Labour Code [LC], 30 december 1971 as last amended by Act No. 44 of August 1995 (Código del Trabajo) - available in Spanish
Date:12 Aug 1995;
view website »
(view in NATLEX »)
Size of enterprises excluded (≤): none
Workers' categories excluded: civil/public servants, members of cooperatives
Art. 2 LC: Civil servants are governed by civil service rules, except in those cases where any provision of the LC is expressly stated to be applicable to them.
Art. 3 LC: Agricultural and agro-industrial cooperatives are governed by the special regulations.
Note that Act No. 34 of 1979 regulates the working conditions of Balboa and Cristóbal dockworkers and its relationship with the employer. (Act abrogated in October 2012)
FTC regulated: Yes
Valid reasons for FTC use: objective and material reasons
Art. 75 LC: The duration of a contract for a specified period is valid only:
* where the nature of the work performed so permits;
* if it is made for the purpose of temporarily replacing a worker who is on leave, on vacation or absent because of any temporary impediment; or
* in the other cases provided for in the LC.
Maximum number of successive FTCs: no limitation
No statutory limitation on renewals provided that the total duration does not exceed 1 year.
Contracts concluded for a job requiring special technical skills can however be renewed twice within a 3-year-period in the cases where vocational training is provided by the employer: art. 74 LC.
Maximum cumulative duration of successive FTCs: 12month(s)
Contracts may be made for an unspecified period, for a specified period of not more than one year, except in the case of services requiring special technical skills, in which case the duration may be stipulated for a maximum of three years: art. 74 LC.
% of workforce under FTC: 77
Statistics for 2007: includes contracts concluded for specified period (definido) 44.9 % and for a specified piece of work (obra determinada)
Source: Ministry of Labour (http://www.mitradel.gob.pa/estadisticas/Contratos.pdf)
Maximum probationary (trial) period (in months): 3 month(s)
Art. 78 LC: a probation period can be stipulated when the work requires certain aptitudes or special skills. The maximum duration of the probation period is three months, provided that it is expressly contained in the written contract of employment.
Obligation to provide reasons to the employee:
Yes
Art. 214 LC: The notice of dismissal shall be in writing and shall specify the date and the specific reasons for the dismissal or termination of the employment relationship. Any additional reasons subsequently alleged and differing from those set out in the said notice are invalid.
The LC recognizes numerous disciplinary, non-disciplinary (including capacity-based) and economic reasons that are considered valid grounds for the termination of employment at the initiative of the employer that are listed in art. 213 LC.
No general prohibition of discrimination in the LC.
However, the Act No 11 of 22 April 2005 prohibits discrimination in employment based on race, birth, disability, sex, social condition, political ideas. See also art. 19 of the Constitution.
In the LC, dismissals based on trade union activities, participation to a strike, filing a complaint against the employer are considered "unfair practices against trade unionism and the worker's rights" (práctica desleales en contra del sindicalismo y de los derechos del trabajador) in art. 388 2), 3), 7).
- On trade union protection (fuero sindical), see art. 381 -387 LC. The special protection applies to the following workers: the members of trade unions, where the unions are being established; the members of the executive committees of workers', trade unions' federations, confederations or central congresses, up to a maximum of 11 members, substitute members of the executive committee.
Art. 384 of the LC establishes a series of rules applicable to the duration of trade union immunity:
* for the members of trade unions in the course of formation: for three months following the date on which such association's registration is authorized;
* for titular and substitute members of executive committees (the latter if they enjoy trade union immunity) and trade union representatives: for one year running from the date on which they cease to hold office;
The protection of trade union immunity commences on the date on which the worker's name appears on the list of candidates for election, on condition that such list is communicated to the employer or to the Inspectorate of Labour, and provided that such protection does not cover a period of more than one month before the actual date of the elections. Elected candidates continue to enjoy trade union immunity even before they take office, and unsuccessful candidates are to continue to enjoy such protection for the entire month following the date of the election returns. If the communication referred to above is not made, immunity should be afforded to members of the executive committee and trade union representatives as from the date of their election.
- Maternity protection: see art. 106 LC.
An expectant mother may be dismissed only for valid reasons and with prior authorization of the judicial authorities. An expectant mother who receives notice of dismissal or of unilateral termination of her employment which has not been authorized by the competent labour court must submit to the employer or to any labour authority a medical certificate of her pregnancy within the 20 days of receipt of such notice of dismissal. On completion of this formality the employee is entitled to immediate reinstatement in her employment plus payment in full of her remuneration as from the date of the dismissal. If she allows the said 20-day period to expire without taking any action, she may submit the certificate and claim reinstatement at any time during the following three months, but in this case she is entitled only to back payment of her remuneration as from the date on which she submits the certificate. If the employer refuses to reinstate her, she may sue in the ordinary way for a reinstatement order.
