It is significant that it is possible to identify such voluntary severance pay, arithmetically, as equal to the surcharge or an exact portion thereof, thereby validating an increasingly widespread corporate practice.
On July 2, 2026, the Santiago Court of Appeals (Case No. 1768-2025) upheld the validity of offsetting, via a setoff defense, the voluntary severance pay paid by a company at the time of signing the settlement agreement against a potential award for wrongful termination.
Although the First Labor Court of Santiago initially chose to reject the set-off defense filed by the company, the Santiago Court of Appeals reversed that decision, reasoning that:
“The defendant raises a set-off defense with respect to the amount ordered to be paid in the judgment, corresponding to the 30% statutory surcharge on severance pay for years of service, since, as it states, the settlement agreement confirms that the payment was made under the heading of ‘Voluntary Severance Pay.’”
Thus, the Court notes that regardless of the name or designation used for the payment at the time the severance pay statement is issued, what matters is the amount itself, since the severance payment statement indicated that the employee had received “the sum of $14,665,040 as severance pay for years of service and the amount of $4,399,512 as voluntary severance pay.”
In this regard, “according to a simple arithmetic calculation, the surcharge mandated by Article 168(a) of the Labor Code corresponds to 30% of the severance pay for time worked—that is, the very same amount ordered to be paid in the judgment, $4,399,512.”
Consequently, the Court concludes: “Thus, there is no doubt that the company, operating under a different name and, as it states, to avoid litigation, paid the surcharge imposed by Article 161 of the Labor Code—that is, in the case of an unjustified dismissal.”
In the Court’s opinion, the foregoing aligns precisely with the grounds for the setoff defense raised by the defendant, and the claim regarding the statutory surcharge must therefore be dismissed.
Thus, the reasoning provided by the Santiago Court of Appeals can serve as an important guide for companies of various sizes and industries, which sometimes choose to include—as voluntary severance pay or under another designation—a percentage of a potential surcharge for unjustified termination, or, as in this case, the full surcharge.
To this end, it is important to be able to identify such voluntary compensation as being mathematically equivalent to the surcharge or an exact portion thereof, thereby validating an increasingly widespread corporate practice, whether on an individual or collective basis.
For more information on these issues, please contact our Labor Group:
Jorge Arredondo | Partner | jarredondo@az.cl
Jocelyn Aros | Director Labor Group | jaros@az.cl
Felipe Neira | Senior Associate | fneira@az.cl
Palmira Valdivia | Associate | pvaldivia@az.cl
Manuel Sepúlveda | Associate | msepulveda@az.cl
Catalina Díaz | Associate | cdiazp@az.cl
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