Labour & Employment

Panama

José Miguel Navarrete
Arosemena Noriega & Contreras
  1. 1.

    May foreign employers hire employees directly in your jurisdiction or is it necessary to act through a local subsidiary? Are secondments or loans of personnel lawful?

  2. In order to hire employees, foreign companies need to be registered and established in Panama. In this regard, the government of Panama has implemented a special regime for the Establishment of Headquarters of Multinational Companies (MHC) with special tax, customs and labour incentives for these kinds of companies.

    Labour legislation prohibits any arrangement or contract in which a person or organisation provides to another party one all of the employees needed by the latter for its operations. Should this occur, the supplier of the employees remains the employer and is subject to any corresponding sanctions.

    Notwithstanding the foregoing, the labour legislation also provides that previous authorisation from the Ministry of Labour and Labour Development is required for those companies that assign employees to other organisations. The assignment should be temporary, for a period that does not exceed two months, at the direction of the assigning organisation, and in accordance with the following rules:

    • the minimum wage that the employees must receive is the highest established for the relevant district;
    • organisations that use the employees’ services are jointly and severally responsible with the employer company for the salary, benefits and indemnities for the period that the employees work for the organisations; and
    • any act of the beneficiary organisation that prejudices the workers, is considered an act of the employer, for all legal purposes. 

    Those foreign companies that wish to engage the service of employees must be registered and established in Panama. 

  3. 2.

    Is there a limit to the number (or ratio) of foreign employees an employer may have in your jurisdiction?

  4. Labour legislation states that each employer may hire foreign nationals totalling no more than 10 per cent of its regular labour force. The employer may, however, hire foreign specialised or technical personnel not exceeding 15 per cent of its total workforce. A larger percentage of foreign specialists or technicians may be permitted where prior recommendation by the relevant ministry and approval by the Ministry of Labour and Labour Development has been granted. Foreign nationals married to Panamanians and those who have an indefinite work permit are not included in these quotas.

    Regardless the foregoing, foreign employees of an MHC-licensed company holders of a resident visa do not need a work permit from the Ministry of Labour and Labour Development. MHC-licensed companies are exempted from the regulations of the Labour Code in the case of foreign personnel with resident permits. Consequently, the requirement that each employer can only hire ordinary foreign personnel in a proportion of no more than 10 per cent of its regular labour force is not applicable to MHC-licensed companies.

  5. 3.

    May labour or employment agreements, and the termination of those agreements, be subject to any legislation other than that of your jurisdiction?

  6. The provisions contained in the Labour Code are of public policy and consequently are binding on all individuals or legal entities, residing and/or operating in Panama. In view of said legal provisions, all employment relationships involving foreign nationals are regulated by the Panama Labour Code.

    Based on the principle of territoriality, the provisions contained in the Labour Code are mandatory and applicable to all foreign nationals working within the jurisdiction of Panama. Legislation from other jurisdictions is not applicable in Panama to any labour or employment matter.

  7. 4.

    What are the requirements for an enforceable agreement? Are there any formalities that labour or employment agreements must adopt to be enforceable in your jurisdiction? Are fees, duties or taxes generated by any of them?

  8. Under Panama legislation, the principal elements of a labour relationship are:

    • Legal subordination, which is defined as the employer’s right to control and direct the employee and the employee’s corresponding duty to obey the employer. Labour legislation provides that legal subordination exists in the powers that are or may be exercised by an employer or its representative, to direct performance of the work.
    • Economic dependency. Labour legislation provides that dependency exists where the amount received by the individual is his or her only source of income, comes directly or indirectly from a person or organisation as a result of the work or where the individual does not have economic autonomy, and is financially dependent on the work provided by the employer.

    If the service performed is personal, subordinate or economically dependent on the organisation, a labour relationship exists, even where not provided in the agreement.

    The general rule is that a written employment contract must be executed with the employee at the beginning of the labour relationship and registered at the Ministry of Labour and Labour Development without any cost.

    The Labour Code stipulates that a written employment agreement shall contain:

    a.  Personal data.  The name, nationality, age, sex, civil status, address and number of the national identity document of each of the parties. If the employer is a juridical persona, its name or trade name, address, name of its legal representative, and the data respecting recording in the Public Registry shall be provided.

    b.  Dependants of employee. The names of the persons who are living with the employee and who are his dependants.

    c.  Work and work methods. Specific determination of the agreed work or services and the methods agreed to for their performance.

    d.  Workplace. The place or places in which the work or services are required to be performed.

    e.  Term. The term of the agreement if it is for a fixed period of time or an appropriate clause if it is for an indefinite period of time or for a specific piece of work.

    f.  Division of work day. The duration and regular division of the working day.

    g.  Wages and certain related information. The wages, the form thereof and the day and place of their payment.

    h.  Incidents of signing. The place and date of the signing of the agreement.

    i.  Signatures; proof of official approval. The signatures of the parties if they are able to sign, or a fingerprint given in the presence of witnesses who sign upon request, and proof of official approval of the agreement in the cases in which this approval is required by the Labour Code.

