GUATEMALA - Employment Law Alliance



GUATEMALA

Cynthia Müller

Arias & Muñoz

Avenida Reforma 7-62 zona 9

Edificio Aristos

Oficina 1001E

Guatemala, Guatemala

Cynthia.muller@

What are the key employment and labor law issues that must be identified and addressed before the transaction takes place?

• A Labor Due Diligence must be executed for all the companies involved in the transaction.

• Request a copy of company policies and internal regulations.

• Practices of payment of labor benefits to the employees, and for the labor agreement terminations.

• An analysis to determine acquired rights and seniority of the employees

What unilateral changes can the new employer make to wages, benefits, and other terms and conditions of employment?

• The new employer cannot make unilateral changes to wages, benefits, and other terms and conditions of employment.

• No changes can be made to the employee´s detriment. The new employer cannot diminish any right of the employees.

• In general, the new employer will have to honor the rights derived from the previous labor agreement, and the seniority of all the employees. It can, however, always improve the conditions of the employees,.

• Is important to notify employees of any internal regulations of the new employer, in order for the employees to sign a document acknowledging they are aware of the company’s rules.

• In case of an employer substitution, the employee must sign an agreement with both the former employer and the new employer

• In case of a merger, the labor agreements of the employees that are going to be transferred to the other employer must include a note stating the change of the employer and the date of the merger. The labor rights remain the same.

What legal rights and guarantees can’t be waived when an acquisition occurs?

• In Guatemala, labor law is considered a public order law such that minimum labor rights cannot be waived. These rights include: minimum salary or salary agreed with the employee, work schedules agreed upon, Christmas Bonus, Annual Bonus, 15 days of vacations, and severance for time served.

• Other rights known as “acquired rights” should also be taken into consideration. Even if they are not required by law, if an employee has acquired these rights throughout the relationship, they cannot be easily eliminated afterwards. If the intention of the company is to eliminate or change them, compensation to the employee must be considered.

What liabilities remain with the former employer?

• In instances of acquisitions, the substituted employer will be liable along with the new employer for the obligations derived from the labor agreement or legal provisions from the date of the substitution up to six months, after which time the new employer will be liable for the obligations derived from the labor contract. This is not applicable for mergers if the former employer is going to disappear due the merger.

• During the transaction in cases of acquisition, the parties can decide whether to terminate employment agreements and pay severance and proportional labor benefits or to continue the employment relationship, which would imply payment of all the years of service once the relationship comes to an end. In case of a merger, the liabilities of the labor agreements will be assumed by the new employer.

What are the top three ways to work effectively with a labor union during one of these transactions?

• If the companies involved in the transaction have a union, the parties must review the Collective Bargain Agreement in order to verify if it includes provisions regarding change of control of the employer. If the Collective Bargain Agreement includes the conditions on how to handle labor substitutions, the transaction must be carried out under these provisions.

• If the case is that they do not have those provisions included in the Collective Bargain Agreement, the companies must proceed with the labor substitution in accordance with law, and negotiate with the union if necessary regarding the conditions for the substitution, according to the applicable provisions of the Labor Code to the labor substitution. According to the Commercial Code, with a merger, the company that will absorb will become the new employer. In this case the recommendation is to keep the Executive Committee of the union duly informed about the change. With a merger, the union of the entity that is being acquired will disappear; however, the rights originated from the Collective Bargaining Agreement will be honored; the union cannot be transferred – only the employees. Depending on the scenario when the merger takes place, the parties can agree that the labor contracts are not included in the transaction. If that occurs, the entity to be absorbed must terminate all labor contracts with all employees according to the labor law, including those in unions, and the new employer will start a new relationship with the employees from the acquiring company. By doing this, the employee will carry out the labor employment contract under the practices of the new employer. It also provides the new employer with an opportunity to determine if it needs all the employees or can hire only some of the employees in order not to duplicate the staff due to the merger.

• In all cases, the parties must consider that the intervention of the Labor Inspection will be present in order to verify that the substitutions or terminations are carried out in accordance to law.

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