Notification to the worker to be dismissed: written
Art. 214 LC.
Notice period:
No statutory notice periods to be observed.
However, there is an exception for some specific categories of workers to which the "just cause" rule does not apply. Those workers can be dismissed without just cause provided that the employer gives 30 days' prior notice or pay the corresponding amount in addition to a payment amounting to compensation for unfair dismissal.
This rule applies to those workers with less than two years' uninterrupted service; domestic employees; permanent employees of small agricultural, fishing or manufacturing undertakings; seafarers serving on board vessels operating on international routes; apprentices; workers in retail sales establishments and in undertakings with five or fewer workers, except in the case of insurance establishments or real estate (art. 212 LC).
tenure ≥ 6 months:
tenure ≥ 9 months:
tenure ≥ 2 years:
tenure ≥ 4 years:
tenure ≥ 5 years:
tenure ≥ 10 years:
tenure ≥ 20 years:
Pay in lieu of notice: No
Except for those workers listed in art. 212 LC to which the "just cause" requirement does not apply.
Notification to the public administration: No
Except for dismissals (individual and collective) on economic grounds: art. 215-216 LC Procedural requirements applicable to such dismissals are dealt with under the theme "Procedural requirements for collective dismissals for economic reasons".
Notification to workers' representatives: No
Approval by public administration or judicial bodies: No
Except for dismissals (individual and collective) on economic grounds: art. 216 LC Procedural requirements applicable to such dismissals are dealt with under the theme "Procedural requirements for collective dismissals for economic reasons".
For dismissals based on any other authorized ground, the employer has the option of applying to the labour courts for prior authorization to dismiss. Such judicial authorization is however not compulsory.
Approval by workers' representatives: No
As a general rule, the employer is not required to observe statutory notice period under the Panamanian labour legislation.
Depending on the reasons for dismissal, before proceeding to dismissal, the employer has either the obligation to obtain authorization from the labour administration (in case of an economic dismissal) or the option of applying to the labour courts for prior authorization to dismiss when dismissal is based on any other authorized ground.
Definition of collective dismissal (number of employees concerned):
No definition of collective dismissal.
However, there is a definition of "economic reasons" for dismissal. The law provides for a specific regime applicable to any dismissal (individual or collective) based on economic reasons.
Art. 213 C) LC: The following are valid economic reasons for the employer to terminate the contract of employment:
- the employer's bankruptcy or insolvency;
- the closing down of the undertaking or retrenchment, due to the undertaking obviously not being able to pay its way, or to the exhaustion of raw materials in the case of extractive industries;
- the final and permanent termination of the activity which is the subject of the contract; and
- the duly proven reduction of the employer's activities due to serious economic crisis or part of the operations not paying their way on account of decline in production or innovations in the production process or manufacturing plant; or the fact that an official tender or concession is called in or lapses; cancellation of sales or purchasing orders, or any similar reason duly proven by the competent authority.
Prior consultations with trade unions (workers' representatives): No
No statutory provision in the legislation reviewed.
Notification to the public administration: Yes
Art. 215 LC: If an employer contemplates dismissing a worker for any of the reasons stated in art. 213, clause C (valid grounds for dismissal based on economic reasons), the employer must furnish evidence to the labour administration authorities.
Dismissal carried out without the fulfilment of that requirement is considered wholly unjustified. However, if after 60 calendar days the labour administration authorities have not issued a decision on the application, the employer may proceed to give notice of dismissal, which will be considered entirely proper but which will require the payment of the compensation prescribed by the LC.
Notification to workers' representatives: No
No statutory provision in the legislation reviewed.
Approval by public administration or judicial bodies: Yes
Art. 216 LC:
The labour administration authorities called upon to take a decision respecting the granting of prior authorization to terminate a contract or dismiss a worker on economic grounds must personally inform the worker or workers concerned of the employer's making an application, giving them a time limit of three days to present their case.
The authority must examine the evidence within a reasonable period and issue an immediate decision granting or refusing the authorization applied for.
After being notified, the parties may appeal against the decision to the next higher competent authority, such appeal acting to suspend the decision.
Approval by workers' representatives: No
Priority rules for collective dismissals (social considerations, age, job tenure): Yes
In the event of dismissal for economic reasons, the following rules are applied (art. 213(C)(3), LC):
- the first workers to be affected are those having the shortest length of service in the categories concerned;
- after that, in deciding which workers are to be maintained on the staff, preference should be given to Panamanian workers (over aliens), to workers who are members of the trade union (over those who are not), and those who have shown the most efficiency should be given preference over less efficient workers;
- expectant mothers, even if they are not protected by the preferential treatment, should be laid off last of all and only in cases of absolute necessity, with due observance of all the legal formalities; and
- all other things being equal, after the above rules have been applied, workers protected by their trade union status or office have preference over the other workers as regards maintenance of their contracts.
