Panama

    1.1 In what circumstances does the employee transfer law apply?

    Under Panamanian law, there is no specific law regulating the employment aspects of a transfer of a business.

    However, changes to the legal or economic structure of the business do not generally affect existing employment relationships in a way that is harmful to employees.

    Employees do not transfer automatically, but the sale of a business may constitute an ‘employer substitution’, in which case employees’ rights will be protected.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    When a new employer acquires all or most of the old employer’s assets there is an ‘employer substitution’. For this to happen, the new employer must continue with the same or a similar commercial activity as the old employer, in which case, it will keep, for example, the same personnel, organisational structure and location.

    (b) Outsourcing

    The ‘employer substitution’ rules do not apply to outsourcing and employees are therefore not protected under the transfer rules. However, employees are protected by the laws governing outsourcing, which say that organisations that use the services of outsourced employees are jointly and severally liable with the organisation that employs them, in relation to all wages, benefits and indemnities during the time their services are used.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    If the ‘employee substitution’ rules apply:

    • The transferor will be jointly and severally liable with the transferee for obligations under agreements or imposed by law which arose prior to the date of the transfer and for a period of one year from the date of the notice referred to below.
    • Notice of the substitution of a new employer must be given in writing to employees and their trade unions, not later than 15 days after the date of the transfer.
    • Failure to give notice of the transfer will mean that joint and several liability continues until notice is given.
    • The ‘employer substitution’ (transfer) must be communicated to the Social Security Institute within 30 days from the date of the substitution.
    • The employees’ terms and conditions are maintained with the new employer. 
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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.1 Who transfers?

    The employees will be subject to an ‘employer substitution’ and consequently, the transferee will be the new employer.

    If only part of the business transfers, but this includes most of the assets or a significant portion of them, there will be an ‘employer substitution’.  However, note that if the employees spend part of their time on one activity and part on another, those employees will not transfer.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.2 Can employees object to transferring?

    Employees have no right to object to an employer substitution.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    The terms and conditions of an employment relationship can only be changed by a collective bargaining agreement, the internal rules of the company or by mutual consent.

    Modifications to terms and conditions will be permitted as long as they are not detrimental to the employee.

    Consequently, in an ‘employer substitution’, the terms of the contracts remain the same.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.4 What about other employee benefits?

    All other employee benefits must be maintained with the transferee. They can only be changed with the consent of the employees and provided they are not less favourable to the employees than the old terms.

    If it is difficult for the transferee to provide a particular benefit, the transferee must nevertheless try and offer something equivalent.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.5 What happens to pension rights?

    Pension rights under the transferor remain in place with the transferee. However, if the transferor had a pension scheme but the transferee does not, there is no obligation on the transferee to provide one. That situation would not be regarded as an ‘employer substitution’ and so the transfer rules would not apply.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.6 What liabilities transfer?

    In principle, all liabilities transfer upon an employer substitution. However, note that this does not include criminal liability of the seller.

    It is not necessary for the transferor to agree indemnities for liabilities relating to the employees. No statutory severance or termination payments need be made. by the transferor or transferee to the employees in connection with the transfer.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.7 Do collective agreements transfer?

    If there is an employer substitution, the new employer must respect the collective agreement agreed made with the old employer. The old agreement can be changed, but only with the consent of the employees.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    The transferor cannot share information about employees with the transferee without the employees’ consent.

    However, as soon as the transferee has become the employer, it will have access to the employees’ information.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    Employers cannot make changes to employees’ contracts without their consent and the changes cannot be less favourable to the employees than their previous conditions. There are no additional rules.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    If there is an ‘employer substitution’, there is no means for the employer to dismiss the employees safely.  The termination of employment contracts in Panama is highly regulated. Contracts for a fixed period will end when the period has elapsed. Employment contracts for an indefinite period can be terminated by voluntary resignation by the employee, by the mutual agreement of both parties or by dismissal based on one of the ‘justified causes’ set out in law. Note that if the employer tries to dismiss people by reason of the transfer, this would automatically be regarded as unjust.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    4.1 Who must employers consult?

    There are no information or consultation obligations on employers in the event of a business transfer.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    4.2	What information must they provide?

    No information need be provided.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    4.3	What does consultation involve?

    There is no legal requirement to consult.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    4.4	How long does consultation last?

    There is no legal requirement to consult.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    Not applicable.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    No statutory severance or termination payments are payable to employees by the transferor or transferee following a transfer of assets.

    If there is no ‘employer substitution’, the transferee may hire employees of the transferor who have terminated their employment relationship with the transferor, either by resigning or by mutual consent. However, in this event, the employees would not retain the same employment conditions, as a new employment relationship would be created.

    In Panama, the employer must register its employees with the Social Security Institute as soon as they have started working. This covers the social security system for health, maternity leave, disability, retirement pension and death by causes not related to work. The employer pays part of the social security contributions and withholds the employee's portion, so as to pay it directly to the Social Security Institute.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    The employer substitution laws do not apply to cross border transfers either into or out of Panama.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    The main rules governing ‘employer substitution’ are contained in the Labour Code, and Law 51 of 27 December 1995, by which the Law of the Social Security Institute has been amended.

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    Author: Arosemena Noriega & Contreras

    Date: January 2017

     

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