A Brief Overview of Costa Rica Labor Laws
Every employer and employee in Costa Rica should have a basic understanding of the country’s labor laws. These laws apply to all employers and employees, regardless of whether they are foreign or national, and whether they work in a foreign or local company. The only exceptions are members of the Costa Rican Legislative Assembly (the unicameral Congress), workers for embassies and consulates and those who perform unpaid work on behalf of a religious organization .
The Costa Rican labor laws aim to give employees advantages over their employers in terms of rights in the workplace. The Costa Rican Ministry of Labor and Social Security provides an online tool that enables employers and employees to see all their benefits and rights in terms of Costa Rican law. This tool is provided in a "plain language" format which allows for easier understanding of the law.
Costa Rica Employment Contracts
Costa Rica labor laws recognize three types of business relationships between employers and employees. The most common is for an indefinite period, sometimes referred to as precarious employment, which means that no specific end date has been established for the employment relationship. An indefinite basis contract is what most persons focus on when they think of jobs in Costa Rica. Fixed-term contracts mean that a specific expiration date has been agreed upon by the parties, and cannot be for more than one year. An indefinite trial period (periodo de prueba) contract means that the employment relationship ends after the initial established period (up to 3 months depending on the particular position), unless renewed. In addition, the Costa Rica labor laws establish that it is possible to convert an indefinite basis contract into a fixed-term contract or into an indefinite trial period in some cases, in order to meet employer needs. For example, for a specific work, to fill an available position, to temporarily replace another employee, etc. In such cases, the contract must be analyzed in accordance with the case law.
For contracts for an indefinite period, the probationary period in the contract is optional, but if included cannot exceed three months. During an indefinite contract, the law allows for the parties to contractually agree to a period of suspension of the employment relationship (suspension del contrato de trabajo) for a maximum of 6 months, with the consent of both parties, but the parties must comply with the suspension procedure. Statutory paid vacation time each year can only take place within the first 4 months of the year following the date in which the employee completes 50 weeks of continuous service to the same employer.
For fixed-term contracts, it is the law that the contract cannot exceed three years, but the employer may in some circumstances extend the term up to two additional years (and only when justified by exceptional circumstances). If the employer fails to give the notice prior to the contract expiration date, the contract will be considered indefinite and each extension shall be considered an indefinite-term contract. These extensions can only be for work referred to above. If the employee is notified, and the employee does not agree to such extension, the original term must end, with the possibility of starting a new contract.
For indefinite trial period contracts, the maximum period is three months, although the Supreme Court has interpreted the law to apply without regard to the continuous provision of services. Accordingly, if the employee goes on vacation, is not working due to an accident or illness, etc., the trial period will end only when the three months of the trial period expire. The employee is not entitled to payment for scheduled vacation time in this context, and further notice is not required for the termination of the agreement.
Costa Rica Working Hours and Overtime Laws
In general, working hours in Costa Rica for commercial and industrial companies, as well as for professional activities, are eight (8) hours a day or forty eight (48) hours a week. However, domestic workers are only required to work up to twelve (12) hours a day and the workweek cannot exceed the maximum number of hours of the employer’s industry or business activity. Local businesses may establish the work schedule of their employees in the office by agreement.
Any time worked in excess of the maximum working hours is considered overtime or extraordinary overtime, depending on when the extra hours were worked. Ordinary overtime is time spent working during the usual working hours of Monday through Friday while extraordinary overtime refers to any work performed during Saturdays, Sundays, holidays or outside the normal daily working hours. The premium for overtime is calculated according to the ordinary hourly salary of the employee.
The employer must be reasonable in the use of extraordinary overtime, recognizing the rest period of the employee. Any agreement between an employer and an employee that permits extraordinary overtime will not be valid when: (i) there are special legal provisions that limit the use of that extraordinary overtime; or (ii) the employee is being paid a higher salary than corresponds to their specific position. For example, if the use of extraordinary overtime has been authorized by the Ministry of Labor, or if there is an external emergency rendering extraordinary overtime indispensable. A special legal provision, for example, regulates the extension of working hours for those employees assigned to dispatch, loading and unloading of beverages, beer, wines, liquors and other alcoholic drinks as well as other products such as ice.