  9. 5.

    What are the implications of hiring personnel without a clear, written, employment agreement in place? May this have any effect in the event of litigation?

  10. The Labour Code stipulates that, in the absence of a written employment contract, any facts or circumstances alleged by an employee that should have appeared in the written contract, shall be presumed to exist.

  11. 6.

    What are the employers’ obligations (social security and related benefits) regarding employees after contracting? Are any social benefits tax deductible? Are these applicable to foreign employees?

  12. Employers and employees must contribute to the Social Security Regime according to the following rate:

    • employers: an amount equivalent to 12.25 per cent of the employee’s salary;
    • employees: an amount equivalent to 9.75 per cent of his or her salary.

    Employers must register with the Social Security Institute. Employers must register employees within a period of six working days after hiring. Further, employers must withhold and pay employees’ social security contributions from their salaries.

    Employers must also withhold and pay from employees' salaries the income tax rate, based on the following rate:

    The minimum taxable base is US$11,000 per year. Those employees who earn between US$11,000 up to US$50,000 per year are taxed at a rate of 15 per cent of the excess. Those employees who earn more than US$50,000 are taxed with US$5,850 at a rate of 25 per cent of the excess. 

    Educational Tax. The employer contributes 1.5 per cent of the salary and employees contributes 1.25 per cent of the salary.

    Moreover, pursuant to Panamanian labour law employers are obliged to pay employees a special bonus called ‘thirteenth month’, which consists of one day’s salary for every 11 days or fraction worked. This bonus is paid proportionally on 15 April, 15 August and 15 December each year.

    Pursuant to the Social Security Fund Law, an employee is entitled to 18 paid days of illness or injury per year. An employer cannot recover from the state any sick pay granted to employees.

    Permanent employees are also entitled to the following severance benefits regardless the way of termination of the labour relationship:

    • seniority premium;
    • accrued and proportional vacations;
    • accrued and proportional 13th month; and
    • indemnity (in case of unjustified dismissal).

    The tax incentives for foreign employees of an MHC employee holder of a resident visa are:

    • exemption of income tax, social security contributions and educational tax when the salary is received from abroad;
    • exemption of import duty tax on personal and household goods when the employee is transferred to Panama for the first time; and
    • total customs duty exemption every two years for the importation of a vehicle for personal or family use.
  13. 7.

    What benefits, other than cash remuneration are employees in your jurisdiction entitled to? What severance entitlements may employees claim?

  14. Salary paid in kind consists, in part of the salary that an employee or his or her family receives in food, housing, vehicles, clothing, etc that is intended for his or her immediate personal consumption. In any case, the salary paid in kind must not be higher than 20 per cent of the total amount of the salary in cash.

  15. 8.

    What is the role of the unions in the relationship with foreign employers and employees?

  16. The Labour Code provides that the creation of trade unions is of public interest, and that they are an effective mean to contribute to the economic support and development of the country.

    There is no difference between foreign employers and employees about the role of the unions in a labour relationship.

    Employees unions must represent and defend their affiliates’ legal rights and economic interests in any dispute with employers.

  17. 9.

    Do employees have the right to form unions? Is it mandatory for employers to honour this?

  18. Employees have the right to create a union within the company in which only employees of said company may affiliate. However, the workforce tend to be unionised in relation to different categories (eg, industrials, construction workers, pilots, telecommunication employees, artists, etc).  An employer is obliged to recognise and work with any established union in which its employees are affiliated and that has been authorised by the Ministry of Labour and Labour Development.

  19. 10.

    May unions be an independent party to a labour controversy in your jurisdiction? What are their rights and duties towards the employer and unionised employees?

  20. Unions are no “independent parties” to labour controversies in Panama. In this respect, unions represent their affiliates in those collective disputes related to legal rights that are based on the interpretation or application of a provision contained in laws, decrees, internal rules of the company, customs, employment contracts or collective bargaining agreements which affect a group of employees (eg, violation of the minimum wage rules by the employer).

    On the other hand, collective disputes based on economic interests are those in which the unions on behalf of their affiliated employees seek with the Ministry of Labour and Labour Development to celebrate a collective employment agreement, or when there are  social-economic interests disputes.

    Trade unions have also the following objectives, to wit:

    • better work conditions for all their members;
    • stable work for all of their members;
    • improvement of their social-economic demands;
    • permanent democratisation of society; and
    • legal assistance and other benefits to their members.
  21. 11.

