Importance and Nature of the Individual Employment Agreement

March 1, 2012
Importance and Nature of the Individual Employment Agreement

The Federal Labor Law establishes that the individual employment agreement, regardless of its form or denomination, is that by which a person agrees to provide another with personal subordinate work in exchange for the payment of a salary. Therefore, the principal elements are subordination and economic dependency. The Federal Labor Law (LFT, for its acronym in Spanish) establishes that employment relationships may be for an indefinite term (permanent) or temporary, pursuant to which individual employment agreements may only be of three types: (i) for specific work (temporary agreement); (ii) for a definite time period (temporary agreement); and (iii) for an indefinite time period (permanent agreement). The agreements normally executed between companies and their employees are for an indefinite time period and those for specific work or a defined term are only executed on an extraordinary basis. It should be noted that upon executing agreements for specific work or definite time periods, companies should be very careful as a result of the complicated requirements that must be complied with and due to the specificity required with respect to their content. The designation of specific work in an individual work agreement may be stipulated only when required by the nature of such agreement; therefore, in order to execute an individual employment agreement for specific work, it is essential to specify the following with precision: (i) the work that the temporary employee will perform, meaning the scope of such; and (ii) the approximate duration of such project and during what phase the intervention of such employee will be necessary. Furthermore, in accordance with the LFT, the individual labor agreement for a definite term may only be executed in the following events: (i) when required as a result of the nature of the work that will be provided; (ii) when the purpose is to temporarily substitute another employee; and (iii) in the event of employment requiring a special skill (e.g. musicians, actors and athletes) and seasonal employment that is necessary for a determined period during the year (e.g. in department stores when personnel is hired for the month of December as a result of the Christmas festivities). The LFT establishes that in the absence of an express stipulation in an individual employment agreement, the employment relationship will be considered one for an indefinite time period. Furthermore, if the individual employment agreement does not provide for a temporary duration, theagreement will be understood as one executed for an indefinite or undetermined time period. Given theforegoing, it is very important to consider that once the employee begins the provision of services, there exists anemployment relationship and, as a result, a series of obligations and reciprocal rights between both parties,independent of whether or not an individual employment agreement exists. In conclusion, it is important to takeinto account that the employment agreement is not a suitable means of proving all conditions of employment, butdoes serve as an efficient means of proof when combined with other evidence in the event of a conflict before thelabor authorities, especially since the LFT establishes that the employer is required to maintain a copy of theindividual employment agreement and prove the employment conditions of its personnel.

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