- 1.May foreign employers hire employees directly in your jurisdiction or is it necessary to act through a local subsidiary?
- 2.Is there a limit to the number (or ratio) of foreign employees an employer may have in your jurisdiction?
There is no limit to the number of foreign employees an employer may hire in Costa Rica, as long as the employees fulfill the immigration requirements established by law.
- 3.May labour or employment agreements, and the termination of those agreements, be subject to any legislation other than that of your jurisdiction?
Yes, but only in the event the foreign legislation grants more benefits to the employees than Costa Rican legislation.
- 4.What are the requirements for an enforceable agreement? Are there any formalities that labour or employment agreements must adopt to be enforceable in your jurisdiction? Are fees, duties or taxes generated by any of them?
Costa Rican labour legislation requires that employment agreements must be written. However, our legislation does not require contracts to be recorded at the Labour Department. Also, our legislation does not require special forms or formalities for employment agreements or contracts. The only legal requirement is that three copies of the contracts must be executed by the parties, one copy per party, and the third one must be delivered to the Labour Department. Labour contracts do not pay taxes.
- 5.What are the implications of hiring personnel without a clear, written, employment agreement in place? May this have any effect in the event of litigation?
Full proof of the labour conditions requires a written employment agreement. In the event an employer hired personnel without a clear, written employment agreement, the employees will keep every labour right established by law. Moreover, the employer will have the burden of proof of the essential conditions of that agreement. If the employer wants to proof those conditions with witnesses that are also employees, the law requires the testimony of at least three witnesses that must coincide on the essential terms of employment. Also the employer would be exposed to endure proceedings related to infraction of labour law. These proceedings may result in fines. In the event of litigation, as stated before, the employer will have the burden of proof so it is recommended to have a written contract; however, the employer may produce some other type of document to proof his position or argument in court.
- 6.What are the employers’ obligations (social security and related benefits) regarding employees after contracting? Are any social benefits tax deductible?
The employer must contribute with a 26.17 per cent of the employee’s remuneration to the social security fund. Also, the employer must subscribe an insurance policy against labour risks and accidents. These obligations are tax deductible.
- 7.What benefits, other than cash remuneration are employees in your jurisdiction entitled to? What severance entitlements may employees claim?
Employees are entitled to Aguinaldo (Christmas bonus), a two week paid vacation period after a 50 week of continuous work period, minimum wage depending on the employee’s category, eleven holidays established by law, one day off after six days of continuous work, also remuneration bonuses will be considered salary. Employees may claim the following severance entitlements: Christmas bonus, pending vacation days not previously enjoyed, up to 176 days due to severance pay depending on the employee’s seniority, up to one month’s salary depending on the employee’s seniority, damages, interests, attorney’s fees.
- 8.What is the role of the unions in the relationship with foreign employers?
Unions may force an employer to negotiate a collective bargaining as long as they union has more than one third of the company’s employees affiliated. Also unions have the right to arrange meetings with the employer in order to discuss economic and social issues related with employees. Finally, unions may call for a strike with the sole purpose of defending or improving those economic and social interests.
- 9.Do employees have the right to form unions? Is it mandatory for employees to honour this?
Employees have the right to form unions. No employee can be forced to join or abandon a union. For an employee’s union to be legally formed, it must fulfill the following requirements:
- at least 12 members; and
- a request, executed by the union’s president or chairman, must be issued to the Labour Department, along with the authenticated copies of the incorporation agreement and its by-laws. The incorporation agreement must include the memberss amount, the type of union, and the names of the board of directors.
- 10.May unions be an independent party to a labour controversy in your jurisdiction? What are their rights and duties towards the employer and unionised employees?
Unions may legally represent unionised employees through the courts and also before administrative authorities, as long as the employees request that representation in individual, economic and social controversies. Unions may represent unionised employees in the event the collective bargaining has been breached without the need of employee’s authorisation. Any action by the employer that may result in an anti-union practice will be considered discriminatory and could be declared null and void.
