Law 157 of August 3, 2020

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Establishing temporary measures to protect employment in companies affected by COVID-19.

Below we highlight the main points:

• The Law applies exclusively to companies that have closed, in whole or in part, their operations since the beginning of the national state of emergency and to workers whose contracts have been suspended by tacit or express authorization of the Ministry of Labor and Labor Development during this period.

• The suspension of workers’ contracts may be extended, month by month, until December 31.

• The employer may gradually restart its economic activity and gradually reintegrate workers with suspended contracts.

• The hiring of new workers in the same or similar position to a suspended worker is prohibited. The hiring of new workers will only be permitted if companies require new jobs.

• The gradual reinstatement of workers with suspended employment contracts may not be used as a measure of retaliation or discrimination for reasons of union, race, sex, religion, health, disability or any other type, to the detriment of the workers. Any employer who is found by the administrative labor authorities to have incurred in this prohibition will be sanctioned with fines ranging from $500.00 to $1,000 for each discriminated worker.

• Employers who have resumed operations may establish work shifts other than those currently in force at the company, informing workers of such changes 48 hours in advance.

• Workers who do not receive the second installment of the Thirteenth Month, due to the suspension of their employment contracts, will be entitled to a bonus whose amount will be determined by the Executive Branch and paid by the Ministry of Economy and Finance.

• For terminations by mutual agreement, the employer will provide the employee with a written proposal to which he must respond within two business days. If the mutual agreement is signed before the established deadline has elapsed, the employee may demand the nullity of the agreement before the sectional labor courts and request reinstatement.

• Termination of the employment relationship by mutual consent, dismissal or by unilateral decision of the employer, within three months following the reinstatement of the suspended worker, requires the immediate cancellation, in a single payment, of all the benefits to which the employee is entitled.

•  The calculation of the seniority bonus and compensation for workers whose contract has been suspended or for workers with reduced working hours will be calculated based on the wages received during the previous six months or the last monthly salary before the declaration of the national state of emergency, whichever is more favorable to the worker.

•  The calculation of the time corresponding to maternity leave is suspended during the period of suspension of the effects of employment contracts, when this is due to force majeure or economic incapacity to continue activities. The remaining time of the leave will be reactivated as soon as the worker returns to work.

For questions regarding these new provisions, please contact us at igranet@icazalaw.com.

See the complete list of COVID-19 Regulations established by the Government of Panama at the following link: COVID-19 Regulations.

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