It is important to note that according to Costa Rican law, the payment of overtime is mandatory and this includes even if the payment of overtime is specifically excluded in individual employment contracts, collective bargaining agreements and company internal policies. The only authorization an employer in Costa Rica may provide, provided the work schedule is a known requirement of performance (for example, unloading products), is to authorize employees to decide, within the limit of 12 hours a day, to arrive early or leave late in order to, for example, finish the load or unload task on the same day. This employee time management does not incur in extraordinary overtime. It is only in unusual situations when a business cycle cannot be interrupted and it is necessary to have continuity in the execution of tasks that extraordinary overtime may be accepted.
According to Costa Rican labor legislation, the payment of overtime is prohibited for employees working for a salary of 4 times the base salary established for the corresponding occupation in the Administrative Ministry Directorate (a service of the Ministry of Finance).
Costa Rica Wages and Compensation
Employees are entitled to receive a minimum payment, which is fixed and sufficient to give all the workers’ needs, according to their work, power and habits; such a measure is set by the Labor Ministry (TCR Labor Code, Art. 242). It must be in cash, monthly, weekly, daily or hourly, as determined by the parties in accordance with the law. Workers or employees may not waive or compromise on this right. The payment must be made during the ordinary hours of business on banking days (TCR Labor Code, Art. 243).
The Ministry sets the minimum wage rates for the various occupations and industries, which are published once a year. This happens after the Ministry of Labor’s Advisory Committee on Salaries that includes employers and unions representatives has discussed the proposed rates. The salaries set out in the minimum wage schedule are based on the estimated basic family budget, that it is the amount required for the minimum subsistence of an average family with four members.
The Party paying the wages is obliged to deduct from them the amounts determined by law for social security, as well as enforceable judgments, fines or labor awards (TCR Labor Code, Art. 244). The law establishes the obligation for companies to pay severance benefits by depositing them in the bank account specified by the employee (TCR Labor Code, Art. 88).
Article 88 is part of the Costa Rican Constitution. This article is part of the protection allowances and religious vacations granted by the Constitution to low-income workers, like severance payments and the Ministry of Labor.
An Overview of Employee Rights (and Obligations) in Costa Rica
Employee rights and obligations
In light of the most recent advances in Costa Rican labor legislation, as well as national and international standards, the rights and obligations of employees are very well defined. Amongst the principal rights provided to employees are the following:
• To have a written contract that must be registered before the Ministry of Labor and Social Security.
• To constitute an employees´ Union.
• To enjoy of the right to strike.
• To be treated equally in relation to salary and working conditions.
• To be able to join the Costa Rican Social Security System (CCSS).
• To enjoy of paid maternity leave, hospitalization and medical leave in case of accidents or illness.
• To enjoy of paid leave during pregnancy, illness or accidents (not caused by the worker).
• To receive vacation time with remuneration.
• To receive the proportional part of the thirteenth month and the Christmas bonus.
• To receive vacation and/or the proportional part of the Christmas bonus.
• To be paid as a landlord for the provision of lodging, food and drinks to employees, if applicable.
Amongst the main obligations of the employees is not to create a direct or indirect competition with their employer during the term of the labor relationship. This does not mean the employee cannot work anywhere else and earn money, which is why Costa Rican Law has established a limit of a 10% conflict between the employee and employer´ business. In case of detecting a conflict between 10% or more, the employer can terminate the contract for cause.
Employees are entitled to electric utilities and the payment of housing fees assigned by the employer, if applicable. They also must avoid sharing or taking confidential information from the company, and must fulfill their duties with diligence and opportunity.
