The final passage of President Javier Milei’s Labour Modernisation bill is imminent. During legislative debate, in both chambers of Congress, the government has argued in favour of the need to reduce labour litigation and end the so-called labour “trial industry.” However, various labour lawyers warn that it could have the inverse effect.
Lower legal costs, reduced severance, modified trial periods and easier conditions for firing workers are some of the key objectives that La Libertad Avanza wants to fulfill with its bill being debated in Congress, which comes amid a context of high labour conflict and plunging registered employment.
Here’s a look at some of the key issues in President Milei’s reform package:
Cheaper to fire
One of the bill’s central changes has to do with the cost of dismissals without justification. As explained by Lucas Battiston, a labour lawyer at the offices of the PASBBA legal firm, “the formula for firing without due cause stays the same, one salary for every year worked,” but the reform introduces key details as to how hat severance is calculated.
Battiston detailed that a reformed Article 245 establishes that “neither vacations nor midyear or Christmas bonuses nor anything not part of monthly pay should be considered.” While this criterion has already been applied by national labour courts, he pointed out that in other jurisdictions, like Buenos Aires Provinces, those bonuses form part of the calculation, further citing the so-called “Vizzoti ruling,” which forbids any reduction of the severance base superior to 33 percent.
From a more critical outlook, labour lawyer Nahuel Altieri considered that dismissals are made cheaper by two additional routes.
“The extras previously forming part of the severance now become social benefits and cease to be computed,” he maintained while warning that part of the compensation will be financed by the new FAL (Fondo de Asistencia Laboral) fund “using money which today goes to pensions,” which could trigger future court disputes.
Trial periods: what changes and what not
Regarding trial períods, Battiston was categorical: “They are not expanded by this law.”
As the lawyer explained, the span continues to be six months, as established by the ‘Ley de Bases’ with the possibility of extending it to eight or 12 months only via collective bargaining in small companies, something hardly ever applied in practice, he affirmed.
The concrete change, he explained, lies in prior notice.
“Until now, if you dismiss somebody during a trial period, you would have to pay those 15 days of advance notice which would not be paid if this law is approved,” he detailed, reducing the cost of early termination.
Altieri agreed that the trial period had been previously extended but warned that the combination of longer periods with lower costs could impact the dynamics of employment.
“There is plenty of job rotation today and this could increase because it will be cheaper to fire both new workers and those with more seniority,” he pointed out, while explaining that the phenomenon also responds to generational changes and difficulties in retaining talent.
Battiston, in contrast, saw that impact as relative, expressing a critical personal opinion regarding the extension of the period.
“Six months seems excessive to me; three months used to suffice to evaluate whether a worker was any good or not,” he maintained, remarking that the aim of trial periods is exclusively to evaluate.
Labour trials, interest rates and payment in instalments
In its judicial chapter, the bill introduces two heavyweight changes. One is to unify the criteria for interest rates, now to be calculated as “inflation plus three percent.” Battiston finds this measure reasonable because it “avoids the worker losing purchasing power” and eliminates the disparity of criteria between provinces.
The other point is the possibility of paying labour sentences in instalments: up to six for major companies and up to 12 for PyME small and medium-sized companies. Battiston considered that this novelty could relieve companies in financial difficulties but questioned it from a legalistic viewpoint.
“It is difficult to defend a debtor imposing on the creditor how a sentence should be collected,” he warned.
In a more cautious reading of the bill, labour lawyer Gastón Ferretti maintained that the reform does not imply, in reality, cheaper dismissals.
“The cost of dismissal is neither cheaper nor costlier; what the reform does is to establish clearer rules,” he affirmed, underlining that the severance régime “continues exactly the same as now,” with one month’s salary per year plus the corresponding prior notice.
Ferretti also agreed with Battiston that there are no additional changes in the trial periods, rejecting that the reform drives greater job rotation.
“The cost of dismissal remains the same as today,” he maintained, defining the FAL as “a mechanism of financial foresight which neither replaces nor reduces rights but facilitates compliance with severance obligations,” an outlook contrasting with Altieri’s warnings about its impact on pensions and possibly being taken to court.
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