    May a union request, bring about or cause a stoppage? If so, in what cases and what remedies would be available to the employer?

  22. The Political Constitution recognises the right to organise a strike. The law regulates this subject matter and may establish special restrictions in exercising this right with respect to public services (eg, doctors, police, fire-fighters, etc).

    Under the Labour Code, it is mandatory for the Ministry of Labour and Labour Development to declare that the organisation of the strike is legal. It worth noting that before the Ministry decides on the merits of the strike, the employer and the trade union representatives must have to go to a mediation process in which an officer of the Ministry will act as a mediator.

    If the parties cannot reach an agreement, the Ministry of Labour will declare legal the strike in the event that it is organised for the following purposes:

    • to obtain better labour conditions;
    • to obtain the celebration of a collective employment agreement; 
    • to demand the compliance of an existing collective bargaining agreement; and
    • to obtain the compliance on legal rules that have been violated repeatedly by the employer. 
  23. 12.

    Which legislation governs the enforcement of international relationships or labour agreements provided for in international business contracts, and in international commercial proceedings, to be performed within your jurisdiction?

  24. The provisions contained in Panama Labour Code are of public policy and consequently are binding on all individuals or legal entities, residing and/or operating in the country. 

    Based on the principle of territoriality, the provisions contained in the Labour Code are mandatory and applicable to all foreign nationals working within the jurisdiction of Panama.

    The Labour Code also protects nationals working abroad through the enforcement of the locus regit actum principle, which establishes that all acts and agreements are ruled by local law.

    In this sense, whenever a Panamanian national executes a labour contract with a company established and operating in Panama to perform duties abroad, that individual will be bound and protected by the provisions of the Labour Code.

    Not withstanding the foregoing, the Private Law International Code of Panama (approved by means of Law 61 of 7 October 2015) stipulates the following rules about the applicable laws on individual international labour relationships:

    • When the individual employment relationship is developed on a permanent basis, it is subject to the enforcement law of the employment contract.
    • When the individual employment relationship is developed temporarily abroad, the governing law shall be the one from the place of origin of the labour relationship.
    • In the case of a long term foreign destination, the law of the new place of execution of the employment contract shall be applied, except in the case of high level technicians or management, in which case the law from the place of origin will continue to apply or the one agreed between the parties.
    • In the case of multiple destinations abroad, the applicable law will be any of the following options to the employee’s choice:
    1.  the law of the registered domicile of the contracting company; or
    2. the law of the branch where the employee is hired and assigned.

    If a foreign law is applicable to the employment relationship, the court may declare applicable substantive rules of national legislation if it believes that such regulations are of public order, or to protect vulnerable groups of employees, provided it is shown to serve in the interests of justice.

  25. 13.

    Which international treaties or conventions are applicable to labour or employment relations in your jurisdiction? Has your country made any reservations to or denounced any treaties of the International Labour Organization?

  26. The following international conventions applicable to labour or employment relationships have been approved and ratified by Panama:

