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Costa Rica

Employment Agreement Essentials

Understand the key elements of employment contracts in Costa Rica

Types of employment agreements

In Costa Rica, labor law permits several types of employment agreements, each with unique characteristics. It's essential for both employers and employees to understand these variations to ensure a legally compliant and fair working relationship.

Regular Employment Contract (Contrato de Trabajo por Tiempo Indefinido)

The regular employment contract, which has no predetermined end date, is the most common type of employment agreement in Costa Rica. This agreement provides employees with indefinite tenure, meaning they can remain employed by the company for as long as both parties agree and no just cause for termination exists. The Costa Rica Labor Code governs these contracts, outlining employee rights and employer obligations.

Temporary Employment Contract (Contrato de Trabajo a Plazo Fijo)

Temporary employment contracts are established for a specific duration. The Costa Rican Labor Code stipulates that such agreements cannot exceed one year. If the employment continues beyond this period without a new agreement, the contract automatically converts into a regular employment contract. Temporary employment contracts might be used in situations such as seasonal work (e.g., tourism industry), project-based work, or covering for employee absences.

Verbal Employment Contract (Contrato Verbal de Trabajo)

Costa Rican law recognizes verbal employment contracts under specific circumstances, although they are less common. These agreements are typically used in agricultural or livestock farming businesses and temporary work not exceeding ninety days. Verbal contracts offer less protection to employees compared to written contracts. For clear communication and to safeguard the rights of both parties, it's advisable to have a written agreement even for these limited situations.

Additional Considerations

Collective Bargaining Agreements may apply in certain sectors. These agreements, established between unions and employer associations, can supersede some provisions in individual employment contracts. Employment contracts for specific professions, like farm work, may have special provisions regarding minimum wage and other entitlements.

Essential clauses

In Costa Rican employment agreements, it's crucial to include certain essential clauses to ensure clarity and protection for both the employer and employee.

Basic Information

The agreement should include the full names, identification details (nationality, ID number), and domicile of both the employer and employee.

Employment Details

The employee's job title, responsibilities, and any reporting structure should be clearly outlined. The official start date of employment should be specified. The standard work hours, including breaks and rest periods, should be defined as mandated by Costa Rican labor law. The employee's salary or wages, including overtime pay calculations and any bonuses or allowances, should be detailed.

Benefits and Leave

The agreement should outline the employee's entitlement to paid vacation time (minimum of two weeks per year) and national holidays. It should specify how the mandatory "aguinaldo" (13th-month salary) will be calculated and paid. It should indicate how social security contributions will be handled (typically shared between employer and employee). Procedures for sick leave, maternity leave, and other forms of leave mandated by law should be addressed.


The agreement should clarify the grounds for termination with or without cause, following Costa Rican Labor Code guidelines. It should outline the terms for severance pay calculation and disbursement in case of termination. The required notice period for termination by either party, as mandated by law, should be specified.

Additional Clauses

Consider including clauses to address ownership rights to any intellectual property created by the employee during employment and to establish a process for resolving any disagreements arising from the employment contract.

Probationary period

In Costa Rica, the concept of a probationary period differs slightly from what you might expect in other countries.

No Legal Definition of Probation

Interestingly, Costa Rica's Labor Code doesn't explicitly define a probationary period. This can be confusing, as employers often refer to an initial period as a "trial" phase.

Three Months as the Benchmark

While there's no legal mandate, a three-month window is generally accepted as the standard probationary period in Costa Rica. This period allows employers to assess an employee's suitability for the role and vice versa.

Termination During Probation

During this initial three months, either the employer or the employee can terminate the employment relationship without needing to provide notice or severance pay. This functions similarly to a trial period.

Probation vs. Fixed-Term Contract

It's important to distinguish between a probationary period and a fixed-term contract. Probation applies to indefinite employment contracts, while fixed-term contracts have a pre-determined end date. Termination during a fixed-term contract typically requires justification and may incur severance obligations.

Key Points to Remember

  • Probationary periods in Costa Rica are not legally mandated but widely used.
  • The standard duration is three months.
  • Neither party needs to provide notice or severance pay during probation.
  • Probation applies to indefinite employment contracts, not fixed-term ones.

Confidentiality and non compete clauses

In Costa Rican employment law, the protection of both employer and employee interests is paramount. This includes the safeguarding of confidential information and the promotion of fair competition in the job market. Confidentiality clauses and non-compete clauses are two key elements in employment agreements that address these concerns.

Confidentiality Clauses

The Undisclosed Information Law No. 7975 of 2000 in Costa Rica underscores the significance of confidentiality. According to Article 7 of the law, individuals who have access to undisclosed information due to their employment are legally obligated to refrain from using or disclosing it without the employer's consent, even after the termination of the employment relationship.

While this suggests that a separate confidentiality clause within an employment agreement is not strictly necessary, it does bolster the employer's position by explicitly outlining the employee's obligations regarding confidential information. A well-drafted confidentiality clause should clearly define what constitutes confidential information and the limitations placed on employee disclosure.

Non-Compete Clauses

Non-compete clauses limit an employee's ability to work for a competitor after leaving the company. Costa Rican law permits non-compete clauses, but with significant limitations. The enforceability of such clauses depends on two key factors:

  • Compensation: Costa Rica requires that employers compensate the employee for the entire duration of the non-compete period. This compensation amount should be clearly defined within the agreement.

  • Reasonableness: The terms of the non-compete clause, including geographical scope and duration, must be deemed reasonable by a court. Excessively broad restrictions are unlikely to be upheld.

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