COVID-19 Executive Decree 81 of March 20, 2020

Suspension of employment contracts due to COVID-19

As of March 21, 2020, Executive Decree No. 81 of March 20, 2020 came into force and effect in Panama, which, in relation to employer-employee relations, it establishes, in summary, the following:

1. For the application of Numeral 8 of Article 199 of the Labor Code, the declaration of a State of National Emergency decreed by the Government on March 13, 2020 due to COVID-19 may be considered to be a “fortuitous event or force majeure” as stated in such disposition of our Labor Code.
2. The employment contracts of companies that close operations in a temporary manner in compliance with State of National Emergency due to COVID-1, will be considered to be suspended for all labor law purposes, from the date the temporary closing as ordered and said suspension must be authorized by the Ministry of Labor and National Development (“Mitradel”) according to article 203 of the Labor Code.
The suspension of employment contracts means that employees are not obligated to provide their service and employers are not obligated to pay salaries, which does not imply the termination of employment contracts or exempt the parties from previous obligations or affect the seniority of workers.
3. The employment contracts of companies that close in a temporary manner due to or as a consequence of the closure of other companies, will be considered suspended in the same terms as in paragraph 2 above, provided that such suspension is authorized by Mitradel.
4. For the suspension of employment contracts, the employer must send the following documents in a PDF format to the email of the Mitradel:
(i) Note or memorandum justifying the suspension of employment contracts, signed by the attorney or legal representative of the company, requesting the suspension for up to one (1) month, extendable.
(ii) Simple copy of the employer’s operating permit or business license (or the analogous document).
(iii) Simple copy of the last pre-prepared form of the Social Security Offices, prior to closing.
(iv) Valid proof of the economic affectation to the company.
(v) List of workers whose contracts are requested to be suspended, specifying name, identity card, social security number, residential address, occupation, sex, age, telephone number and email.
5. Collaborators whose contracts have been suspended pursuant to the above will be included in the lists of beneficiaries of the programs established by the Executive Branch to mitigate the crisis.
6. The Mitradel will notify the employees union or the workers’ representation of the request. The Mitradel will resolve it, authorizing or rejecting it, within 3 days of the suspension.
7. The resolution authorizing the suspension may be notified by the Mitradel by electronic means.
8. If at the end of 3 business days following the request for suspension of employment contracts, as the case may be, the Mitradel does not rule on it in either manner, it will be deemed approved.
9. The salaries of the workers of the companies closed in a manner different from the above or without the required authorization, will be covered by the employer, until the Mitradel authorizes the suspension.
These companies may request the economic benefits approved the Government due to the State of National Emergency, 1 month after the notification of the suspension of work contracts, issued by Mitradel.
10. At the end of the State of National Emergency, employees will return to their jobs in the same conditions that were in force at the time of suspension.
As an unjustified verbal dismissal shall be considered the act of employer’s that prohibits the worker’s return to his or her job the day after the State of National Emergency ends.

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