Labor Reform in Colombia: 6 Implications for Companies

The Labor Reform in Colombia is shaping up to be a crucial issue that will have a significant impact on the relationship between companies and their employees in the country. In light of this perspective, BéndiksenLaw, a law firm specialized in counsel for national and multinational companies, has conducted an informative webinar where the most relevant aspects of this reform were analyzed, revealing six key elements that will affect labor relations in companies.

1. Higher labor costs: One of the direct consequences of labor reform, according to Sebastián Béndiksen, lawyer and master of law from Universidad de los Andes and managing partner at BéndiksenLaw, will be the increase in labor costs for companies. All labor surcharges and indemnities will be affected, as well as payments associated with apprenticeship contracts. Additionally, the extension of paternity leave will also impact the operational costs of companies. An important change is the modification in the night shift surcharge payment schedule, which will start from 6 p.m. instead of 9 p.m., implying an additional cost in companies’ operations. There will also be limitations on working hours and the total time a worker can work, which will require some companies to hire new personnel to cover vacant shifts.

2. Greater job stability: The labor reform aims to provide greater job stability for workers, which will imply changes in the way companies hire. The general rule will be indefinite-term employment contracts, granting greater stability to employees. However, this will also entail higher costs for employers. Furthermore, stricter restrictions will be imposed on dismissals, including the prohibition of arbitrary or discriminatory dismissals, in which case workers will have the right to request reinstatement.

3. Limitation on outsourcing: Another relevant aspect of labor reform is the limitation on outsourcing and the hiring of temporary services. Once the provision of temporary services, which will have a maximum duration of one year, is completed, it will not be possible to extend the contract or hire with a different temporary services company. Additionally, in case of disputes, there is a possibility that the company hiring the services will be considered the true employer of the temporary workers, despite the outsourcing. This means that companies outsourcing services will have to assume greater responsibility and be prepared to face possible legal disputes questioning their role as employers.

4. Review of internal policies: Implementing the Labor Reform will require all companies to review their current contracts and internal regulations. It will be necessary to adjust dismissal processes and include aspects related to inclusion and labor rights in companies’ internal policies. For example, special attention must be given to the non-discrimination of non-binary individuals and the protection of those who change their gender identity. Additionally, almost any form of inappropriate behavior will be considered workplace violence, and companies will be required to offer flexible schedules in certain cases. These aspects, which are currently not present in most company regulations, must be incorporated to comply with updated labor regulations.

5. Job formalization: The Labor Reform includes a chapter dedicated to the formalization of jobs in various areas, such as digital platforms, agricultural work, employment for migrants, professional athletes, and domestic workers. This measure aims to promote the formalization of different economic sectors and encourage compliance with labor and social security obligations.

6. Strengthening of labor unions: The Labor Reform also aims to strengthen workers’ associations and labor unions, granting them greater facilities for their creation and operation. It is expected to be easier to establish unions and carry out strikes, with fewer opportunities for companies to declare strikes as illegal. Additionally, the consequences for those participating in illegal strikes will be reduced, and their dismissal is prohibited.

Despite the progress represented by the Labor Reform in terms of formalization and worker protection, BéndiksenLaw’s lawyers express concern that the public sector is not included in these modifications. They consider it essential to address abuses in the hiring of services in the public sector. Furthermore, the need to provide support and subsidies to companies during the transition process towards labor formalization, especially for small and medium-sized enterprises that will face a significant burden, is emphasized.

The Labor Reform in Colombia presents significant challenges and opportunities for companies. It is essential for companies to be informed and actively participate in the process of debating the legislation. There are still four pending debates in Congress, so it is crucial to stay attentive, communicate with representatives, and exert social pressure to ensure that the interests and needs of companies are taken into account in this reform. BéndiksenLaw positions itself as a source of specialized advice for companies seeking to adapt to the new legal and labor requirements.

Remember that at BéndiksenLaw, you will find the support and counsel you need to successfully navigate labor changes in Colombia. Do not hesitate to contact us for more information and to protect the interests of your company with this new labor regulation!

Watch the webinar (in Spanish)

To download the presentation (in Spanish) click here

New Regulation for Remote Work Contracts in Colombia

On April 9, through Decree 555 of 2022, the Colombian Ministry of Labor regulated the conditions that must be met by employers, workers and workers’ compensation administrators (ARL, by its Spanish acronym), for cases in which workers provide their services remotely. This type of work is known as remote work and is a form of performance of employment contracts in which information and communications technologies or similar means are used. In other words, employers and workers do not interact physically, since all the stages of the contract are performed virtually [1]. Therefore, companies that want to implement remote work must have a procedure that recognizes and respects the rights and guarantees of workers, as well as promote the appropriate use of information and communication technologies in a way that eliminates barriers that limit the performance of remote work. In this regard, this decree establishes new obligations for  remote employers, who must comply with  sending of a copy of the remote employment contract to the ARL along with: (i) the information of the place chosen for the provision of the service, (ii) any changes to this, (iii)  weekly work schedule, (iv) the occupational risk classification corresponding to the tasks to be performed and (v) the occupational risk classification corresponding to the company or workplace, as well as filling out the form required by the ARL. Additionally, the methodology to identify, evaluate, assess and control dangers and risks to workers of the company must include the category of remote work in order to adopt all necessary actions in the annual Work Plan of the Occupational Health and Safety Management System (SG-SST, by its Spanish acronym).

