In Costa Rica, there is no legal rule that expressly states the time limit for paying severance and other employment entitlements upon termination of the employment contract; however, for decades the courts of justice have recognized the payment of interest from the first day of termination, at which point they consider such amounts to be due and payable.
This makes sense if one considers that once the employment contract has ended, salary payments also cease, and since these entitlements are the only income that workers will receive from their former employer, from that perspective they substitute remuneration of a subsistence nature.
Despite this, questions are often raised regarding the maximum payment date that companies have once the contract has ended. In some cases, the question is justified by a temporary inconvenience in the employer’s cash flow, if not a definitive one; in other cases, depending on the size of the company, the reason is the internal process involved in making that payment, which prevents it from being ready immediately or within a relatively short time after the worker’s departure.
For some strange reason, the origin of which is unknown, a kind of pseudo-custom has arisen that there is a one-month period to settle the debt. Since this practice is unlawful, it lacks the binding element of custom.
Consequently, the term is defined by the creditor, namely the worker, and it may be extended for a longer or shorter period, depending on whether the worker considers that waiting represents a faster and less costly solution than filing a judicial claim for payment. The parties may also agree on a method of payment, which, in the event of breach, will give rise to the corresponding judicial claim, but which, so long as it is complied with, constitutes a prejudicial solution that, given the current and increasing backlog of the courts, is by no means a negligible alternative. In such cases, the extension of the term or the installment payments will ultimately depend on what the worker considers reasonable.
There are also cases in which the time periods may be longer, in scenarios such as the liquidation of the employment contract and the worker’s immediate rehiring, where the amount to be paid is treated as a salary supplement that is added to the salary to be received under the new employment contract.
However, they will be shorter in partial severance settlements or rehirings accompanied by a reduction in the new salary, where this type of supplement takes on a different purpose, that of temporary compensation intended to offset the less favorable conditions that will apply in the future.
In this context, the legislature is attempting to regulate this legal gap, and a recently published bill to create a labor payment order proceeding, being processed under file No. 24,316, has caught our attention. Through this bill, the aim is to facilitate workers’ collection of monetary obligations that are liquidated and due, owed by the employer, such as severance settlements. The purpose of this initiative is to create an expedited mechanism so that, where the employer acknowledges what it must pay, the worker may request the attachment of the employer’s assets and force recognition of what is owed; a solution made possible by access to the Social Public Defense system, which is free of charge.
If the debt exists and the payment term has expired, the advantages of the bill are obvious and justify the legislature’s concern. However, let us look more closely at the proposal.
For the claim to be admissible, a certificate signed by the employer must be submitted, stating the termination of the employment contract and the liquidated and due monetary amounts owed. Accordingly, section 35 of the Labor Code is amended to impose on the employer the obligation to provide that certification. The employer may refuse to provide it, although through a constitutional relief action or in enforcement of the judgment for violation of labor laws, a court order for delivery may be obtained.
Once the claim is admitted, the judge will issue a payment order requiring payment of all liquidated and due monetary items referred to in the certificate of termination of the employment relationship, and will order attachment in the amount of the total sum thereof, plus an additional fifty percent to cover future interest, indexation, and costs.
The only defense admitted in answering the claim will be payment, which evidently must be proven by documentary evidence showing delivery of what was owed.
The procedural deadlines, as in any payment order proceeding, are short, both at first instance and, where applicable, on appeal; less than one month in total.
As for the attachment, the first point to be made is that there are no guarantees in the law that, with the same speed with which attachments against the employer are ordered, they will be lifted once payment has been proven. These precautionary measures are based on the assumption that they operate with sufficient speed both to order them and to revoke them, and this is false. Courts have normally been effective in the former, but not in the latter, and judges may take months, and there is no shortage of cases in which years pass before these encumbrances are lifted.
The 50% surcharge is possibly calculated on another premise, namely a possible 25% award for legal costs, so that the other 25% would be to cover interest and indexation, which is difficult to justify. Although the formal one-month term for processing it is another legislative assumption that will be overtaken by the administrative reality that permeates court management, the additional 25% is clearly excessive. It is curious that no possibility is provided for the employer to raise a defense demonstrating the existence of a payment agreement whose terms have not yet been breached, since it is obvious that whoever has a term in their favor is not in default.
Payment order proceedings, summary proceedings, and others of their kind collide head-on with the reality of a permanent shortage of judicial resources. The need to establish these proceedings as a safeguard for workers should not come at the cost of creating new procedural inequalities. There are certainly solutions in which the premises from which the legislature proceeds may come closer to reality, but that implies equipping the justice system with the tools and personnel necessary to handle judicial proceedings. Legislating on premises that have repeatedly proven unrealistic only creates greater inconvenience, unless the indirect and undisclosed purpose is precisely to create those inequalities.
As long as the legislative rules do not change, and I do not believe they will, because the easiest solution is to legislate for an ideal world, the best recommendation is to create mechanisms within companies that ensure the prompt payment of employment entitlements.
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