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By: Estefanía Guardia – Lawyer
I. General
In the Republic of Panama, as in other countries in the region, it is very common to hire domestic employees to assist with household care.
The domestic employee provides a personal service, since he/she assists in the tasks proper or inherent to a person’s or a family’s home. This includes housekeeping, cleaning, ironing, gardening and cooking activities, as well as the tasks carried out by the “nannies” or those who take care of young children or elderly adults, and the chauffeurs.
In domestic work there is no profit-making interest on the part of the employer; in fact, those who hires domestic services does not do so with the aim of obtaining a profit based on these services but do so for the benefit of their own family and household needs.
Domestic work is important for a country’s economy as it allows other people to work outside the home, while others take care of household chores.
This boosts the economy and creates a greater flow of capital, since hiring a person – a domestic employee – to take care of household chores, in addition to generating employment, in turn allows the person who develops professionally outside the domestic sphere to engage on their work full time.
II. Regulation In Panama
The Labor Code of the Republic of Panama regulates matters relating to domestic work. Article 230 defines it as employees who provide, on a regular and continuous basis, housekeeping, assistance, or other services typical of the home of a person or the family members.
We can highlight the following legal characteristics about domestic work:
1. The contract may be verbal or written. The domestic employee has a more informal hiring process than other employees.
2. In an Individual Labor Contract for Domestic Services, it is feasible to establish a probationary period of only two (2) weeks, within which the employer can terminate the employment relationship without liability or obligation to compensate the domestic employee. However, the probationary period must be included in a written labor contract; if the hiring of the domestic employee is formalized verbally, then the probationary period does not apply.
3. The service of domestic employees shall not be subject to schedules, but they shall enjoy at least an absolute rest from 9 p.m. to 6 a.m. and have a weekly rest plus annual paid vacations.
The domestic employee shall enjoy paid rest during holidays or national mourning days, unless the employer orders or permits the provision of the service, in which case the workday shall be paid with a surcharge of one hundred percent (100%) of the wage earned.
4. Domestic employees have the right to enjoy thirty (30) calendar days of paid vacations, for every eleven (11) months of continuous work at the service of their employer.
5. The labor contract may be terminated at any time and must only be notified with a thirty (30) days’ prior notice, which may be made verbally.
6. In order for the employer to terminate a domestic service contract without justified cause, the employer must pay severance pursuant to the following table:
Service Time Severance to be paid
From 2 weeks to 3 months of services 1 week wages
From 3 months to 1 year of service 2 weeks wages
1 year to 2 years of service 1 month’s wages
2 years to 4 years of service 2 months’ wages
4 years to 6 years of service 3 months’ wages
6 years to 10 years of service 4 months’ wages
10 years to 15 years of service 5 months’ wages
From 15 years to 20 years of service, 6 months’ wages
From 20 years of service onwards 7 months’ wages
7. In labor terminations by mutual agreement, severance pay is completely negotiable.
8. Any settlement of employment benefits, regardless of the form and/or cause which motivates the labor termination, must include the payment of the outstanding wages (if any), pending and/or proportional vacations, thirteenth proportional month and, if the labor relationship was for an indefinite period, the seniority premium (at the rate of 1 week of salary for each full year of services).
9. Domestic employees are entitled to be granted the necessary leave by their employer to attend school, as long as it is compatible with their working schedule.
10. Unless otherwise agreed, it is presumed that the remuneration of the domestic employee includes, in addition to payment in money, the provision of food and housing.
11. The employer shall bear the funeral expenses of the domestic employee.
12. It is forbidden to hire children under 14 years of age to perform household chores.
III. Recommendations for the hiring of domestic employees
1. Always formalize the hiring of a domestic employee in writing through an Individual Labor Contract for Domestic Services.
Documenting all aspects of the domestic service labor relationship (hiring, permits, payments, and loans or salary advances) shall allow the employer to have sufficient evidence to defend himself/herself against labor claims that the domestic employee may file at any given time.
2. Place as many tasks as possible in the Individual Labor Contract, to minimize the risk that, subsequently, the domestic employee does not want to comply with an instruction alleging that it is not part of his/her tasks and responsibilities because it is not properly identified in his/her Contract.
3. If the employer decides to pay the salary in cash, it is advisable to implement a payment control, so that he/she can properly document each of the payments which are made in favor of the domestic employee, whether it is a biweekly salary, vacation, thirteenth month, etc.
4. If the employer requires and demands his/her domestic employee to wear a uniform, then he/she must provide it free of charge, i.e., at no cost to the domestic employee.
5. Register domestic employees before the Caja del Seguro Social (“Social Security Agency”); this, in addition to being a legal obligation, shall prevent the employer from having to take responsibility for the medical (hospital, medicines) and economic benefits (disabilities, maternity leave) arising from an accident at work.
IV. Conclusion
Although the domestic employee has a more informal hiring system and labor relationship compared to the rest of the employees, they have labor rights that must be respected during and at the termination of the labor relationship.
The domestic employee provides dignified work within the organized societal structure, which is often undere