    • Forced Labour Convention, 1930 (No. 29);
    • Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87);
    • Right to Organise and Collective Bargaining Convention, 1949 (No. 98);
    • Equal Remuneration Convention, 1951 (No. 100);
    • Abolition of Forced Labour Convention, 1957 (No. 105);
    • Discrimination (Employment and Occupation) Convention, 1958 (No. 111);
    • Minimum Employment Age Convention, 1973 (No. 138); 
    • Worst Forms of Child Labour Convention, 1999 (No. 182);
    • Labour Inspection Convention, 1947 (No. 81);
    • Employment Policy Convention, 1964 (No. 122);
    • Tripartite Consultation (International Labour Standards) Convention, 1976 (No. 144). This Convention will enter into force on 11 June  2016;
    • Maternity Protection Convention, 1919 (No. 3);
    • Right of Association (Agriculture) Convention, 1921 (No. 11);
    • Workmen's Compensation (Agriculture) Convention, 1921 (No. 12);
    • White Lead (Painting) Convention, 1921 (No. 13);
    • Workmen's Compensation (Accidents) Convention, 1925 (No. 17);
    • Equality of Treatment (Accident Compensation) Convention, 1925 (No. 19) ;
    • Night Work (Bakeries) Convention, 1925 (No. 20);
    • Inspection of Emigrants Convention (Vessels), 1926 (No. 21);
    • Minimum Wage-Fixing Machinery Convention, 1928 (No. 26);
    • Marking of Weight (Packages Transported by Vessels) Convention, 1929 (No. 27);
    • Hours of Work (Commerce and Offices) Convention, 1930 (No. 30);
    • Protection against Accidents (Dockers) Convention (Revised), 1932 (No. 32);
    • Workmen's Compensation (Occupational Diseases) Convention (Revised), 1934 (No. 42);
    • Sheet-Glass Works Convention, 1934 (No. 43);
    • Underground Work (Women) Convention, 1935 (No. 45);
    • Holidays with Pay Convention, 1936 (No. 52);
    • Contracts of Employment (Indigenous Workers) Convention, 1939 (No. 64);
    • Penal Sanctions (Indigenous Workers) Convention, 1939 (No. 65);
    • Seafarers' Pensions Convention, 1946 (No. 71;
    • Medical Examination of Young Persons (Industry) Convention, 1946 (No. 77);
    • Medical Examination of Young Persons (Non-Industrial Occupations) Convention, 1946 (No.78);
    • Final Articles Revision Convention, 1946 (No. 80);
    • Contracts of Employment (Indigenous Workers) Convention, 1947 (No. 86);
    • Employment Service Convention, 1948 (No. 88);
    • Night Work (Women) Convention (Revised), 1948 (No. 89);
    • Labour Clauses (Public Contracts) Convention, 1949 (No. 94);
    • Protection of Wages Convention, 1949 (No. 95);
    • Abolition of Penal Sanctions (Indigenous Workers) Convention, 1955 (No. 104);
    • Indigenous and Tribal Populations Convention, 1957 (No. 107);
    • Seafarers' Identity Documents Convention, 1958 (No. 108);
    • Plantations Convention, 1958 (No. 110);
    • Medical Examination (Fishermen) Convention, 1959 (No. 113);
    • Fishermen's Articles of Agreement Convention, 1959 (No. 114);
    • Final Articles Revision Convention, 1961 (No. 116);
    • Social Policy (Basic Aims and Standards) Convention, 1962 (No. 117);
    • Guarding of Machinery Convention, 1963 (No. 119);
    • Hygiene (Commerce and Offices) Convention, 1964 (No. 120) ;
    • Medical Examination of Young Persons (Underground Work) Convention, 1965 (No. 124);
    • Fishermen's Competency Certificates Convention, 1966 (No. 125);
    • Accommodation of Crews (Fishermen) Convention, 1966 (No. 126);
    • Maximum Weight Convention, 1967 (No. 127);
    • Vocational Rehabilitation and Employment (Disabled Persons) Convention, 1983 (No. 159);
    • Labour Statistics Convention, 1985 (No. 160) Acceptance of articles 7-10 and 12-15 of Part II has been specified pursuant to article 16, paragraph 2, of the Convention;
    • Safety and Health in Construction Convention, 1988 (No. 167);
    • Private Employment Agencies Convention, 1997 (No. 181);
    • MLC - Maritime Labour Convention, 2006 (MLC, 2006);
    • Domestic Workers Convention, 2011 (No. 189).

    The following conventions of the International Labour Organization have been denounced and are not in force:

    • Placing of Seamen Convention, 1920 (No. 9);
    • Minimum Age (Agriculture) Convention, 1921 (No.10);
    • Minimum Age (Trimmers and Stokers) Convention, 1921 (No. 15);
    • Medical Examination of Young Persons (Sea) Convention, 1921 (No. 16);
    • Seamen's Articles of Agreement Convention, 1926 (No. 22);
    • Repatriation of Seamen Convention, 1926 (No. 23);
    • Officers' Competency Certificates Convention, 1936 (No. 53);
    • Shipowners' Liability (Sick and Injured Seamen) Convention, 1936 (No. 55);
    • Sickness Insurance (Sea) Convention, 1936 (No. 56);
    • Minimum Age (Sea) Convention (Revised), 1936 (No. 58);
    • Convention concerning Statistics of Wages and Hours of Work, 1938 (No. 63);
    • Contracts of Employment (Indigenous Workers) Convention, 1939 (No. 64);
    • Penal Sanctions (Indigenous Workers) Convention, 1939 (No. 65);
    • Food and Catering (Ships' Crews) Convention, 1946 (No. 68);
    • Certification of Ships' Cooks Convention, 1946 (No. 69);
    • Seafarers' Pensions Convention, 1946 (No. 71);
    • Medical Examination (Seafarers) Convention, 1946 (No. 73);
    • Certification of Able Seamen Convention, 1946 (No. 74);
    • Accommodation of Crews Convention (Revised), 1949 (No. 92); and
    • Fee-Charging Employment Agencies Convention (Revised), 1949 (No. 9).

    And the following have accepted the provisions of Part II:

    • Minimum Age (Fishermen) Convention, 1959 (No. 112); and
    • Minimum Age (Underground Work) Convention, 1965 (No. 123).
  27. 14.

