In Nicaragua, labor law permits both written and verbal employment contracts, albeit with certain restrictions. There are three primary types of employment agreements recognized in this country.

Indefinite Term Contract (Contrato por Tiempo Indefinido)

The Indefinite Term Contract is the most prevalent type of employment agreement. It offers job security without a specified end date, providing stability for employees. This contract is typically used for ongoing positions within a company.

Definite Term Contract (Contrato a Plazo Fijo)

The Definite Term Contract sets a specific timeframe for employment, with a clear start and end date. This contract is often used for temporary projects, seasonal work, or tasks of a permanent nature, which Nicaraguan law permits.

Contract for Professional Services (Contrato de Prestación de Servicios Profesionales)

The Contract for Professional Services is different from a traditional employment contract. It is intended for hiring independent professionals for specific services, often on a short-term basis. Unlike employees, independent contractors are usually responsible for their own taxes and social security contributions. However, Nicaraguan authorities closely monitor these contracts to ensure that genuine independent contractor relationships exist. Misclassification of employees as independent contractors can lead to legal consequences for employers.

Verbal contracts are only valid for specific situations, such as agricultural work, domestic work, and temporary work not exceeding 10 days. Even in these cases, employers are still required to provide a record of employment containing key details like start date, services rendered, and agreed-upon wage. It's essential for both employers and employees to understand their rights and obligations as outlined in the Nicaraguan Labour Code. Consulting with a legal professional is always recommended to ensure compliance and navigate the specifics of each employment agreement type.

In Nicaragua, while some employment agreements can be verbal under specific circumstances, written contracts offer greater clarity and protection for both employers and employees. Here's a breakdown of essential clauses to include in your Nicaraguan employment agreements, referencing the Nicaraguan Labour Code as the primary legal source:

Parties to the Agreement

Clearly identify the employer and employee by name, including any company registrations or identification numbers.

Job Description

Define the employee's position, duties, and responsibilities.

Work Schedule

Outline the agreed-upon work hours, including regular working days, overtime provisions, and rest periods.

Remuneration

Specify the employee's salary or wages, including payment frequency and any additional compensation like bonuses or commissions.

Vacation and Leave

Detail the employee's entitlement to paid vacation days, sick leave, and other forms of leave as mandated by the Labour Code.

Termination

Outline the grounds and procedures for termination by either party, following the stipulations set forth in the Labour Code. This includes notice periods and severance pay requirements.

Social Security and Benefits

Confirm the employer's responsibility to register the employee with social security and withhold the corresponding contributions from the employee's wages. Any additional benefits offered, like health insurance, should also be mentioned.

Dispute Resolution

Outline the agreed-upon process for resolving any disputes arising from the employment relationship, such as mediation or arbitration.

Nicaraguan Labour Code also recognizes the concept of "acquired rights," which means benefits or working conditions not explicitly mentioned in the contract but established through custom or past practice cannot be unilaterally reduced by the employer. It's advisable to have the employment agreement reviewed by a legal professional familiar with Nicaraguan labour law to ensure compliance and address any specific requirements for your industry or situation.

Nicaraguan labour law acknowledges a probationary period within employment agreements, allowing both employers and employees to assess suitability for the role.

Standard Duration

The Nicaraguan Labour Code establishes a maximum probationary period of 30 days for indefinite term contracts. This period serves as a trial phase for both parties to evaluate job fit and performance.

Termination During Probation

During this 30-day window, either the employer or the employee can terminate the employment relationship without needing a specific justification. No severance pay is owed in such cases.

Purpose of the Probationary Period

This initial period allows employers to assess the employee's skills, work ethic, and cultural fit within the organization. Employees can also use this time to determine if the role aligns with their expectations and career goals.

Absence of Probationary Period in Fixed-Term Contracts

It's important to note that Nicaraguan law does not typically allow for a probationary period in fixed-term contracts since these agreements already have a predetermined end date.

Recommendations

While a probationary period can be beneficial, it's crucial to ensure a fair and transparent process. Here are some recommendations:

• Clearly outline the expectations and evaluation criteria for the probationary period within the employment agreement.
• Provide adequate training and support to the new employee during this initial phase.
• Conduct regular performance reviews to assess progress and address any concerns.

Nicaraguan labor law approaches confidentiality and non-compete clauses with a focus on protecting employee rights while acknowledging legitimate employer interests.

Confidentiality Clauses

Nicaraguan employers can include confidentiality clauses in employment agreements to safeguard sensitive company information, trade secrets, or intellectual property. However, these clauses cannot be overly broad and must be reasonable in scope.

Specificity in Confidentiality Clauses

The agreement should clearly define the type of information considered confidential. This could include customer lists, technical processes, marketing strategies, or unpublished inventions.

Reasonable Duration of Confidentiality

The duration of confidentiality obligations should be reasonable and limited to the time necessary to protect the legitimate interests of the employer. Perpetual confidentiality clauses are generally not enforceable.

Non-Compete Clauses

Nicaraguan law adopts a more restrictive approach towards non-compete clauses compared to confidentiality clauses. In principle, these clauses are considered null and void due to potential limitations on an employee's right to work and earn a living.

Exceptions for Senior Positions

There's a possibility of limited enforceability for non-compete clauses for high-level executives or employees with access to highly sensitive information. However, even in these cases, the clauses must be:

• Reasonable in geographic scope: Restricted to a specific territory relevant to the employee's role and the employer's business operations.
• Time-bound: Limited to a reasonable period after employment termination, typically not exceeding two years.
• Financially compensated: The employer must provide financial compensation to the employee in exchange for the limitations imposed by the non-compete clause.

Importance of Legal Consultation

Given the complexities surrounding non-compete clauses, it's highly advisable for employers to consult with a Nicaraguan labor lawyer to draft enforceable confidentiality provisions and navigate the legal limitations on non-compete restrictions.