Peru

    1.1 In what circumstances does the employee transfer law apply?

    There is no specific employee transfer law in Peru but employee rights are protected upon transfer based on case law and general practice. Employees are protected when their employer changes as a result of a sale, merger or spin-off of the company.

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    Author: Estudio Olaechea

    Date: March 2017

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

    (a) Sale of a business

    Employees are protected on sale of a business based on case law and general practice.

    (b) Outsourcing

    By law, outsourcing means contracting with companies to provide specialised services where:

    • the company providing the service does so on its own account and at its own risk;
    • has its own financial, technical and material resources;
    • is responsible for the results of its activities;
    • its employees work under its full subordination.

    To be subject to the law, the outsourcing must also involve the employees of the company providing the service moving to the offices of the hiring company. In addition, it must be a continuous, as opposed to an ad hoc, arrangement.

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    Author: Estudio Olaechea

    Date: March 2017

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

    The transferred employment relationships continue without a break and the transferee must respect their terms and conditions, as these are acquired rights. Where this means that some employees are under different terms and conditions than others at the transferee, the transferee may try to harmonise their conditions. However, any new conditions must not be less favourable than those enjoyed at the transferor.

    Further, a transfer must not be used as a reason to terminate employment. If employees object to being transferred, the transferor must dismiss them and pay the legal indemnity or negotiate termination on mutually agreed terms.  If the employer dismisses an employee, the employee can claim reinstatement in the job and so the employer should ensure it can prove the employee was given the option of working at the new employer but refused to transfer.

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    Author: Estudio Olaechea

    Date: March 2017

    2.1 Who transfers?

    The seller transfers the employees to the buyer. When only part of a business transfers, the parties can agree which assets or liabilities transfer and which employees cross over. If certain employees spend some of their time on the transferring activity and some on other activities, the transferor will decide whether they transfer. Note that employees can refuse to transfer and choose stay with the transferor.

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    Author: Estudio Olaechea

    Date: March 2017

    2.2 Can employees object to transferring?

    The consent of the employees is needed before a transfer takes place. The employee has the right to refuse to be transferred, but in this scenario the seller can dismiss the employee upon payment of a statutory indemnity. If the employee refuses to be transferred but the seller does not terminate the employment contract, the employee can continue working with the seller.

    If the employee refuses to be transferred and the employer dismisses the employee, he or she also has the right to request reinstatement in the job with the seller. In these circumstances, in theory, the seller should make it clear that the employee has the right to continue working with the buyer but refuses to be transferred.

    Note that if more than 10% of the employees refuse to transfer, the company could initiate a ‘collective cease’ (i.e. a collective dismissal before the Labour Authority. If this is granted, the company would not be obliged to pay the usual statutory indemnity to the employees. This process takes approximately 90 days. In our experience, no collective cease has ever been approved by the Labour Authority so it is better to agree the termination of employment with the employees.

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    Author: Estudio Olaechea

    Date: March 2017

    2.3 What happens to terms of employment contracts?

    There is no law regarding the terms of employment contracts upon transfer. However, case law has established that transferred employees keep their former employment conditions. If the transferor, transferee and employees have not made any specific agreement about this in the transfer agreement, the employees have the same benefits and conditions as they had with the transferor.

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    Author: Estudio Olaechea

    Date: March 2017

    2.4 What about other employee benefits?

    All other benefits granted by the transferor must be transferred, unless the parties agree different conditions. The transferee should maintain or improves existing benefits.

    Note however, that statutory profit shares do not transfer, as the transferee’s profits depend on its earnings and the total number of employees on its payroll. However, if the transferor has a profit share plan that is different from the statutory one, this should be transferred.

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    Author: Estudio Olaechea

    Date: March 2017

    2.5 What happens to pension rights?

    By law, employees have the right to choose the system they want to contribute to, which is either the National Pension System, requiring a monthly contribution of 13%; or a private pension managed by a pension fund management company, whose contributions depends on the one selected, but may be around 12.9% of salary. Contributions are paid by the employees. Pension rights are managed by an independent legal entity and are not affected if the employer changes.

    If the transferor grants its employees a different pension scheme or benefits to those offered by the transferee, this must be transferred to the transferee.

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    Author: Estudio Olaechea

    Date: March 2017

    2.6 What liabilities transfer?

    In principle, all the transferor’s labour obligations, including as pay and other labour benefits transfer to the transferee. However, note that criminal liabilities stay with the person who committed the offence. There may be joint liability for some obligations, depending on what is agreed between the parties, but labour matters will always be the responsibility of the transferee. The transferor will have no liability for matters that arise after the transfer.

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    Author: Estudio Olaechea

    Date: March 2017

    2.7 Do collective agreements transfer?

    In the event of a merger, transfer, sale, change of line of business or other similar situation, the collective bargaining agreement remains in force until it expires. This has been confirmed by case law and serves to protect employees’ acquired rights. Only in cases where parties have agreed to renew particular provisions, can the conditions be changed. Other conditions remains in force until the collective bargaining agreement expires.

    The law provides that terms agreed in collective bargaining agreements cannot be waived and so even if employees agree to waive provisions, the employer should not rely on this.

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    Author: Estudio Olaechea

    Date: March 2017

    2.8 How does the transferee obtain information on transferring employees?

    The transferor is the party that holds information about the employees and may pass information to the transferee but is not obliged by law to do so. Any disclosure of information must be done in such a way as to comply with the personal data protection law in Peru. This means that the data subject’s consent will be required before information can be disclosed to the transferee.