    Are arbitration agreements to resolve labour or employment disputes valid and enforceable in your jurisdiction? Is there any legislation in your jurisdiction governing the private arbitrability of labour or employment disputes? May controversies in labour or employment matters in your jurisdiction be resolved through private arbitration (in your jurisdiction or abroad), or in foreign courts?

  28. Pursuant to Private Law International Code those international agreements about alternative dispute resolutions on labour or employment matters can be accepted by a court provided that these do not imply the waiver of rights recognised by the applicable employees law.

  29. 15.

    Are mediation mechanisms available and legally enforceable in your jurisdiction? Do conciliation fora exist in your jurisdiction and is conciliation mandatory before litigation? Is conciliation conducted by labour boards or courts or by an independent body?

  30. The Judicial Code and the Private Law International Code, stipulate that the labour special jurisdiction has the exclusive competence the resolve the disputes between employees and employers that arise directly or indirectly from the labour or employment individual or labour relationships or international agreements.

    The labour jurisdiction is made up of the following entities:

    • the Chamber of Cassation of the Supreme Court of Justice;
    • the Labour Superior Courts;
    • the Sectional Labour Courts; and
    • the Conciliation and Decision Boards.

    The labour judicial or arbitration proceedings must be carried out only in Spanish.

  31. 16.

    Does the law in your country require that labour or employment proceedings be held in a specific jurisdiction or place or require that proceedings be carried out in a specific language?

  32. The class lawsuit does not apply in Panama labour legislation.

    Two or more proceedings may be consolidated, pursuant to the following rules:

    • Common rights, obligations, etc. If the proceedings relate to common rights and obligations and are based upon the same facts or the same internal work rules, work orders, or agreement, agreement or collective employment agreement, even though the parties are different.
    • Similarity of employer’s claims. If there are several proceedings brought by the same employer against employees of the same company and the same claims are asserted therein.
    • Dependency of results. If the result of one proceeding necessarily affects the outcome of another proceeding.
    • Undisputed facts. If there is no dispute as to the facts but only as to the interpretation or application of the same legal provisions, even if the proceedings, the objects thereof and the plaintiffs are different, provided that the same plaintiffs are opposed to each and every one of the plaintiffs.

    Human rights grievances are not admissible in labour and employment proceedings.

  33. 17.

    Is there a concept in your jurisdiction providing for class-lawsuit in labour or employment matters? Does your law allow the consolidation of multiple labour or employment proceedings? Are human rights related grievances admissible in labour and employment proceedings?

  34. Foreign lawyers are not admitted to serve as counsel in Panama in any judicial and administrative proceedings including labour and employment.

  35. 18.

    Can foreign lawyers serve as counsel in labour or employment proceedings in your jurisdiction? If so, can they do so alone or must a local lawyer serve as co-counsel? Are their fees subject to local taxation?

  36. Labour and employment awards rendered by foreign arbitration courts will be recognised and enforced in Panama in accordance to the following legal instruments:

    • Convention on Recognition and Enforcement of Foreign Arbitration Awards of New York, 1958;
    • Interamerican Convention on International Commercial Arbitration of Panama, 1975; and
    • Any other treaty on recognition and enforcement of arbitration awards ratified by Panama.

    An international arbitration award issued in any country will be binding.

    A written special petition for the recognition and enforcement of an international arbitration award must be filed before the Fourth Chamber (General Matters) of the Supreme Court of Justice.

    Labour and employment awards rendered by foreign judicial courts will be recognised and enforced in Panama subject to the following requirements:

    • that the judgment has been rendered by a competent court without violation of the exclusive competence of the Panamanian courts;
    • that the judgment has not been rendered in absentia or default of the defendant. The defendant has been duly notified of the proceeding;
    • that the judgment does not infringe principles and fundamental rights of public policy in Panama; and
    • that the copy of the judgment is authentic and translated into Spanish.
  37. 19.

    Are labour or employment awards issued by foreign courts or arbitration courts recognised and enforced in your jurisdiction?

  38. In order to avoid the ineffectiveness of a proceeding and the transfer, disposition, concealment, impairment, encumbrance or dissipation of movable or immoveable property owned by a defendant, the plaintiff may seek attachment in any proceeding.

    A petition for attachment shall be filed by the plaintiff with a bond of 10 to 15 per cent of the amount or value of the property attached, in order to provide compensation for damages and harm that may be caused by his or her actions.

    No bond shall be required if an employee presents strong circumstantial evidence as to his rights and evidence of a written instrument stating the facts that are the basis of his or her complaint, the amount in controversy is fixed or easily determinable, and there is justified reason to fear that the defendant may be insolvent or that, for any other reason, a judgment may be without effect.