Termination and Severance Law in Costa Rica
Employment in Costa Rica may be terminated directly by the mutual or unilateral decision of the parties, or by operation of law. Termination by mutual consent is usually a friendly affair, with no further implications. A signed agreement is made to demonstrate the cause for termination, freedom of contract, and a receipt confirming the final payment (including salary, overtime, vacation, bonus, and anything else the employer deems appropriate). Unilateral termination may be with or without just cause: Termination with just cause (despido con causa) occurs when, at the employer’s discretion, the employment relationship is irreparably harmed by the employee due to a serious offense. In these cases the employer must provide written notice to the employee with the reasons for dismissal. In Costa Rica, just cause includes, but is not limited to: insubordination, fraudulent or negligent conduct, dishonesty, disrespectful treatment to the employer or third parties, negligence, habitually tardy arrival or absence, drunkenness or use of narcotics, or any crime committed by the employee that makes employment impossible. To support this type of dismissal, documented evidence is advisable. Termination just cause (despido sin causa) occurs when, at the employer’s discretion, the employment relationship is irreparably harmed by a reason attributable to the employer. In this case, the employer shall give the employee a written notification of the termination of the contract and its allegations in a period not exceeding five business days after the dismissal occurs. In the absence of this communication, the employee shall be entitled to a severance equivalent to twenty (20) days of salary for each year of employment or for the fraction of the year until the termination of the contract (es decir, 1/260 of the salary corresponding to the period), plus the amounts of non-crossed vacation , proportional bonus, and other pending liabilities. After two years the employee is entitled to an additional twenty (20) days of salary for each year of service and/or fraction, included the amount of the proportional thirteenth month salary. An exception to the worker’s entitlement to severance pay is in cases where the employee enters into an agreement for voluntary resignation, in which case the parties agree upon the payment with the aim of making a waiver of rights by the worker. In voluntary activation of the employment contract by the employee (autodespido), the employee should give notice of termination in writing thirty (30) days in advance or provide an equivalent amount of salary in lieu of such notice. The employer is entitled to payment for taxes and other amounts owed by the employee. Dismissal due force majeure (fuerza mayor) occurs when the company goes bankrupt or its assets are placed under governmental custody. In these cases the employee should receive a severance equivalent to fifteen (15) days of salary for each year of service or fraction of the year until the end of the year of service (es decir, 1/240 of the salary corresponding to the period), plus the amounts of non-crossed vacation, proportional bonus, and other pending liabilities. The termination of a contract for any of the causes established by law requires the worker’s consent or the recognition of the authorities or judges’ competence to decide them. All termination of employment must be promptly communicated to the Ministry of Labor and Social Security through a special procedure called "chófer". Unless a cause of seriousness, the Ministry generally fixes a period of 30 days of confidence for the worker to dismiss the employee. Once completed the grace period, the Ministry issues a certificate authorizing the employer to dismiss the employee unequivocally.
Maternity and Paternity Leave in Costa Rica
In the case of maternity leave, when the child is born, the worker also counts upon the right to a prenatal (in Spanish, prenatal) and a postnatal (in Spanish, postnatal) leave. The prenatal leave is during four months (I.L.R., art. 91 and 92), and the mother is entitled to its totality or up to a month before delivery. The postnatal leave is 18 weeks, and it is granted to mothers, regardless of their time of service, under the condition that they return to work assistant. It can be possible to request the permission of a lesser period of postnatal leave (up to six weeks). The parents are entitled to the same leave in the event of the death of one of them, and the other has to take care of the minor. It is important to note here that the authorization concerning prenatal leave is a minimum of two weeks before labor, and in practice, it is usually granted from one week before. Article 93 of the I.L.R. emphasizes that after delivery, the worker is entitled to uninterrupted rest, during which SHE will also be paid 100% of her base salary until the last day of postnatal leave. In the case of maternity leave, the 100% payment is subsidized by the National Insurance Institute (in Spanish, Caja Costarricense de Seguro Social). The I.L.R. describes paternity leave as an "absence" due to the birth of a child. The text of I.L.R. art. 98 establishes that the duration of paternity leave is 10 consecutive days counted from the date of delivery.
Occupational Health and Safety Laws in Costa Rica
Costa Rican law obligates each employer to uphold the health and integrity of his/her own employees. However, the responsibility for health and safety extends beyond the workplace itself, enacting a host of rights and obligations for workers, their families, employers, and even users of products and services.
