Establishing compliant employment relationships in Costa Rica requires a thorough understanding of the country's labor laws, which are primarily governed by the Labor Code. A well-drafted employment agreement is fundamental to defining the terms and conditions of employment, protecting both the employer and the employee, and ensuring adherence to local regulations. These agreements must reflect the specific nature of the work, the duration of the relationship, and include all mandatory legal provisions.
Navigating the nuances of Costa Rican labor law, particularly regarding employment contracts, is essential for companies hiring in the country. The agreement serves as the legal foundation for the employment relationship, outlining key aspects such as compensation, working hours, duties, and termination conditions, all while complying with the minimum standards set by the Labor Code.
Types of Employment Agreements
Costa Rican labor law recognizes different types of employment agreements, primarily distinguished by their duration. The most common types are indefinite-term and fixed-term contracts.
| Contract Type | Description | Typical Use Cases |
|---|---|---|
| Indefinite-Term | The standard type of contract with no specified end date. It continues until terminated by either party according to legal grounds or mutual agreement. | Most permanent positions, ongoing roles within the company. |
| Fixed-Term | Used for specific projects or temporary needs, with a defined start and end date. Legally restricted in duration and purpose. | Seasonal work, project-based roles, temporary replacement of an employee on leave. Must be justified by the nature of the work. |
Fixed-term contracts are only permissible under specific circumstances defined by law, such as for temporary or seasonal work, or for the execution of a specific project. If a fixed-term contract is used improperly or extended beyond legal limits without proper justification, it can be reclassified as an indefinite-term contract by the labor authorities.
Essential Clauses
Costa Rican labor law mandates that certain information must be included in every written employment agreement to ensure its validity and clarity. While verbal agreements are legally recognized, a written contract is highly recommended for clarity and proof.
Mandatory clauses typically include:
- Identification of Parties: Full legal names and identification details of both the employer and the employee.
- Start Date: The date the employment relationship begins.
- Employee's Role and Duties: A clear description of the position, responsibilities, and tasks the employee is expected to perform.
- Workplace: The location where the work will be performed.
- Working Hours: Specification of the daily and weekly working hours, including start and end times and rest periods, adhering to legal maximums.
- Compensation: The agreed-upon salary or wage, how it is calculated (e.g., hourly, weekly, monthly), and the payment frequency.
- Duration of Contract: Whether the contract is for an indefinite term or a fixed term (specifying the end date or event for fixed-term contracts).
- Other Benefits: Any additional benefits provided by the employer beyond the legal minimums (e.g., bonuses, health insurance, transportation allowance).
- Signatures: Signatures of both the employer (or authorized representative) and the employee.
Probationary Period
Costa Rican labor law allows for a probationary period at the beginning of an employment relationship. This period serves as a trial phase for both the employer to assess the employee's suitability for the role and for the employee to evaluate the job and work environment.
- Duration: The typical and legally recognized maximum duration for a probationary period is three months.
- Termination during Probation: During the probationary period, either party can terminate the employment relationship without cause and without liability for severance pay (cesantía) or prior notice (preaviso). However, termination must not be discriminatory or violate fundamental rights.
- Rights during Probation: Despite the ease of termination, the employee is still entitled to receive payment for work performed, accrued vacation time, and the Christmas bonus (aguinaldo) proportional to the time worked.
- After Probation: Once the probationary period ends, the employment relationship continues under the terms of the contract, and termination requires just cause or payment of severance and notice according to the Labor Code.
Confidentiality and Non-Compete Clauses
Confidentiality and non-compete clauses are common in employment agreements, particularly for roles involving sensitive information or specialized knowledge.
- Confidentiality Clauses: Clauses requiring employees to maintain the confidentiality of company information during and after employment are generally enforceable in Costa Rica, provided they are reasonable in scope and duration and relate to legitimate business interests.
- Non-Compete Clauses: Clauses that restrict an employee from working for a competitor or starting a competing business after leaving the company are subject to strict scrutiny by Costa Rican courts. For a non-compete clause to be potentially enforceable, it must be:
- Reasonable: Limited in geographical scope, duration, and the type of restricted activity.
- Justified: Protect a legitimate business interest (e.g., trade secrets, highly confidential information).
- Compensated: Often, enforceability is contingent on the employer providing specific compensation to the employee for adhering to the restriction after termination.
- Limited Duration: Typically, enforceable non-compete periods are short (e.g., a few months).
- Enforceability is not guaranteed and depends heavily on the specific wording of the clause and the circumstances of the case.
Contract Modification and Termination Requirements
Modifying an existing employment agreement requires the mutual consent of both the employer and the employee. Any significant changes to the essential terms of the contract, such as salary, working hours, or duties, should ideally be documented in writing as an addendum to the original agreement. Unilateral changes by the employer are generally not permitted unless explicitly allowed by law or the original contract under specific, limited circumstances.
Termination of an employment contract in Costa Rica can occur for several reasons:
- Mutual Agreement: Both parties agree to end the relationship.
- Just Cause: Termination by the employer based on serious misconduct or breach of contract by the employee, as defined by the Labor Code. If just cause is proven, the employer is not liable for severance pay or prior notice.
- Termination Without Just Cause: Termination by the employer without a legally recognized just cause. In this case, the employer is legally obligated to pay the employee severance pay (cesantía) and compensation in lieu of prior notice (preaviso), calculated based on the employee's tenure and salary, in addition to accrued benefits like vacation and aguinaldo.
- Resignation: The employee voluntarily leaves the job. The employee must provide prior notice according to the law (typically two weeks after three months of service) unless there is just cause for immediate resignation (e.g., serious employer misconduct).
- Expiration of Fixed Term: For fixed-term contracts, the relationship ends automatically upon reaching the specified end date or completing the project, provided the contract's use was legally justified.
Proper procedures, including written notification, must be followed for termination, especially when alleging just cause, to avoid potential legal challenges.
