Termination at Will Returns

On Christmas Eve, the Argentine Government issued Decree No. 886/2021, which orders a gradual phasing out of double severance for dismissals and puts an end to the prohibition on termination at will by the employer. The double severance has been in effect for over a year since the declaration of a Public Emergency in Occupational Matters by Decree No. 34/2019, which was extended three times by Decrees No. 528/2020, 961/2020 and 39/2021.  The government’s prohibition of an employer’s ability to terminate without cause has been in effect since late March 2020.

Decree 886 announces the end to the government’s prohibition on dismissals without cause for all employees hired before December 13, 2019. The Decree allows these dismissals, though keeping in place a severance supplement payable to the employee. This supplement decreases over the next six months according to the following schedule:

• For dismissals between January 1 and February 28, the employer must pay statutory severance plus a supplement equal to 75% of that amount.
• For dismissals between March 1 and April 30, the supplement is reduced to 50% of statutory severance.
• For dismissals between May 1 and June 30, the supplement falls to 25% of statutory severance.

The phase-out retains the cap on the supplement of AR$500,000 established by Decree No. 39.

After June 30, 2022, the employer’s cost to terminate at will reverts to the preceding statutory rules in which an employee is paid severance based on the term of employment and without any supplement.

As with the preceding Decrees, the supplement does not apply to any employees hired after December 13, 2019 or to federal government employees. The supplement will apply to construction industry workers, who had previously been exempted.