In addition to rights to a safe and sanitary workplace, such as not exposing employees to toxic, explosive or flammable matter and objects that could harm them physically or psychologically, Costa Rican law imposes responsibility on employers for preventing work-related accidents and diseases. To this end, employers must take preventative measures in collaboration with collective bargaining or other representative bodies.
Additionally, many businesses must have an internal committee that includes one or more employer representatives, two or three representatives of the employees, and a professional from an accredited institution. Employers in priority activities (such as construction and mining, among others) must for their part submit a report to the Ministry of Health and the labor inspection service, noting the risks in their workplace environments, the potential impact on employees, and designation of responsibility for those risks.
Workers receive the right to a healthy and safe work site, but must contribute, to the best of their abilities, to his or her own safety and health and their co-workers. General law requires that workers have control of and responsibility for those dangers that infringe upon their well-being. Workers can participate in carrying out activities, programs and procedures that seek to reduce any damage that individual actions may cause to them or their environment.
High-risk employers are responsible for granting workers with sick leave in the event of an accident. When the accident takes place at the workplace, the employer must pay for medical care, nursing care and assistance, medicines, psychologists, physiotherapists and rehabilitation centers. The employer must also pay for transportation of the worker, if necessary.
Provided these conditions are met, and the worker is not recognized by the law as an independent worker, employers are not responsible for incidents and accidents that occur in the lecture halls, kitchens, bathrooms, lounges of break or room areas, including excluding offices and cubicles; in places that belong to the community, including barracks, bathrooms, showers, dining rooms, medical offices, first aid posts and access roads, parks, stadiums, schools, bowling alleys, gyms.
Dispute Resolution and Legal Support
Costa Rica’s legal framework offers several resources and mechanisms to facilitate the resolution of labor disputes, a process that can often be complex and time-consuming. Regardless of the entity involved, the body charged with adjudicating labor disputes in Costa Rica is the Labour Court (Juzgados de Trabajo). A dispute may come before the Labor Courts if it arises out of the interpretation or enforcement of any written or oral labor contract. Subject-matter jurisdiction of the Labor Courts extends to private-sector employers, workers, employee associations, unions, unions’ federations and confederations.
The Labor Courts have exclusive jurisdiction to process cases involving wrongful dismissal, but employers may freely submit any other type of employment-related dispute, such as disputes over salary, vacation days, overtime hours, etc., to mediation at the Ministry of Labor. The Ministry of Labor may also serve as a mediator or arbitrator if an employer and a worker submit their dispute to the office of the Labor Inspector.
In the event a labor dispute remains unsettled, any party to the controversy may file a formal request for resolution with the corresponding Labor Court. The filing must be accompanied by the plaintiff’s employment contract and evidence that the matter was mediated unsuccessfully before the Ministry of Labor. Absent an express emergency , the filing of a claim does not require the posting of a bond.
The trial process before the Labor Court is designed to be fast and flexible. The Procedural Labor Code establishes accelerated deadlines for the resolution of controversies, which is frequently complied with by the Court. Currently, 80% of cases are resolved within nine months. After the judge receives the files, preliminary hearings are scheduled, granting the parties a deadline of seven days to submit documents and testimony with respect to the claimed labor rights violations.
Judgments of the Labor Court are subject to appeal to the Constitutional Chamber (Sala Constitucional) and the Fifth Chamber of the Supreme Court of Justice. Because they involve constitutional and international law questions, appeals to the Constitutional Chamber are allowed as of right whenever an employment dispute brings into question a constitutional right. Review and appeal before the Supreme Court are discretionary and therefore not as routine. The practice of consolidating claims and appeals has resulted in a relatively small number of such cases reaching the Supreme Court each year.
Lawyers specialized in labor law are scarce in the country, but potential litigants may contact the Aid of Free Counsel program at the Colegio de Abogados, the sole legal aid entity in Costa Rica. This program helps people with no financial resources locate free legal representation.