1. Criteria of the Ministry of Labor and Social Security
On August 4, 2022, the Ministry of Labor and Social Security (MTSS) issued press release Nº CP031-2022 MTSS warns that public and private employers cannot apply deductions of any kind below the minimum wage, except in the case of alimony. In this sense, within said communication, the following is established:
During the press conference that was held last Wednesday, August 3, after the session of the Governing Council, the Minister of Labor and Social Security, Marta Esquivel Rodríguez, clarified that the prohibition of applying deductions to the unseizable minimum wage is a mandatory rule that reaches all employers and workers in the public and private sectors, a provision that is protected by article 172 of the Labor Code.
This protection to the non-seizure of the salary aims to ensure the well-being and dignified existence included in article 57 of our Magna Carta and convention 95 of the International Labor Organization.
As the minister pointed out, the Labor Code states that the minimum wage is unseizable, this is fixed through the decree that, currently, is a liquid sum of ¢216,887.24, delimited to meet the basic needs of the working person. (Decree No. 43633-MTSS, effective as of July 1, 2022).
The preceding means that it is not possible to apply deductions (judicial liens, credit operations, affiliation fees, among others) to workers who receive a liquid amount below the established minimum wage, except those that correspond to alimony…".
The previously described communication has been preceded by actions of other ministries in the same direction. In this sense, through the press release of July 6, 2022, the Minister of Finance, together with the MTSS, announced that the Government was not going to apply deductions of any kind to the salary of officials who receive through the system Integra a monthly liquid amount below the minimum wage, except for alimony.
According to the news of the newspaper La Nación entitled "Minimum wage recovers its embargo-proof shield", dated August 4, 2022, one of the foundations of the decision made by the Minister of Finance is the vote 656-2022 of the Second Chamber of the Supreme Court of Justice (Source: : t.ly/1Gny).
2. Judgment Nº 2022-000656 of the Second Chamber of the Supreme Court of Justice
The Second Chamber of the Supreme Court of Justice, through resolution Nº 2022-000656 of May 23, 2022, partially declared admissible a lawsuit filed by a public official against the State and two cooperatives due to salary reductions that exceeded the legal minimum wage. Therefore, the vote orders that said reductions are suspended and only applied when the worker's salary exceeds the minimum wage established in article 172 of the Labor Code.
The case analyzed by the Second Chamber corresponds to a worker who in 2014 requested loans from two cooperatives, which were approved based on his salary at that time, which was made up of a base and surcharges (worker carried out extra and temporary functions for a greater salary). However, in 2015, due to administrative decisions, the surcharges decreased, and in subsequent years they were not assigned more, which led to the worker's compensation reducing considerably.
Despite the preceding, automatic deductions continued to be applied for credits obtained with cooperatives, so when applied to the worker's gross salary – which was ¢562,518.00 per month – he received a net income of less than ¢30,000.00 fortnightly. This led to the remuneration received by the worker being less than the legal and non-seizable minimum wage.
Within the legal grounds that the Second Chamber used to support its resolution is an opinion issued by the Attorney General's Office that, in its opinion, offers a solution to the case raised because although said criterion establishes that article 174 of the Labor Code establishes an exception to the proportion that can be transferred, sold or taxed from the salary in favor of cooperatives or with legally constituted credit institutions and that are governed by the same principles as those, said particularity is subject to compliance with two conditions:
"1) that the untouchable minimum wage is respected, article 172 first paragraph of the Labor Code and 984, subsection 1, of the Civil Code; and 2) that it be the deduction of the fees that the worker has agreed to pay to cooperatives or legally constituted credit institutions, which are governed by the same principles as cooperatives, for loans or savings and credit contracts for the acquisition of own housing article 69, subsection K, and 174 of the Labor Code"
Likewise, concerning the defense thesis of the cooperatives, which was based on the fact that the worker had authorized his employer to proceed with the deductions that were being made, the Second Chamber determined that the consent of the collaborator is not an aspect that legitimizes salary deductions below the legal minimum under the principle of salary intangibility.
In this same sense, the Second Chamber indicated that "the position of the ILO and the Constitutional Chamber has been to set a "reasonable and proportional" limit for employers to apply when making reductions in the salary of workers, limit that is found in the minimum minimorum that derives from the application of numeral 172 of the Labor Code".