Likewise, employers must inform workers about the available means of communication to report any updates related to the performance of remote work, work accidents and occupational diseases. Similarly, every employer must order periodic medical evaluations to identify the health conditions of remote workers. Finally, employers must provide workers with safe work equipment and adequate means of protection, and virtually verify the health and safety conditions of the place where workers will perform their functions.

With respect to remote employment contracts, this decree establishes that they must contain the activities that workers must perform and the physical conditions of the workplace. In addition, the work tools that will be delivered to remote workers for the effective performance of their functions must be included in the contracts, as well as the liability for the custody of these items, the way in which these items will be delivered to and returned by workers, and the computer security measures that remote workers must know and comply with. Furthermore, the value of the assistance fee that employers must pay to compensate for the cost of energy, Internet and / or telephone services used in the provision of the services by the worker must be specified, which may not be lower than the value of the transportation aid established by the National Government. Employers and workers may also agree on a monthly compensation value for the use of work tools owned by the worker.

Moreover, employers may require remote workers, in exceptional circumstances, to attend the employer’s office or workplace in-person. These exceptional circumstances must be included in the employment contract. In addition, flexible schedules may be agreed upon by the parties and employers may implement corresponding technological mechanisms to ensure and verify the effective compliance with the schedule, without prejudice to workers’ right to disconnect from work.

In case you have doubts regarding these obligations or any labor issue, do not hesitate to contact us so that we can provide you with the legal counsel you need.

[1] Article 3rd, Law 2121 of 2021.

What Are “Wage-Exclusion Agreements” and What Are Their Limits?

In accordance with article 127 of the Colombian Labor Code, anything workers receive as a direct compensation for the service they provide must be considered wages, regardless of whether it is paid in money or in-kind, or the type or name given to this payment. However, it is possible for employers to grant other occasional sums to workers in order to achieve the full performance of their duties, without seeking to grant benefits to workers or grow their wealth. Likewise, it is possible for the parties to expressly agree to grant certain benefits or aids to workers, either regularly or occasional, without these being considered as part of their salary, since these sums are not intended to remunerate the work they perform; this is known as a “Wage-Exclusion Agreement” and these payments may not exceed 40% of the total remuneration received by workers[1].

With respect to these agreements, the Colombian Supreme Court of Justice, in judgment SL5159-2018, and reiterated in judgment SL5146-2020, recalled that these can only apply to those payments that, despite not directly compensating work, in the absence of a previous wage-exclusion agreement, could generate discussions and confusion regarding their nature, that is, whether they constitute salary or not. Such is the case of extralegal bonuses for food, room or clothing, holidays or Christmas, among others. Thus, employers will have the burden of demonstrating that these payments, despite being regular and/or habitual, do not have the direct purpose of remunerating the services of workers or growing their wealth, but instead have a different objective, such as guaranteeing the fulfillment of tasks or covering certain needs. This is necessary because employers do not include these sums in the payment of social security contributions (pension, health, workers’ compensation administrators) or social benefits (legal bonuses, severance and its interests, legally mandated work uniforms), since the basis for calculating these payments is solely the sum that does constitute wages. Therefore, in the event that the existence of a duly executed wage-exclusion agreement cannot be proved, the employer will be obliged to pay workers, as compensation, a sum equal to the last daily wage for each day of delay in the payments of these sums (contributions and social benefits), in accordance with the provisions of article 65 of the Colombian Labor Code.

Consequently, on March 23, the Colombian Supreme Court of Justice analyzed an appeal against a judgment that declared two (2) companies jointly and severally liable, for an ineffective wage-exclusion agreement. In this regard, the Court argued that even though the worker freely agreed to execute this agreement, it is not possible to exclude from her salary any amount that, by its nature, essence and purpose constitutes salary, more so if the employer cannot demonstrate that these payments do not have the purpose of remunerating the services of the worker. In other words, the employer, through a wage-exclusion agreement, wanted to exclude sums that were constitutive of salary since they compensated the work performed by the worker. Additionally, the Court recalled that, in these cases workers must file their claim within 24 months following the termination of the labor agreement. Otherwise, workers are no entitled to the compensation established in article 65 of the Colombian Labor but only default interest accrued from the termination of the contract.

For the specific case, the worker had worked with a company for 13 years under an open-ended labor contract, after which she was notified that the employer would be replaced by another company. However, before this replacement was made, the worker executed an additional clause to the contract through which she would be granted a monthly remuneration plus a “non-salary benefit” that would not be included in the basis for calculating social benefits and contributions to the social security system. This clause, despite the employer substitution, was in force until the moment of termination of the contract. In this regard, the Court recalled that article 69, paragraph 1, of the Colombian Labor Code establishes that previous and current employers are jointly and severally liable for any obligations that at the date of substitution are enforceable against the previous employer. It is for this reason that the determination made by the court of appeals to declare both companies jointly and severally liable and order them to pay the sums owed along with the default interest, was correct, which is why the Court decided to confirm the ruling.

At BéndiksenLaw we can help you draft, review and modify the employment contracts of your workers to ensure full compliance with the regulatory provisions on labor matters. We can also settle any of your doubts regarding this or any other labor issue. Contact us.

[1] Council of State, Fourth Section, File No. 05001-23-33-000-2016-02496-01(25185) of December 9, 2021, C.P. Dr. Milton Chaves García.