    A bond may also not be required, in the judge’s decision, when judgment is rendered by a lower court in favour of a plaintiff.

    The judicial attachment is not applicable to assets located abroad Panama.

    The funds of every social organisation shall be held in accounts at a banking institution located in the place of its domicile or, if there is no such bank, in a different place.

    The funds and property of union organisations shall not be susceptible of seizure, attachment or any other precautionary measures, except for seizure of immoveable property pursuant to the provision of a mortgage thereon arising from foreclosure proceedings.

    Moreover, an employee that is a union representative and/or a pregnant employee dismissed without the previous judicial authorisation based on a justified cause, are entitled to seek their immediate reinstatement.

  39. 20.

    May labour courts or boards grant interim relief? If so, how is that relief enforced? Does it apply to assets located abroad? Are these valid against unions?

  40. When a person desires to sue, fears that he will be sued or has a justified fear that eventually evidence will be missing or that it will be difficult or impossible for him to obtain it at an opportune time, he may ask the courts or boards immediately to take any of the following evidentiary measures:

    • Discovery.
    • Inspection. Judicial inspection and expert opinions.
    • Reconstruction. Reconstruction of occurrences or events.
    • Acknowledgment. Acknowledgment of a signature the or summoning of a presumptive opposing party for the purpose of his admitting the authenticity of a document suscribed by him or her or by a third party.
    • Production. Request for reports, certified public or private documents of any class, as required by the petitioner, in accordance with the limitations and restrictions established by law.

    Those individuals who are given statements as witnesses shall be summoned by the secretary of the court by means of a notice setting forth the day, time and place at they are required to appear, as well as the object of the summons. If the person refuses to sign the notice, the bearer thereof, if he is a court employee, shall sign the notice on behalf of the person who has been summoned. In this event, the court employee shall write a brief statement that the witness shall sign.

    If witnesses reside in a foreign country, letters rogatory shall be sent through the Ministry of Foreign Relations to the judicial authorities of the country having jurisdiction, in order that statements may be made pursuant to its laws and returned to the Ministry through a diplomatic or consular agent of Panama or of a friendly nation residing in that country.

    The judges have adequate powers to make the decisions required to punish acts that hinder the execution of their orders in accordance to the provisions related to contempt of court and shall use the police if necessary.

  41. 21.

    Can labour courts or boards issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them? If so, will a court of law lend its aid in enforcing such an order against a recalcitrant third party?

  42. In case of unjustified dismissals the employees are entitled to claim the payment of the severance benefits, compensations and reinstatement through a judicial proceedings.

  43. 22.

    Can a party to a labour proceeding seek relief from the court or board? What is the scope of such relief?

  44. Labour courts resolutions may be challenged only by the measures and proceedings provided in the Labour Code for the purpose of correcting any error alleged to be contained therein before the same judge who issued the order or the proper appeals court.

    The following recourses are established:

    • Reconsideration (before the same court that issued the resolution or order).
    • Appeal (before the Superior Courts).
    • Wrongful denial recourse. Appeal for wrongful denial of a recourse to the affected party.
    • Annulment or cassation labour recourse (before the Labour Cassation Chamber of the Supreme Court of Justice). Appeal as to labour law matters for the correction of injuries caused by judicial orders and judgments issued by the Superior Courts of the second instance (appeal) related to matters that have previously been decided and which constitute res iudicata, but which may nevertheless cause irreparable or serious prejudices because of their nature. In addition, this recourse has the object to obtain strict observance of the laws on the part of the courts and to establish a uniform national jurisprudence. Consequently, three uniforms decisions of the Supreme Court on the same point of law shall constitute legal doctrine and judges may apply it in analogous cases, but the court shall not be prevented from varying legal doctrine when it determines that the prior decisions were erroneous.
  45. 23.

    Are the resolutions issued by a labour court or board final? What are the remedies available for the parties?

  46. The grounds for challenging an award are the errors incurred in the resolutions or judgments issued by a court that infringe the labour law.  New claims may no be asserted in a general appeal against a judgment, except for claims for interest, wages, indemnities, payment for services, instalment payments or similar matters accruing after the judgment was rendered and related to or supplementing the relief sought in the first instance.

    The time periods for challenging a resolution or award are the following:

    • Reconsideration recourse – Three working days after the resolution is notified to the affected party.
    • Appeal recourse – This recourse will be filed upon the notice of the judgment or within the three working days after the resolution is notified to the affected party. 
    • Wrongful denial recourse. If a recourse is denied or is not admitted within a five working days period, the affected party may file this action.
    • Annulment or cassation labour recourse – Five working days after the judgment rendered by the Superior Court is notified to the affected party.
  47. 24.

