Establishing compliant employment relationships in Chile requires a thorough understanding of the country's labor laws, particularly concerning employment agreements. The employment contract, known as the "contrato individual de trabajo," is the fundamental document governing the relationship between an employer and an employee. It must be in writing and signed by both parties within specific timeframes after the employee starts work. This contract outlines the rights and obligations of both parties, ensuring clarity and legal compliance throughout the employment lifecycle.
Chilean labor law is protective of employees, and contracts must adhere strictly to the provisions of the Labor Code. Any terms in a contract that are less favorable to the employee than those established by law, collective bargaining agreements, or company internal regulations are generally considered null and void. Therefore, drafting a compliant employment agreement is crucial for mitigating legal risks and fostering a stable working environment.
Types of Employment Agreements
Chilean labor law primarily recognizes two main types of individual employment contracts based on their duration:
| Contract Type | Description | Duration | Key Considerations |
|---|---|---|---|
| Indefinite | Standard contract for ongoing roles. | No fixed end date. Continues until terminated by legal means. | Most common type; provides greater stability for the employee. |
| Fixed-Term | Used for temporary needs, specific projects, or initial periods. | Must specify a clear start and end date. Maximum duration applies. | Generally limited to one year (two years for managers/professionals). Can be renewed, but typically converts to indefinite after two renewals or exceeding the maximum duration. |
| For a Specific Job or Service | Used for work related to a defined project or service with a clear end. | Ends upon completion of the specific job or service. | Requires clear definition of the project/service. |
The choice of contract type depends on the nature and expected duration of the work. Using a fixed-term contract inappropriately or exceeding legal limits on renewals or duration can result in the contract being automatically deemed indefinite by law.
Essential Contract Clauses
Chilean law mandates that employment contracts include specific information to be valid and compliant. The Labor Code outlines the minimum required clauses:
- Place and date of the contract: Where and when the agreement is signed.
- Identification of the parties: Full name, nationality, date of birth, and identity card number of the employee; legal name, RUT (tax ID), and legal representative's details for the employer.
- Date of entry into service: The effective start date of employment.
- Nature of the services: A clear and precise description of the specific duties and functions the employee will perform. This is crucial for defining the scope of work.
- Location or city where services will be rendered: The primary place of work. If the work is mobile, this should be specified.
- Remuneration: The agreed-upon salary, including details of fixed and variable components, payment frequency, and any additional benefits or allowances.
- Duration and distribution of working hours: Specification of the ordinary working day, including start and end times, breaks, and the distribution of hours over the week. Adherence to legal maximum working hours is mandatory.
- Term of the contract: Whether it is indefinite, fixed-term (specifying the end date), or for a specific job/service.
- Other agreements: Any other clauses agreed upon by the parties that do not violate labor law provisions.
Omitting any of these mandatory clauses can render the contract non-compliant and potentially subject the employer to penalties.
Probationary Periods
Chilean labor law does not formally recognize a distinct "probationary period" as a separate legal status within an indefinite contract. Instead, employers often manage the initial period of employment by using a fixed-term contract.
- Using Fixed-Term Contracts: A common practice is to hire an employee initially on a fixed-term contract, typically for a duration like one to three months. This allows both parties to assess the fit.
- Conversion to Indefinite: If the employment continues beyond the fixed term, or if the fixed-term contract is renewed (subject to legal limits on renewals and duration), it automatically converts into an indefinite contract.
- Termination during Fixed Term: During the fixed term, the contract can be terminated by either party according to the specific rules for fixed-term contracts, which differ from those for indefinite contracts. Termination by the employer during this period typically requires a valid legal cause.
While not a formal "probationary period," the initial fixed-term contract serves a similar practical purpose for evaluating the employment relationship before committing to an indefinite term.
Confidentiality and Non-Compete Clauses
- Confidentiality Clauses: Clauses requiring employees to maintain the confidentiality of company information are generally enforceable in Chile, provided they are reasonable in scope and duration and relate to legitimate business interests. These are standard in many employment agreements.
- Non-Compete Clauses: Post-termination non-compete clauses are highly restrictive under Chilean law and are generally considered unenforceable. The principle is that employees should be free to work and use their skills after leaving a company. While agreements restricting competition during employment are valid, restrictions after termination are typically not upheld by courts unless very specific and limited circumstances apply, often requiring significant compensation to the employee for the restriction period. Due to their limited enforceability, employers should seek specific legal advice before including or relying on post-termination non-compete provisions.
Contract Modification and Termination
- Modification: Any modification to the essential terms of the employment contract (such as duties, location, hours, or remuneration) must be agreed upon in writing by both the employer and the employee. Unilateral changes by the employer are generally not permitted unless specifically allowed by law or the original contract under very limited circumstances (e.g., minor changes to duties within the same job category).
- Termination: Employment contracts in Chile can only be terminated based on specific grounds established in the Labor Code. These grounds vary depending on whether the contract is fixed-term, for a specific job, or indefinite.
- Termination by Mutual Agreement: Both parties agree in writing to end the contract.
- Resignation: The employee voluntarily terminates the contract by giving written notice to the employer.
- Termination by Employer: The employer can terminate the contract based on legal grounds, which include:
- Causes attributable to the employee: Such as serious misconduct, unjustified absences, or serious breach of contract obligations.
- Company needs: Based on rationalization, modernization, lack of profitability, or changes in market conditions. This ground requires payment of severance pay.
- Force majeure: Unforeseeable and irresistible events.
- Termination of Fixed-Term Contract: Ends automatically on the specified date.
- Termination of Contract for Specific Job/Service: Ends upon completion of the job or service.
Proper procedure, including written notification specifying the legal cause and providing supporting facts, is mandatory for employer-initiated termination. Failure to follow the correct procedure or justify the termination with a valid legal cause can result in the termination being declared unjustified by labor courts, leading to significant penalties and obligations for the employer, including potential reinstatement or increased severance payments.
