Costa Rica is known as a relaxed and laid back country, no wonder our motto is Pura Vida, which literally means Pure Life, which could be summed up in a take it easy and chill. This motto is intrinsically woven in every Tico you meet along the way. Sadly, doing business in Costa Rica is not Pura Vida. As matter of fact, it is totally the opposite, but the Ticos still face it with a Pura Vida attitude, most of the time.
Doing business could be complicated, as well as keeping up with the labor law. Why? Well, number one, the labor code (Ley N°2) is written in Spanish and there is no English version of it. Number two, there are a lot of practices in the business world that are not according to the law, but is what everyone does (or most people do) so, it kind of becomes common practice and could eventually get your business in trouble.
Our goal at Today In Costa Rica, is to explain out to you the most important articles of the Costa Rican Labor Code. Also, we want to let you know how to apply them, and what the correct practices are, despite of what most people will tell you out there on the street (sometimes even your lawyers will get this one wrong!).
We want to start off by explaining who, in Costa Rica, is considered and employer, an employee and an intermediary. Our goal is that by fully understanding what those are, you will be off to a good start when setting up your Costa Rican business, or hiring someone to work at your vacation home.
The first term defined in the Costa Rican Labor Code is Employer (Patrono in Spanish). According to the Costa Rican legislation, an employer could be an individual, or a corporation – legal entity, it could also be a private or a public entity, who employs the services of a single person or a group of people, under a labor contract, which, in turn could be, expressed or implicit, verbal or written, individual or collective. By the way, yes, there could be a labor relationship even if a written contract has never been signed between the parties, but we will give you another article on this later.
It is also important to make sure that any company director, managers, administrators, boat captains, or anyone who has director or managing authority on behalf of an employer, is considered an employer’s representative. So, any wrongdoing by any of this individuals against any employee could get the employer liable to the Costa Rican law.
Then, the Labor Code defines what an Intermediary is, and you better pay attention to this one. And Intermediary is a person who contracts the services of an individual or a group of people to perform a job benefiting an employer. It is important to understand that, in this type of relationship, both the employer and the intermediary are equally responsibly, under the solidarity principle, to the employee and to the Costa Rican legislation. But, how does this work?
For example, you are going to build a house. You hire an individual builder, who will then hire a team to work at your house. The builder you hire is responsible to guarantee that all labor rights are given to the employee (we will talk later about this). However, if the builder, which in this case is the Intermediary, fails to comply with the labor code, you, as the owner of the house could be legally responsible to those employees. The same applies in a business, in case you have another entity staffing your business. That is why it is so important to make sure your intermediaries are complying with the labor law and that are giving their employees all the rights commanded by law.
The last term we will look at in this article is the employee. Article 4 of the Labor Code says that an employee is any individual (not a corporation, so no, you cannot hire a corporation as an employee) who renders its material or intellectual services, or both, on behalf of another person, under a labor contract, which could be express or implicit, written or verbal, individual or collective. It is important to note that collectors, commercial agents, salesmen, and anyone who only receives a commission as payment, used to be under this definition of employee. However, in 1990, under vote 1336-1990, the Constitutional Court of Costa Rica declared that last part to be unconstitutional.
In summary, in Costa Rica, an employer is anyone (individual or legal entity) who hires and individual (employee) to work for a salary. An intermediary is anyone who staff a business or hires individuals to work for another employer.
In the next article on this series, we will take a closer look at issues regarding language, negotiations between employee and employer, and the employee right to seek for advice with the Costa Rican labor authorities.
For a copy of the Costa Rican Labor Code in Spanish, Click Here