On the other hand, at the request of the plaintiff to apply the content of numeral 44 ter of the Law for the Promotion of Competition and Effective Consumer Protection, according to the reform introduced on June 16, 2020, the Second Chamber established that as said norm came into force from this last date, it is not possible to apply it to legal situations that arose previously, as in the case of the worker's credit operations. In this sense, the rule that the plaintiff intended to be applied was the following:
Article 44 ter- Right of the financial consumer worker. Workers have the right to request the retention by the employer of the quotas for the payment of their credits, as long as there is an agreement between the worker, the employer, and the creditor entity. The Central Bank of Costa Rica, through the National System of Electronic Payments (Sinpe) must implement a system to make deductions.
No deductions may be made from the worker's salary that affect the intangible and unseizable minimum wage, referred to in article 172 of Law 2, Labor Code, of August 27, 1943. Excepted from this provision is what corresponds to the alimentary pension.
Any individual or legal entity that grants a credit that disrespects the untouchable minimum wage referred to in the first paragraph of article 172 of the Labor Code will be subject to the sanction considered a very serious infraction under subparagraph a) of Article 155 of Law 7558, Organic Law of the Central Bank of Costa Rica, of November 3, 1995.
Therefore, although it is determined that in this specific case, it is not possible to apply the regulations previously described concerning said law, the Second Chamber indicated that:
it is clear that the employer has to guarantee that its workers receive the minimum minorum wage of an unseizable nature, being able to apply the deductions communicated by a financial entity and authorized by the worker, only as long as they do not affect the aforementioned minimum.
On the other hand, it is essential to establish that, when taking into consideration the date on which the worker's credits were formalized (2015 and 2016), and according to the arguments of the parties, the judgment of the Second Chamber does not analyze the content of article 44 ter of the Law for the Promotion of Competition and Effective Consumer Defense, which underwent essential changes with the last reform introduced in November 2020.
Likewise, even though the judgment of the Second Chamber is from 2022 and mentions the jurisprudence of the Constitutional Chamber as the basis for the vote, the Second Chamber does not refer to the most recent resolutions of the Constitutional Chamber, specifically to the judgment 2021- 11996. In said ruling, it dismissed an action of unconstitutionality against the current and transitory text of article 44 ter of the Law for the Promotion of Competition and Effective Consumer Defense, which establishes an exceptional situation in which it is possible to affect the worker's legal minimum wage.
In the same way, as expressly indicated by the Second Chamber in the resolution, the "object of debate in this case revolves around the nature of the salary and its protection against possible creditors who intend to enforce their credit right on it"; therefore, said court focuses its analysis on determining whether or not it is possible to affect the worker's legal minimum wage, to settle the fees that he/she promised to pay to the cooperatives. Due to the preceding being unrelated to the debate, the Second Chamber does not analyze or weigh the right to the minimum wage against other rights of a constitutional nature, such as the right to association, which applies to cooperatives and social associative-based organizations whose purpose is not for profit.
3. Judgment Nº 2021-011996 of the Constitutional Chamber of the Supreme Court of Justice
The Constitutional Chamber of the Supreme Court of Justice, through resolution Nº 2021-011996 of May 26, 2021, rejected the unconstitutionality action filed by the National Association of Public and Private Employees (ANEP) against articles 2 and 3 of Law Nº 9918, called Reform Law for the Promotion of Competition and Effective Consumer Defense, of November 18, 2020.
ANEP argued that article 2 of the Reform Law for the Promotion of Competition and Effective Consumer Protection of November 18, 2020, which modifies article 44 ter to the wording that currently holds, harms article 57 of the Political Constitution; article 7 of the International Covenant on Economic, Social and Cultural Rights; article 10 of the ILO Convention C95, and numerals 2 and 3 of the ILO Convention C131, since it allows the workers' salary to be transferred even if it exceeds the seizable limit established by the minimum wage. According to their position, this puts people's socio-economic well-being at risk.
3.1. Challenged rule: Article 2 of Law Nº 9918 Reform Law for the Promotion of Competition and Effective Consumer Defense, of November 18, 2020, and a comment on the amendments introduced
Article 2 of Law Nº 9918 introduced reforms to Article 44 ter of the Law for the Promotion of Competition and Effective Consumer Protection, the content of which is currently in force. In this sense, this norm currently establishes the following:
Article 44 ter- Right of the financial consumer worker. Workers have the right to request the employer the deduction of the quotas for the payment of their credits, provided that there is an agreement of wills between the worker and the creditor entity, up to the seizable limit.
Employers may not discriminate or fail to apply the deductions to the salary of the quotas duly authorized previously by the worker, for the payment of financial credit operations, voluntarily contracted by him or for the payment of his affiliation to organizations based on social associations whose purpose is not for profit, respecting the right and freedom of contracting and association of the worker...
