lack of prevention mechanisms.

3 Second category offenses

All these labor or social security transgressions, the lawyers explain, will be considered as “second category” offenses.

What does this mean? That in order to be included in the category of economic crimes, they must necessarily be committed in the exercise of an office, function or position in a company, or they must be carried out for the economic or other benefit of the company.

4 Freedom of labor and more fines

For Marcelo Albornoz, lawyer of Albornoz & Cía, there are several norms that have labor implications and that could even be unconstitutional, since they would imply a violation of the freedom of work.

In this line, the professional highlights the new article 284 quater of the Penal Code, which establishes that in addition to other penalties, the persons involved in crimes will be imposed the sanction of suspension or disqualification from the exercise of their profession, that is to say, they are prohibited from exercising the profession of which they are holders.

Another aspect of concern, according to the expert, is that the new regulation “greatly exacerbates the penalties”, which could directly affect workers’ salaries.

In the case of certain infractions, the fine can range from 1 day-fine to 300 days, depending on the degree of the custodial sentence. “This value of the day-fine corresponds to the average daily liquid income of a person who has had 1 year before, which considers his remunerations and other incomes”, details Albornoz.

For him, this is “a penalty that expropriates remunerations”, due to the very high amount involved.

5 How to prepare

For García, it is important that companies address the complexity of the new law, reinforcing their procedures regarding the payment of salaries and social security contributions, making it essential to be more vigilant in these areas. “It will be extremely important for companies to seek advice to see what state of compliance they are in and to foresee any possible legal contingencies,” says García.

A similar reading was given by Jorge Arredondo, partner at az, who added that the legislation “obliges companies to have preventive models in the labor area, to establish control mechanisms, and for management to be extremely aware of how labor relations between the organization, its workers and union organizations are conducted and executed”.