Employer responsibilities to employees in the event of bankruptcy, closure or personnel reduction

  • By:Vianela Morillo
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The Dominican Republic Labor Code establishes the possibility of suspending all the employment contracts of a company.

This process is done with prior authorization from the Department of Labor, and is made possible for the following reasons:

  • Lack of raw materials, as long as it is not attributable to the employer (ordinal 8, article 51 of the Labor Code of the Dominican Republic).
  • Lack of funds for the normal continuation of work, if the employer fully justifies the impossibility of obtaining them (ordinal 9 of article 51 of the Labor Code of the Dominican Republic).
  • Surplus production in relation to the economic situation of the company and market conditions (ordinal 10 of article 51 of the Labor Code of the Dominican Republic).
  • Company operations become unaffordable (ordinal 11, article 51 of the Labor Code of the Dominican Republic).

The suspension of the effects of the employment contract based on what was described above, in accordance with article 55 of the Labor Code of the Dominican Republic, may not exceed ninety (90) days in a period of twelve (12) months.

What if the cause of the suspension persists beyond this ninety (90) day period?

Suspensions that extend beyond the term of ninety (90) days, within the indicated period of twelve (12) months is unlawful. If the cause of the suspension persists beyond this period of ninety (90) days, the company will be obliged to terminate employment contracts, in accordance with the provisions of article 82 of the Labor Code of the Dominican Republic.

On the other hand, the Labor Code of the Dominican Republic (ordinal 5, article 82) has also established the payment of “Economic Assistance”, after approval by the Department of Labor, in the following cases:

  • Bankruptcy of the company, provided that the operation of the business ceases completely.
  • Closing or definitive reduction of its personnel, as a result of lack of elements needed to continue operations, if the business becomes unsustainable or a similar cause.

Economic Assistance is a compensation that must be paid to the worker when the contract ends, on one of the grounds established in Article 82 of the Labor Code of the Dominican Republic. In this case, Economic Assistance is a substitution of “labor benefits”.

The Labor Code of the Dominican Republic , establishes the process to follow for cases in which “there is a need to downsize the personnel of a company, on grounds authorized by law” in articles 141, 142 and 143. This creates a system that benefits employees who are married and have family responsibilities, as well as Dominican workers over foreign workers.

Economic Assistance AMOUNT

As we have mentioned in other articles, the amount to be paid is determined by the Dominican Labor Code, in article 82, which establishes the following: «Economic Assistance of five days of regular salary is provided, after continuous work of not less than three months or more than six, a regular salary of ten days after continuous work of not less than six months and not more than one year, and a regular salary of fifteen days for each year of service provided after one year of continuous work, when the employment contract ends…».

In other words, in accordance with the provisions of this article, the employee will be paid 15 days of salary (calculated with the regulatory factor of 23.83) for each year of service, 10 days for 6 months to one year of service and 5 days for 3 to 6 months of services rendered.

HOW TO REQUEST A SUSPENSION DUE TO FINANCIAL HARDSHIP IN THE COMPANY

As mentioned previously, the maximum duration of a suspension is 90 days in a twelve-month period.

After the suspension is requested, if the employer needs an extension of said suspension, the Department of Labor will have the power to grant it, if the causes of the suspension persist, as long as they do not exceed the established term.

The communication must include the following:

  • The cause
  • Possible duration
  • Additionally, the authorization request for the suspension must be accompanied by all the documents that may support it.

The Department of Labor will verify if the alleged cause of suspension is valid, and will issue the corresponding resolution in no more than 15 days (article 56 of the Labor Code).

The authorization of the suspension must be communicated in writing to workers as well as the Department of Labor, in less than three days after the cause that originated said suspension took place.

In the event that the cause that motivated the suspension ceases to exist, the suspension would end as well. The employer should immediately resume work accordingly and inform the Department of Labor.

Our Morillo Suriel Attorneys at Law firm has a division specialized in Labor Law, which can assist you with any questions or concerns you might have in the matter.

We are available

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