Employer's obligation to consider alternatives to dismissal (transfers, retraining...): No
Priority rules for re-employment: No
tenure ≥ 6 months: 0 month(s)
tenure ≥ 9 months: 0 month(s)
tenure ≥ 1 year: 0 month(s)
tenure ≥ 4 years: 0 month(s)
tenure ≥ 5 years: 0 month(s)
tenure ≥ 10 years: 0 month(s)
tenure ≥ 20 years: 0 month(s)
Redundancy payment:
tenure ≥ 6 months: 0.5 month(s)
tenure ≥ 9 months: 0.75 month(s)
tenure ≥ 1 year: 1 month(s)
tenure ≥ 2 years: 3 month(s)
tenure ≥ 4 years: 4.5 month(s)
tenure ≥ 5 years: 5.2 month(s)
tenure ≥ 10 years: 9.75 month(s)
tenure ≥ 20 years: 14.8 month(s)
1) Dismissal with cause (not economic): no severance pay.
2) Economic dismissal: redundancy payment = compensation for unfair dismissal.
3) Dismissal of workers not subject to the just cause requirement (workers with less than two years of uninterrupted service; domestic employees; permanent employees of small agricultural, fishing or manufacturing undertakings; seafarers serving on board vessels operating on international routes; apprentices; workers in retail sales establishments and in undertakings with five or fewer workers, except in the case of insurance establishments or real estate): compensation for unfair dismissal
Compensation for unfair dismissal - free determination by court: No
Art. 225 LC
Compensation for unfair dismissal - Legal limits (ceiling in months or calculation method):
In case of unfair dismissal or failure of notification if mandatory, the worker is entitled to receive from his or her employer compensation based on the following scale (sec. 225, LC) For periods of service prior to 2 April 1972:
- for less than one year's service, the equivalent of one week's wages for every three months of employment, and with a minimum amount of such compensation equivalent to one week's wages;
- for a period of service of between one and two years, the equivalent of one week's wages for every two months of employment;
* for more than two and not more than five years' service, three months' wages;
* for more than five and not more than ten years' service, four months' wages;
* for more than ten and not more than 15 years' service, five months' wages;
* for more than 15 and not more than 20 years' service, six months' wages; and
* for more than 20 years' service, seven months' wages.
This scale may not be applied on a graduated basis, i.e. the highest applicable level determines the amount to be paid.
For periods of service after 2 April 1972, the following scale is to be applied:
* for less than one year's service, the equivalent of one week's wages for every three months of employment (the minimum amount of such compensation to be the equivalent of one week's wages);
* for a period of service between one and two years, the equivalent of one week's wages for each two months of employment;
* for a period of service between two and ten years, the equivalent of wages for three additional weeks for each year of service; and
* for more than ten additional years of service, the equivalent of one additional week for each year of service.
This scale is applied on a graduated basis, the total length of service completed being distributed among the corresponding steps set out in the previous sub-items. In the case of service rendered in periods before and after 2 April 1972, the above-mentioned scales are to be applied separately.
In the case of employment commencing after the LC entered into force, compensation should be equivalent to three to four weeks of wages for each year worked in the ten first years; and each year after ten years should be compensated with the equivalent of one week's wages for each year. Such compensation should not be combined with any other scale. For the two instances cited in this sub-item, where a full year has not been completed, the corresponding proportion is due.
Reinstatement available: Yes
Art. 218 LC: a worker under a contract of unspecifed duration can ask for reinstatement or compensation for unfair dismissal before the Labour Court or the Conciliation Board.
According to art. 219 LC, if reinstatement is ordered by the Court, the employer nonetheless terminate the employment relationship by paying the statutory compensation for unfair dismissal plus a surcharge, calculated as follows:
50%, in addition to the corresponding compensation, for those workers employed in the undertaking at the time the LC entered into force; and
25%, in addition to the corresponding compensation, for those workers who begin working after the LC entered into force, provided that the employer has not established a severance fund.
In addition, wages in arrears are to be paid in the form prescribed by the respective judgment, in accordance with sec. 218 of the LC.
Preliminary mandatory conciliation: No
No provision found in the legislation reviewed.
Competent court(s) / tribunal(s): labour court
Art. 218 LC: The Labour Tribunals and/or The Conciliation and Decision Boards (junta de conciliación y decisión,) have jurisdiction over claims of unfair dismissal. The "juntas de conciliación y decisión" which are tripartite bodies and are integrated into the "Jurisdiccion Laboral".
Existing arbitration: Yes
Art. 218 LC: The Labour Tribunals and/or The Conciliation and Decision Boards (junta de conciliación y decisión,) have jurisdiction over claims of unfair dismissal. The "juntas de conciliación y decisión" which are tripartite bodies and are integrated into the "Jurisdiccion Laboral".
Burden of Proof: both
Article 735 Labour Code.