Therefore, if the content of article 44 ter is contrasted once reformed –which was the one analyzed by the Constitutional Chamber– with the content of that same article before the reform –which was the one examined by the Second Chamber (reform introduced by Law Nº 9859 of June 16, 2020)–, there are relevant modifications, among which the following stand out:
The total prohibition of non-deduction from salary, for whatever reason or purpose, of any sum of money when the minimum unseizable wage is affected is eliminated. Now the law limits the prohibition to a specific assumption (the payment of credits) only as a requirement for the right of the worker to request the direct deduction of the quota from his salary and for the consequent obligation of the employer to satisfy that request.
While the first paragraph of article 44 ter continues to restrict the employer's deduction obligation "up to the unattachable limit", in the second, it recalls that: "Employers may not discriminate or fail to apply deductions to the salary of duly authorized quotas previously by the worker, for the payment of financial credit operations, voluntarily contracted by him or for the payment of his affiliation to organizations based on social associations whose purpose is not for profit", without referring to any specific limit.
Evidently, the second paragraph intends to allow that even when the unseizable minimum is affected, it is possible to deduct the quotas that guarantee that the worker who earns that salary can exercise the constitutional right of association, for which it would be possible for the employer to comply with their obligation to deduct: a) membership fees for unions, cooperatives, and solidarity organizations, as well as workers' savings for the latter and b) fees duly authorized in advance by the worker, for the payment of financial credit operations, voluntarily contracted with said social associative-based organizations whose purpose is not for profit.
3.2. Position of the Constitutional Chamber
Concerning the constitutionality of the current second paragraph of article 43 ter and regarding the possibility of the worker authorizing his employer to affect his minimum wage to cover the membership fees or credits that he has promised to pay to the organizations based on social associations whose purpose is not for profit, the Constitutional Chamber determined the following:
According to the preceding, it is not unconstitutional for the legislator to reserve a part of the financial consumer worker's salary to ensure a vital minimum free of payroll deductions; however, as specified in the aforementioned precedent, this minimum is set within the discretionary framework of the legislator of each country. This legislative discretion is the power that the legislator has to choose the legal solution that he deems most convenient to solve a social need. Note that ordinal 174 of the current Labor Code already established an exception also for the indefeasibility of salary related to legal operations carried out by workers with cooperatives or with legally constituted credit institutions, which were governed by the same principles of those. Consistent with this, and in the face of an erroneous interpretation of the initial reform of article 44 ter of Law No. 7472, the legislators modified the text in the second paragraph, establishing the following:
"… Employers may not discriminate or stop applying the deductions to the salary of the quotas duly authorized previously by the worker, for the payment of financial credit operations, voluntarily contracted by him or for the payment of his affiliation to social association-based organizations whose purpose is not profit, respecting the right and freedom of contracting and association of the worker…"
This is because, according to what the legislators themselves stated in Bill No. 22,109, which gave rise to the challenged rule, their intention was always to regulate payroll deductions that were referred solely to financial (credit) issues, not of any other nature.
Now, certainly, this rule opens the possibility again that the financial consumer worker can request payroll deductions for the payment of financial credit operations, voluntarily contracted by him with social associative-based organizations, whose purpose is not profit, such as the case of cooperatives and solidarity associations, respecting the worker's right and freedom of contracting and association, without establishing a non-deductible minimum wage. However, this Court, unlike the criteria of the Attorney General's Office and the plaintiff, does not consider this to be unconstitutional...
Note that the purpose of these groups is to facilitate better living conditions for workers and seek the development of solidarity as an instrument of economic and social growth for workers, through the savings of its workers, which is consistent with article 50 of the Constitution, which requires the State to seek the greatest welfare for all the country's inhabitants, organizing and stimulating production and the most adequate distribution of wealth. The legislators warned that, precisely in response to the economic needs of those workers whose income is lower and the nature of these groups, they should be guaranteed not only the possibility of accessing credits of this nature, but also the possibility of applying the deductions from their salaries, in the cases in which the worker specifically authorized it, in order also to maintain the benefits that the workers themselves obtain from these associations. (…)
Thus, this Court considers that the distinction applied by the legislator in the second paragraph of the challenged rule, by exempting organizations with a social associative base, whose purpose is not profit, from the limitation established in the first paragraph for other credit entities, is not arbitrary, but reasonably justified and consistent with the democratic principles of solidarity, equality, and equity that also govern our Political Constitution. (The highlight is from the author)
Therefore, the Constitutional Chamber, when weighing the purpose fulfilled by social associative-based organizations whose purpose is not for profit –because it is an instrument of economic and social growth and allows workers to access better credit opportunities– determines that the distinction made by the legislator in the second paragraph of article 44 ter of the Law for the Promotion of Competition and Effective Consumer Protection is reasonable and justified.