- 11.May a union request bring about or cause a stoppage? If so, what remedies would be available to the employer?
Yes they can, as long as the stoppage or strike fulfils the legal requirements. For a strike to be considered legal:
- the strike must be carried out by at least three employees;
- the employees must constitute at least 60 per cent of the personnel within the company;
- the strike must be a peaceful movement;
- its purpose must be related to defending or improving the economic and social interests of employees; and
- employees must have exhausted the conciliatory proceedings established by law.
The employer may reach a direct agreement with a group of two or three workers duly authorised to do so; also, the employer may subject the matter to arbitration or conciliation, both administrative (Labour Department) and through the courts. The employer may request a judge to declare the strike’s illegality in the event the requirements were not fulfilled. In this last case, the employer may request the police’s aid in order to continue the labour within the company.
- 12.Which legislation governs the enforcement of international relationships or labour agreements provided for in international business contracts, and in international commercial proceedings, to be performed within your jurisdiction?
Free tradement agreements subscribed by both parties will establish the applicable legislation. This is the rule established in the most recently approved treaties, including CAFTA.
- 13.Which international treaties or conventions are applicable to labour or employment relations in your jurisdiction? Has your country made any reservations to or denounced any treaties?
- Universal Declaration of Human Rights;
- International Covenant on Civil and Political Rights (ICCPR);
- International Covenant on Economic, Social and Cultural Rights (ICESCR);
- the American Convention on Human Rights (also known as the Pact of San José); and
- the Additional Protocol to the American Convention on Human Rights in the area of Economic, Social, and Cultural Rights (more commonly known as the ‘Protocol of San Salvador’).
ILO conventions
C1 Hours of Work (Industry) Convention; C8 Unemployment Indemnity (Shipwreck) Convention; C11 Right of Association (Agriculture) Convention; C14 Weekly Rest (Industry) Convention; C16 Medical Examination of Young Persons (Sea) Convention; C26 Minimum Wage-Fixing Machinery Convention; C29 Forced Labour Convention; C45 Underground Work (Women) Convention; C81 Labour Inspection Convention; C87 Freedom of Association and Protection of the Right to Organise Convention; C88 Employment Service Convention; C89 Night Work (Women) Convention (Revised); C90 Night Work of Young Persons (Industry) Convention (Revised); C92 Accommodation of Crews Convention (Revised); C94 Labour Clauses (Public Contracts) Convention; C95 Protection of Wages Convention; C96 Fee-Charging Employment Agencies Convention (Revised); C98 Right to Organise and Collective Bargaining Convention; C99 Minimum Wage Fixing Machinery (Agriculture) Convention; C100) Equal Remuneration Convention; C101) Holidays with Pay (Agriculture) Convention; C102 Social Security (Minimum Standards) Convention; C105 Abolition of Forced Labour Convention; C106 Weekly Rest (Commerce and Offices) Convention; C111 Discrimination (Employment and Occupation); C113 Medical Examination (Fishermen) Convention,; C114 Fishermen’s Articles of Agreement Convention; C117 Social Policy (Basic Aims and Standards) Convention; C120 Hygiene (Commerce and Offices) Convention; C122 Employment Policy Convention; C127 Maximum Weight Convention; C129 Labour Inspection (Agriculture) Convention; C130 Medical Care and Sickness Benefits Convention; C131 Minimum Wage Fixing Convention; C134 Prevention of Accidents (Seafarers) Convention; C135 Workers’ Representatives Convention; C137 Dock Work Convention C138 Minimum Age Convention; C141 Rural Workers’ Organisations Convention; C144 Tripartite Consultation (International Labour Standards) Convention; C145 Continuity of Employment (Seafarers) Convention C147 Merchant Shipping (Minimum Standards) Convention; C148 Working Environment (Air Pollution, Noise and Vibration) Convention; C150 Labour Administration Convention; C159 Vocational Rehabilitation and Employment (Disabled Persons) Convention C160; Labour Statistics Convention; C169 Indigenous and Tribal Peoples Convention; C182 Worst Forms of Child Labour Convention.