    What are the grounds for challenging an award and what is the period of time a party has to challenge that award?

  48. A motion for lack of competence can be submitted before the judicial court by the affected party in case that the plaintiff has filed a lawsuit in violation of the arbitration agreement. These types of motions are a matter of previous and special decision.

  49. 25.

    If a party files a lawsuit in violation of an agreement to arbitrate, will a petition by the defendant to remit the lawsuit to arbitration be granted by the labour courts or boards in normal circumstances or is the right to sue not waivable? If so, will that petition be treated as a threshold matter or will it be rolled into the merits of the litigation such that the defendant will also need to defend the merits of the lawsuit in court?

  50. In every case of delay in paying wages, vacation, benefits and indemnities established in the Labour Code in favour of the employee, interests shall accrue at the annual rate of 10 per cent from the time at which the obligation is enforceable. Therefore, the interests will be accrued until the award is paid. The attorney’s fees are not included in the judgment.

  51. 26.

    Does the law provide that post-award interest accrues on an unpaid award?

  52. If a foreign award has been set aside by the courts it can not be enforced in Panama.

  53. 27.

    Can a foreign award be enforced if the award has been set aside by the courts?

  54. Labour contracts for a definite period or the performance of specific works are permitted provided that these must always be in writing, and the duration must not exceed one year. For those services that require a special technical preparation the duration period of the contract may be fixed up to three years. If this special technical preparation is paid by the employer the contract can be extended for two periods.

    Those foreign employees of an MHC licensed company's employees holders of a resident visa can be hired for a five-year period.

  55. 28.

    Are employment agreements for definite periods or seasonal jobs valid?

  56. If the job requires special skills, a clause in a labour contract stipulating a probationary period will be valid.  Usually this period is used by the employer to assess the employee’s suitability and performance in the job. The law allows a probationary period of up to three months. During the probationary period either party may terminate the labour relationship without liability.

    The discretionary power of the employer to assess the employee’s suitability and performance in the job within the probationary period has been recognised as established precedent.

  57. 29.

    Does the law allow probationary or initial training periods? If so, how long may they last?

  58. The employees hired for definite periods or the performance of an specific work are entitled to the following labour benefits that must be paid upon the termination of the contract:

    • Accrued and proportional vacations; and
    • Accrued and proportional thirteenth month.

    If the relationship is terminated without justified cause, the employee has the right of an indemnity equal to the wages that he would have received during the remaining period of the agreement.

  59. 30.

    Are employees hired under any of the foregoing modalities entitled to all labour benefits and social security?

  60. Outsourcing is lawful. Please refer to our answer to question 1.

  61. 31.

    Is outsourcing lawful? Are there special rules or penalties associated with it?

  62. There are no restrictive covenants provided in Panama labour legislation. However, the parties are free to include in an employment contract or in a separate document, a provision whereby the employee undertakes not to act in competition with the employer during the labour relationship and for a certain time after its termination. There must be a reasonable period within a non-compete clause so as to enforce it.

    Under Panamanian law, the employer can include a confidentiality provision in the employment contract requiring the employee not to disclose any work-related confidential information. This can apply both during the employment relationship and after it has ended.

  63. 32.

    Are restrictive covenants, such as non-compete and non-solicitation undertakings lawful and enforceable?

  64. For an appropriate advice to a foreign client that contemplates entering into a business deal with a company established in Panama, the following important labour issues must be considered:

    a. A foreign employee cannot work without a visa and work permit within the ratios established in the Labor Code, unless he or she is a foreign employee of an MHC.

    b. If the foreign employee is a national from any of the countries listed in Executive Decree No. 416 of 15 June 2012, he or she can apply for a permanent residence visa by evidencing to the Immigration National Service:

    (i) proving to the Immigration National Service that he or she has been hired as an employee; or 

    (ii) his or her economic solvency.

    Once the permanent residence is approved, the foreign employee can apply for a work permit for indefinite period.

    c.  There are certain professions regulated by law that only can be performed by Panamanians nationals (eg, attorneys, engineers, medicine doctors, architects, among others).

    d. If the foreign employee is hired according to an international employment contract, the rules contained in the Private International Code must be considered (please refer to our answer to question 12).

    e. The importance of having a written employment contract (please refer to our answer to question 5).

    f. The methods of termination of the labour relationship (eg, voluntary resignation, mutual agreement, dismissal, expiration of the fixed period of the contract and death).

    g. The vested rights and severance benefits.

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Questions

  1. 1.

    May foreign employers hire employees directly in your jurisdiction or is it necessary to act through a local subsidiary? Are secondments or loans of personnel lawful?


  2. 2.

    Is there a limit to the number (or ratio) of foreign employees an employer may have in your jurisdiction?