On the other hand, the Constitutional Chamber also rules out that the last reform introduced violates article 57 of the Political Constitution because, in Costa Rica, the existence of a minimum wage is guaranteed, which is established periodically by a technical body in an equitable manner and under equal conditions, taking into consideration the type of work and category of the worker. It is also essential to rule out the plaintiff's position that the constitutional norm "does not contain, at all, the issue of deductions that the worker, voluntarily and expressly, may authorize from that minimum wage guaranteed in our Political Constitution."
Likewise, the Constitutional Chamber also rejects that the current content of article 44 ter violates article 10 of convention 95 of the International Labor Organization, which promotes the protection of the worker's remuneration and indicates that the salary "must be protected against its attachment or transfer in the proportion deemed necessary to guarantee the maintenance of the worker and his family" because it is constitutional that the legislator has guaranteed the worker an unseizable minimum wage with which his well-being and existence are guaranteed. According to the Constitutional Chamber, the preceding is evidenced in the first paragraph of article 44 ter, for which the content of said norm conforms to the provisions of the international convention.
In the same way, the Constitutional Chamber rules out that the second paragraph that allows affecting the minimum wage violates the international convention due to the following reasons:
"Now, although the challenged rule admits in its second paragraph, that affiliation or credit fees can be deducted from that minimum wage, it does so only under two exceptional conditions: 1) that it be with the voluntary and express authorization of the worker, which automatically rules out the accused violation of due process invoked by the plaintiff, and, 2) in the case of the payment of financial credit operations, or for the payment of their affiliation to social associative-based organizations whose purpose is not profit. The preceding does not mean that the legislator unprotected the salary of that worker whose income does not exceed the salary minimum, but rather that it regulated the disposition of that salary minimum, for the purpose of applying salary deductions from the payroll, within that framework of discretion granted by the convention to each country, allowing the worker himself to make the decision to authorize or not deductions from his salary for affiliation fees or credit, only in the case of organizations with a social associative base whose purpose is not profit, precisely because the benefits that this can represent for the worker and his family...It must be taken into consideration that, due to the model in which these groups operate with the worker's own savings and without generating profit, the costs of the services they provide, as well as the credits, are provided for in more favorable conditions for this worker, hence, the application of the payroll deduction of these fees was authorized in this particular case by the legislator, precisely to help and promote better conditions for workers, by reducing the operating costs that its impossibility would imply. Let us remember that the money that is dedicated to credit is the property of the savers, depositors or associates of these organizations and that the role of these intermediaries is only to facilitate and attend to those needs, at the lowest possible transaction cost."
Therefore, the Constitutional Chamber determines that article 44 ter does not violate Convention 95 or 131 of the ILO, since the challenged rule authorizes the employer to make deductions under exceptional conditions. Said special requirements are associated with an express and voluntary request of the worker, and the deductions must originate from the payment of financial credit operations voluntarily contracted by the collaborator or for the payment of his affiliation, in both cases, to social associative-based organizations whose purpose is not for profit. Due to the preceding, both the right and freedom of contracting of the worker as well as his right of association are respected.
4. Current situation
Under article 13 of the Constitutional Jurisdiction Law, the jurisprudence of the Constitutional Chamber is binding erga omnes, except for itself. The preceding implies that the rulings and interpretations of the regulations by said constitutional court are binding for the rest of the legal operators and the public administration.
Therefore, both the thesis of the Ministry of Labor and the criteria of the Second Chamber of the Court, for cases in which Law Nº 9918, Reform Law for the Promotion of Competition and Effective Consumer Protection, is already in force, of November 18, 2020, which amended its article 44 ter, must comply with the criteria outlined in vote 2021-011996 of the Constitutional Chamber.
Therefore, if the worker is part of trade union organizations, solidarity associations, and cooperatives, all of them social association-based organizations whose purpose is not for profit, he could ask the employer to affect even his minimum wage in order to deduct membership fees (and worker savings), as well as to pay debts contracted with them (such as loans), to stay affiliated and honor their commitments. Once such request has been communicated, the employer must apply the deduction.
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