- 14.Are arbitration agreements to resolve labour or employment disputes valid and enforceable in your jurisdiction? Is there any legislation in your jurisdiction governing the private arbitrability of labour or employment disputes? May controversies in labour or employment matters in your jurisdiction be resolved through private arbitration (in your jurisdiction or abroad), or in foreign courts?
There is a specific law that governs arbitration. This law grants arbitrations res judicata force. These arbitrations must be carried out in special arbitration and conciliatory centers. Through arbitration, controversies concerning both individual and collective matters can be solved. However, controversies concerning individual employment matters may be resolved through private arbitration, in our jurisdiction or abroad, only if both parties agree to do so. In this event the arbitration agreement would be valid. Therefore, even if there is an arbitration clause included in the individual labour contract, the employee may choose to resolve the controversy through the ordinary labour courts. If the arbitration clause is established within a collective bargaining, then that obligation may not be waived by the parties. The Costa Rican judge, based on the territoriality principle, will be able to resolve any labour dispute presented before him for his consideration that occurred in Costa Rica.
- 15.Does the law require that labour or employment proceedings be held in a specific jurisdiction or place or require that proceedings be carried out in a specific language?
Employment proceedings will be held in Spanish and in labour courts where they are available. The judge that will decide the controversy is determined by the place or location where the employment relationship took place.
- 16.Do labour or employment proceedings generate or accrue taxes, duties or any kind of fees, including attorneys’ fees?
Labour proceedings do not generate taxes, duties or fees. However, under normal circumstances, the court award’s attorneys’ fees to the prevailing party, unless there is a valid cause not to award them. The attorneys’ fees granted to the prevailing party range from 15 per cent to 25 per cent of the condemnatory or acquittal sentence. These fees generate interests.
- 17.Is there a concept in your jurisdiction providing for class-lawsuit in labour or employment matters? Does your law allow the consolidation of multiple labour or employment proceedings?
Yes, there is a concept in my jurisdiction providing for class-lawsuit or employment matters, especially when there is a claim concerning remuneration issues within a company or public institution. Costa Rican law allows the consolidation of multiple employment proceedings if the cause is the same.
- 18.Can foreign lawyers serve as counsel in labour or employment proceedings in your jurisdiction? If so, can they do so alone or must a local lawyer serve as co-counsel? Are their fees subject to local taxation?
Foreign lawyers may serve as counsel in labour or employment proceedings only if they have been authorised by the Costa Rican Bar Association. Lawyer fees are indeed subject to local taxation according to the Income Taxable Law article 2.
- 19.What are the rules on discovery in proceedings?
In order to obtain evidence from the opposing party in a pre-trial phase, a party can request answers to interrogatories, requests for production of documents, requests for admissions and depositions.
- 20.Are labour or employment awards issued by foreign courts or arbitration courts acknowledged, recognised and enforced in your jurisdiction?
The arbitration agreements are enforceable in Costa Rica, however, they must fulfill the following requirements:
- the arbitration agreement must be authenticated;
- the defendant must have been notified of the proceedings and the arbitration agreement;
- the claim must not be of Costa Rican exclusive jurisdiction;
- there must not be a proceeding being carried out in Costa Rica or a final resolution issued;
- the arbitration must be enforceable in the jurisdiction of origin; and
- the arbitration must not be contrary to public order.
- 21.May labour courts or boards grant interim relief? If so, how is that relief enforced? Does it apply to assets located abroad?
Labour courts may grant interim relief in the form of a court order that requires a party to do or to refrain from doing certain acts. A party that fails to comply with an interim relief faces criminal offenses that merit possible prison sentences or civil penalties.
- 22.Can labour courts or boards issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them? If so, will a court of law lend its aid in enforcing such an order against a recalcitrant third party?
Labour courts have the authority to compel testimony by a witness or production of evidence under a penalty for failure. The court may order a person or organisation to bring physical evidence before it or face punishment. This is often used for requests of bank information related to the parties. Duly notified witnesses can be brought before a judge by the police in order to render testimony.