  3. 3.

    May labour or employment agreements, and the termination of those agreements, be subject to any legislation other than that of your jurisdiction?


  4. 4.

    What are the requirements for an enforceable agreement? Are there any formalities that labour or employment agreements must adopt to be enforceable in your jurisdiction? Are fees, duties or taxes generated by any of them?


  5. 5.

    What are the implications of hiring personnel without a clear, written, employment agreement in place? May this have any effect in the event of litigation?


  6. 6.

    What are the employers’ obligations (social security and related benefits) regarding employees after contracting? Are any social benefits tax deductible? Are these applicable to foreign employees?


  7. 7.

    What benefits, other than cash remuneration are employees in your jurisdiction entitled to? What severance entitlements may employees claim?


  8. 8.

    What is the role of the unions in the relationship with foreign employers and employees?


  9. 9.

    Do employees have the right to form unions? Is it mandatory for employers to honour this?


  10. 10.

    May unions be an independent party to a labour controversy in your jurisdiction? What are their rights and duties towards the employer and unionised employees?


  11. 11.

    May a union request, bring about or cause a stoppage? If so, in what cases and what remedies would be available to the employer?


  12. 12.

    Which legislation governs the enforcement of international relationships or labour agreements provided for in international business contracts, and in international commercial proceedings, to be performed within your jurisdiction?


  13. 13.

    Which international treaties or conventions are applicable to labour or employment relations in your jurisdiction? Has your country made any reservations to or denounced any treaties of the International Labour Organization?


  14. 14.

    Are arbitration agreements to resolve labour or employment disputes valid and enforceable in your jurisdiction? Is there any legislation in your jurisdiction governing the private arbitrability of labour or employment disputes? May controversies in labour or employment matters in your jurisdiction be resolved through private arbitration (in your jurisdiction or abroad), or in foreign courts?


  15. 15.

    Are mediation mechanisms available and legally enforceable in your jurisdiction? Do conciliation fora exist in your jurisdiction and is conciliation mandatory before litigation? Is conciliation conducted by labour boards or courts or by an independent body?


  16. 16.

    Does the law in your country require that labour or employment proceedings be held in a specific jurisdiction or place or require that proceedings be carried out in a specific language?


  17. 17.

    Is there a concept in your jurisdiction providing for class-lawsuit in labour or employment matters? Does your law allow the consolidation of multiple labour or employment proceedings? Are human rights related grievances admissible in labour and employment proceedings?


  18. 18.

    Can foreign lawyers serve as counsel in labour or employment proceedings in your jurisdiction? If so, can they do so alone or must a local lawyer serve as co-counsel? Are their fees subject to local taxation?


  19. 19.

    Are labour or employment awards issued by foreign courts or arbitration courts recognised and enforced in your jurisdiction?


  20. 20.

    May labour courts or boards grant interim relief? If so, how is that relief enforced? Does it apply to assets located abroad? Are these valid against unions?


  21. 21.

    Can labour courts or boards issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them? If so, will a court of law lend its aid in enforcing such an order against a recalcitrant third party?


  22. 22.

    Can a party to a labour proceeding seek relief from the court or board? What is the scope of such relief?


  23. 23.

    Are the resolutions issued by a labour court or board final? What are the remedies available for the parties?


  24. 24.

    What are the grounds for challenging an award and what is the period of time a party has to challenge that award?


  25. 25.

    If a party files a lawsuit in violation of an agreement to arbitrate, will a petition by the defendant to remit the lawsuit to arbitration be granted by the labour courts or boards in normal circumstances or is the right to sue not waivable? If so, will that petition be treated as a threshold matter or will it be rolled into the merits of the litigation such that the defendant will also need to defend the merits of the lawsuit in court?


  26. 26.

    Does the law provide that post-award interest accrues on an unpaid award?


  27. 27.

    Can a foreign award be enforced if the award has been set aside by the courts?


  28. 28.

    Are employment agreements for definite periods or seasonal jobs valid?


  29. 29.

    Does the law allow probationary or initial training periods? If so, how long may they last?


  30. 30.

    Are employees hired under any of the foregoing modalities entitled to all labour benefits and social security?


  31. 31.

    Is outsourcing lawful? Are there special rules or penalties associated with it?


  32. 32.

    Are restrictive covenants, such as non-compete and non-solicitation undertakings lawful and enforceable?


  33. 33.

    Outline any provisions in your jurisdiction’s law for the gig economy.


  34. 34.

    In brief, what advice do you have with respect to labour or employment relationships and agreements for a foreign lawyer advising a foreign client contemplating entering into a business deal with a company from your jurisdiction? What are the red flags?


Other chapters in Labour & Employment