CNN Español —
Argentina’s Senate approved a sweeping labor reform Friday, giving final clearance to a bill championed by President Javier Milei as a key component of his economic shock therapy. The legislation passed with 42 votes in favor, 28 against, and two abstentions, following approval by the Chamber of Deputies.
The government pushed the bill through during extraordinary summer sessions, securing its passage thanks to shifting political dynamics following midterm elections last October. This move underscores Milei’s ability to navigate the Argentine Congress despite initial skepticism about his ability to perform with the legislative branch.
The debates in both the Chamber of Deputies and the Senate unfolded against a backdrop of protests, strikes, and resistance from unions and social organizations, who argue the new law is detrimental to workers, stripping away established rights and favoring employers. Debates in the Chamber of Deputies were particularly contentious.
The Argentine government conceded to changes to the original proposal to address concerns from its parliamentary allies and even some within its own coalition, ultimately achieving its legislative goals.
The 218-article law addresses a wide range of labor issues, including severance pay, working hours, vacation time, the right to strike, and union dues. It was initially approved by the Senate on February 11 and by the Chamber of Deputies on February 20, but required a return to the Senate after an article concerning sick abandon was removed.
A key provision of the new law alters the calculation of severance pay, excluding bonuses and annual supplements. It also caps severance payments at three times the average salary of the applicable collective bargaining agreement. Small and medium-sized businesses will be allowed to pay severance in up to 12 installments. In effect, the law makes it cheaper to dismiss employees.
The legislation also allows for the creation of labor cessation funds, enabling employers to finance severance payments through employer contributions. This measure has drawn criticism for potentially undermining the pension system.
The law introduces a “time bank” system, allowing employers to compensate employees for overtime with time off, provided legal rest periods are respected. It also permits extending the workday to 12 hours, as long as weekly limits are not exceeded, and allows for the fragmentation of vacation periods.
The probationary period for new hires has been extended to 12 months for companies with up to five employees.
The right to strike is also limited, expanding the minimum service requirements during protests and increasing the percentage of workers required to participate from 50% to 75%, depending on the service. Company authorization is now required for workplace assemblies.
Company blockades are now classified as “serious labor misconduct,” justifying dismissal.
Unions secured some concessions in the final legislation, including the preservation of employer contributions to union healthcare plans and the continuation of union dues for two years.
A key defeat for unions was the elimination of “ultractivity,” which ensured that collective bargaining agreements remained in effect until a new agreement was reached. The new law prioritizes company-level agreements over sector-wide collective bargaining.
The growth of platform and app-based work led to the creation of a new category of “independent worker,” outside the scope of traditional labor laws. This allows for different forms of contracting without establishing a formal employment relationship.
Penalties for labor registration irregularities have been eliminated, encouraging a regularization process without criminal sanctions.
This is not the first attempt to modify labor conditions in Argentina.
The core of worker’s rights in Argentina originated during the governments of President Juan Domingo Perón (1946-1955 and 1973-1976). Following the military dictatorship that began on March 24, 1976, a series of laws and modifications curtailed rights, implementing labor flexibilization measures. The last labor reform passed by Congress was in 2000, eliminating ultractivity.
It was a process marred by corruption and repealed during the government of President Néstor Kirchner (2003-2007), after which a new era of worker protection began, despite an attempt by President Mauricio Macri (2015-2019) to establish more flexible agreements by sector.
The government maintains that the primary purpose of the Labor Modernization Law is to create formal jobs.
But was that the result of some previous reforms? According to labor law specialist Dr. Fontán, “The premise that flexibilization generates employment is a fallacy. Recent history demonstrates the opposite: the only period of sustained employment growth in Argentina was between 2003 and 2008, a stage where labor laws focused on rebuilding protections lost in the 1990s. This shows that the engine of work is increased production and not the removal of rights. Even if labor were free, no company would hire personnel if it had nothing to produce or to whom to sell.”
Milei is betting that this time will be different, applying similar methods, regardless of what history says.