- 23.Can a party to a labour proceeding seek relief from the court or board? What is the scope of such relief?
An employee may request the Supreme Court Constitutional Board to order a labour court to issue a ruling, in the event that court takes a too much time in doing so. Also, an employee may request the Judicial Inspection to order a judge react if the judge takes too much time is issuing a ruling or in taking an specific action during the proceedings.
- 24.Are the resolutions issued by a labour court or board final? What are the remedies available for the parties?
If the employee’s claim represents less than 2 million colones (e2600), the controversy will be resolved by a court constituted by three judges, where these courts are available, and their resolution will be final, no appeal is allowed.
If the employee’s claim represents more than 2 million colones (e2600) the resolution can be appealed within a three day period. After that, the Appellate Court’s resolution can be reviewed by the Cassation Court. The claim before the Cassation court must be issued within a 15-day period and is final. If the claim is related to labour risks or accidents the resolution may be appealed once.
- 25.What are the grounds for challenging an award and what is the period of time a party has to challenge that award?
Depending on the particular case a party might be able to challenge an award before the appellate court on specific grounds. These grounds typically could include errors of law, fact, or procedure. An award may be challenged if the judge made a poor evaluation and consideration of the proof, among other reasons, each case must be considered individually. If the employee’s claim represents more than 2 million colones (e2600) the resolution can be appealed within a three day period. After that, the Appellate Court’s resolution can be reviewed by the Cassation Court. The claim before the Cassation court must be issued within a 15-day period and is final.
- 26.If a party files a lawsuit in violation of an agreement to arbitrate, will a petition by the defendant to remit the lawsuit to arbitration be granted by the labour courts or boards in normal circumstances or is the right to sue unwaiveable? If so, will that petition be treated as a threshold matter or will it be rolled into the merits of the litigation such that the defendant will also need to defend the merits of the lawsuit in court?
The labour court will not grant the petition because controversies concerning employment matters may be resolved through private arbitration, in our jurisdiction or abroad, only if both parties agree to do so. Therefore, even if there is an arbitration clause included in the individual labour contract, the employee may choose to resolve the controversy through the ordinary labour courts. That right cannot be waived. If the arbitration clause is established within a collective bargaining, then they must submit the controversy to arbitration.
- 27.Does the law provide that post-award interest accrues on an unpaid award?
Yes it does. The interest rate is calculated pursuant to the Costa Rican National Bank rate for six months a deposit starting from the date that amount of money was supposed to be paid.
- 28.Is a labour court or board empowered to award attorneys’ fees to the prevailing party?
Yes it does. The attorney’s fees may be granted based on the award. The judges grant a 15 to 25 per cent of the award (principal plus interests) to the prevailing party for attorney’s fees.
- 29.Please describe the standard used by the courts in deciding whether to vacate an award.
In the event the ruling does not resolve issues presented by both parties during the proceedings, if the ruling relates to issues that were not discussed, if the ruling grants more than what the parties requested, if there were errors during the proceedings that may result in a violation of due process, poor evaluation of proof.
- 30.Can a foreign award be enforced if the award has been set aside by the courts?
If an application to set aside judgment was made, that application will not suspend the enforcement of the award, unless the claimant produces a warrant.
- 31.In brief, what advice do you have with respect to labour or employment relationships and agreements for a foreign lawyer advising a foreign client contemplating entering into a business deal with a company from your jurisdiction? What are the red flags?
The foreign client must seek proper counselling in order to elaborate contracts with flexible clauses, concerning issues, for example, a day’s work, a day’s wages, salary, retribution scales, category variations, working place, which may allow changes during the course of the employment relationship without creating contingencies for the company.
Also we recommend an extensive jurisprudence investigation in order to determine the scope of certain legislation which cannot be established only by studying the law, since there are certain requirements in labour matters created by the Supreme’s Court Labour Board.
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