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    Author: Estudio Olaechea

    Date: March 2017

    3.1 Can employers make changes to employment contracts?

    The terms of the employment contracts can be changed by individual negotiation with employees, with their written consent. The law says that the way in which changes are negotiated must be reasonable and proportionate, as employers are the stronger party within the labour relationship. Employers should be able to modify the terms if the new terms will provide the employees with effective protection but the employer must ensure that the interests of both parties are satisfied. If any proposed changes do not meet these requirements, they could be challenged by employees and possibly also the authorities.

    Note that the changes cannot serve to reduce or remove acquired rights (e.g. pay and bonuses) contained either in individual employment contracts or in collective bargaining agreements.

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    Author: Estudio Olaechea

    Date: March 2017

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

    Employees are entitled to employment ‘stability’ and cannot be dismissed unless there is a fair reason, as strictly provided by law and a special procedure is followed. Dismissals are deemed fair in the following cases:

    • commission of a serious offence
    • criminal conviction for fraud
    • a judicial or administrative order which prevents the employee from doing the job
    • physical, intellectual, mental or sensory impairments which hinder the performance of the employee’s duties, provided the employee can be transferred to other duties that do not involve risks to their health and safety
    • low performance compared to the average work performance of employees in similar conditions
    • the unjustified refusal of the employee to take medical tests previously agreed or required by law, or to comply with treatment prescribed by a doctor.

    Termination by reason of a transfer is not a legal cause for termination under Peruvian law.

    If an employee refuses to be transferred and the transferee dismiss the employee, he or she could claim reinstatement in the job or payment of the legal indemnity (equivalent to 1.5 months’ salary per year of service, with a maximum of 12 months’ salary). The transferee could argue that the employee had the right to continue working with the transferor but refused to do it.

    If the percentage of employees who refuse to transfer is more than ten percent of the transferor’s payroll, the transferor could request approval for a collective redundancy before the Labour Authority, by which these employees would be terminated without the need to pay them the statutory indemnity. Note however, that we are unaware of any cases in which the Labour Authority has approved such a course of action.

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    Author: Estudio Olaechea

    Date: March 2017

    4.1 Who must employers consult?

    The transferor must directly inform and consult the staff being transferred about the transfer, in order to obtain their consent.

    In addition, the transferee must inform the relevant authorities about the transfer. These will include the Tax Authority, for income tax purposes; the Labour Authority, to provide it with information about the change of employer; and the financial entities that receive payments by the employer for time served with the employer, to give them information about who will be responsible for making payments going forward.

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    Author: Estudio Olaechea

    Date: March 2017

    4.2	What information must they provide?

    Peruvian law does not specify what kind of information should be provided to the employees. However it is common practice to inform employees about the assets being sold, the proposed date of the transfer, the reasons for it and the labour benefits. If the employees refuse to be transferred, the transferor must inform them of what might occur as a result:

    • the transferor might dismiss the employees, by paying them the statutory indemnity;
    • the transferor and the employees might mutually agree that the employment should be terminated
    • the transferor may seek approval for a collective dismissal with the Labour Authority to terminate the labour relationships with the employees without the need to pay the statutory indemnity.
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    Author: Estudio Olaechea

    Date: March 2017

    4.3	What does consultation involve?

    There are no rules about consulting employees before a transfer. However, in order to maintain a good working environment, it is important that the employees should be properly informed about the transfer and how it will affect them. The transferor should try to convince the employees about the benefits of continuing to work with the transferee.

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    Author: Estudio Olaechea

    Date: March 2017

    4.4	How long does consultation last?

    Peruvian law does not set out a time limit for consultation and it can be difficult to predict how long it will take.  

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    Author: Estudio Olaechea

    Date: March 2017

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

    There are no sanctions if the employer fails to properly inform or consult. If the transferor does not take enough time to explain the transfer to the employees, the employees might refuse to be transferred. If so, the transferor must terminate the labour agreements with the employees and pay the statutory indemnity to each employee or follow the collective dismissal procedure. This process of collective dismissal takes approximately 90 days. Thus, it is important to inform and consult with employees at least 90 days before a proposed transfer.

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    Author: Estudio Olaechea

    Date: March 2017

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

    In Peru the Labour Authority rarely approves a collective dismissal and so it is better if the employer can terminate the employment contracts by mutual consent. In such cases, the employer would normally pay the indemnity payable upon unjustified dismissal.  Generally, if an employee is unfairly dismissed without any compensation, he or she can make a claim for payment of the statutory indemnity.

    There is joint liability on both the transferor and transferee for  labour obligations arising prior to the transfer.

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    Author: Estudio Olaechea

    Date: March 2017

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

    In principle, if a foreign national enters to Peru for work purposes, he or she must apply for a work visa. This applies to foreigners entering into the country to provide services under an employment contract with a local company and the visa must be approved before work can commence by the Peruvian Labour Authority. There are specific exceptions based, for example, on the nationality of the employee. If the transfer is to a transferee outside the country, Peruvian law does not apply and there is no protection under Peruvian employment law.

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    Author: Estudio Olaechea

    Date: March 2017

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

    The main law is the Law of Labour Productivity and Competitiveness, contained in the Single Revised Text of Legislative Decree N° 728, approved by Supreme Decree N° 003-97-TR, and its Regulations, as approved by Supreme Decree N° 001-96-TR.

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    Author: Estudio Olaechea

    Date: March 2017

     

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