Collective Dismissal in Colombia

The employment contract may be terminated for different reasons such as mutual agreement between the parties, just cause, expiration of the agreed fixed term, completion of the work or labor contracted or without just cause. Regarding the latter cause, in fact, the labor regulations in force provide that employers have the right to terminate employment contracts without any justification, provided that there is a payment of an indemnity set forth in the law.

Now, although there are limitations to this power, such as the so-called "fueros", the law also establishes a limit for unfair dismissals, because if this limit is reached, it will be a collective dismissal, and a specific procedure must be followed.

This is how the issue of collective dismissal can generate certain doubts and concerns, so we want to explain the basic and most relevant aspects so that you can understand it better Let's start!

Understanding the legal grounds for collective dismissal: from contracts to alternatives to unfair dismissal

Understanding the legal fundamentals is crucial, so we will address key aspects that every company should understand. Each of these elements plays a significant role in the labor dynamics and has legal implications that should not be overlooked.

What is an employment contract?

As we have analyzed on other occasions, the employment contract employment contract is defined in articles 22 and 23 of the Substantive Labor Code, rules that indicate that it is a contract by which a natural person undertakes to render a personal service to another natural or legal person, under the continued dependence or subordination of the second and through the payment of a salary as consideration for the service.

What is unfair dismissal?

The article 64 of the Substantive Labor Code states that when an employee is dismissed unilaterally and without just cause, the employer must pay the respective indemnity for unfair dismissal set forth in said provision.

What is a collective dismissal?

In order to consider when there is a collective dismissal, it is necessary to refer to the provisions of numeral 4 of Article 67 of Law 50 of 1990, which establishes that the Ministry of Labor may not classify a dismissal as collective, but only when it affects in a period of 6 months a number of workers equivalent to:

1. To determine whether a collective dismissal is present, the total number of workers in the company and the percentage of dismissed workers are taken as a reference.terminations without just cause- in a period of 6 months.
2. In effect, it must be taken into account that the termination of employment contracts for any of the just causes established in the law or for legal cause, such as the expiration of the agreed fixed term, do not form the basis or sum for the purpose of identifying the cause of a collective dismissal.
3. If the number of workers that the company wishes to dismiss exceeds the legal limit, prior authorization must be requested from the Ministry of Labor under the terms of Article 57 of Law 50 of 1990. Article 57 of Law 50 of 1990.
4. The request for authorization to the Ministry of Labor must explain the reasons - accompanied by the corresponding justifications - for the collective dismissal and, at the same time, communicate such situation in writing to the workers who are the object of the request.
5. Collective dismissal shall not produce any effect without the prior authorization of the Ministry.
6. In addition, the Ministry of Labor may impose the sanction of fines on the company that does not request authorization for collective dismissal, pursuant to article 486 of the Labor Code. article 486 of the Substantive Labor Code..

Learn more about Termination of employment contract with just cause in Colombia.

Authorization of a collective dismissal

As indicated above, when a company decides or requires to carry out a collective dismissal, it must have the prior authorization of the Ministry of Labor.

Pursuant to Article 67, numeral 1 of Law 50 of 1990 of the Substantive Labor Code states that "When an employer considers that he needs to make collective dismissals of workers, or terminate work, partially or totally, for reasons other than those provided for in Articles 5, paragraph 1, subparagraph d) of this law and 7 of Decree-Law 2351 of 1965, he must request prior authorization from the Ministry of Labor and Social Security, explaining the reasons and accompanying the corresponding justifications, as the case may be. Likewise, it must simultaneously communicate, in writing, to its workers of such request".

The company must justify why it needs to carry out a collective dismissal, otherwise such authorization will not be extended.

On the other hand, in the event of not requesting prior authorization and exceeding the permitted limit of terminations, the law establishes as a legal consequence the ineffectiveness of the dismissals, indicating that they will not produce any effect, which entails not only the immediate reinstatement of the workers, but also the consequent payment of the salaries and benefits lost since the date of termination, due to the dismissal carried out without complying with the procedures established by law.

Likewise, in addition to the judicial claim that could be filed by the dismissed workers, the Ministry of Labor in different concepts such as the one identified under file No. 52570 of March 20, 2013, has recalled that the non-compliance or non-observance of the labor regulatory provisions - as it would be Article 67 of Law 50 - would lead to the application of the penalty with fines established in Article 486 of the CST, namely:

"The officials of the Ministry of Labor and Social Security indicated by the Government shall have the character of police authorities for the surveillance and control referred to in the preceding paragraph and are empowered to impose fines equivalent to the amount of one (1) to five thousand (5,000) times the minimum monthly salary in force each time, depending on the seriousness of the infraction and while it persists, without prejudice to the other sanctions provided for in the regulations in force. This fine shall be destined to the National Apprenticeship Service, SENA".

Termination of employment contract: everything your company needs to know

Is there a severance payment in a collective dismissal?

Collective dismissal is not a just cause for termination of the employment contract, for which reason the employees will be entitled to the corresponding severance payment for dismissal without just cause.

In effect, numeral 6 of Article 67 of Law 50 of 1990 of the Substantive Labor Code states that "When an employer or company obtains authorization from the Ministry of Labor and Social Security for the definitive, total or partial closure of its company, or to carry out a collective dismissal, it shall pay the workers affected by the measure, the legal indemnity that would have corresponded to the worker if the dismissal had occurred without just legal cause...".

In this sense, the authorization of the Ministry of Labor for collective dismissal does not make the dismissal fair, but legal, and therefore the payment of severance pay for termination without just cause must be made.

However, the following paragraph of the Substantive Labor Code states that "If the company or employer has a taxable net worth of less than one thousand (1,000) monthly minimum wages, the amount of the indemnity shall be equivalent to fifty percent (50%) of the aforementioned amount".

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Alternatives to collective dismissal

An alternative available to companies that need to incur in collective dismissals is to carry out a retirement plan that allows formalizing the dismissal of workers through mutual consent and not by the unilateral decision of the employer (which would not require the authorization of the Ministry of Labor). However, what is suggested is that these mutually agreed terminations include the recognition and payment of a transactional sum, which normally constitutes an additional amount to the severance payment that is significant.

Regarding the validity of retirement plans, the Supreme Court, among others, in Supreme Court of Justice, among others, in the judgment SL1427 of 2019 held:

First of all, it must be said that it has long been held that voluntary retirement plans are perfectly possible and valid within an employment relationship, hence they are not forbidden to employers, and neither can their proposal be qualified at first glance as illegal, a criterion that is peaceful and reiterated, and can be seen, among others, in rulings CSJ SL, 4 Apr. 2006 rad. 26071 and SL, 3 May 2011, rad. 39045, which outlined the following:

It is not superfluous to recall what the Court has long and peacefully taught in the sense that there is no prohibition whatsoever that prevents employers from promoting compensated retirement plans, or from offering their workers sums of money as bonuses, for example for restructuring, without this, in itself, constituting a mechanism of coercion, since such proposals are legitimate to the extent that the worker is free to accept or reject them, and even make different offers to the employer, which can be approved or rejected by the latter, so that neither of them can be considered as undue pressure on the part of the person making them, since it must be understood that such offers are a suitable, legal and often convenient means of terminating employment contracts and settling differences that may arise in the development of employment relationships.

Find out more: Our guide to contract termination