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Labor Modernization Law

On February 27 the Argentine Congress approved the final text of the “Labor Modernization Law” (hereinafter, the “LML”), which will now be submitted to the Executive Branch for its enactment and subsequent publication in the Official Gazette.

The LML introduces substantial amendments primarily to the Employment Contract Act (Ley de Contrato de Trabajo, the “ECA”), the Trade Union Associations Act (Ley de Asociaciones Sindicales, the “TUA”), and the National Collective Bargaining Act (Ley Nacional de Negociación Colectiva, the “CBA”). Likewise, it introduces amendments to the Agricultural Labor Regime, specific rules for platform workers and provides benefits for the regularization of employment contracts and new hires.

The most relevant guidelines of the LML are as follows:

I. Amendments to the Employment Contract Act (ECA)

Section 2. Scope of Application

The new wording of Section 2 of the ECA redefines the sectors excluded from its personal scope of application, establishing that the provisions of this law shall not apply to:

• Public administration personnel, unless expressly included;
• Domestic service workers;
• Agricultural workers;
• Contracts for services, agency, transportation, freight and all other contracts governed by the Argentine Civil and Commercial Code;
• Independent workers and their collaborators (Section 97, Law No. 27,742);
• Independent providers of platform services;
• Maritime personnel under Navigation Law No. 20,094;
• People deprived of liberty in custodial settings.

Section 12. Principle of non-Waivability

The nullity of agreements through which it is intended to modify rights granted by law or by collective bargaining agreements is maintained; however, such nullity is eliminated for agreements modifying working conditions entered through individual employment contracts.

Section 18. Accumulation of seniority

If a period of two (2) years elapses from the termination of the employment relationship, regardless of the cause, and the employee is rehired by the same employer, the prior length of service shall not be computed.

Section 30. Subcontracting

The contracting of services shall trigger joint and several liability between the principal company and the contractor only when such services are performed within the principal’s establishment and correspond to the principal’s normal and specific core activities, excluding those that may be deemed “accessory or ancillary.”

The principal must require its contractors (for normal and specific activities within its premises) to submit the relevant labor documentation, and it shall only be considered jointly and severally liable for labor breaches incurred by the contractor if it fails to request such information. The falsity of the information provided shall also exempt the principal from any liability.

Section 52. Employee Registration

Employers must register employees with ARCA (tax authority), in accordance with the regulations issued by such authority. This registration shall be sufficient for all purposes, and no additional requirements may be imposed by any other authority.

The obligation to keep physical books and records is thereby eliminated. Pre-existing books must be preserved (in physical or digital form) for ten (10) additional years.

Section 80. Certificates of Services and Remuneration

The obligation to deliver certificates of services and remuneration is extended to forty-five (45) days following termination of the employment relationship and shall be deemed satisfied when the employer makes them available to the employee: (a) in physical format at the company’s premises; or (b) in digital format through any system that allows reliable proof of delivery to the employee.

Likewise, ARCA shall implement a web service so that the employee may access this information; accordingly, the obligation shall also be deemed satisfied when the information is complete and available on the relevant website.

Section 92 ter. Part-Time Working Day

The working day shall be deemed part-time—and shall give rise to payment of salary and social security contributions on a proportional basis (except for health insurance)—when the number of hours is less than the applicable legal or collectively bargained working day.

Part-time employees may work overtime above the agreed working day, but not in excess of the applicable legal or collectively bargained working day.

Section 95. Fixed-Term Employment Contract — Early Termination

Unjustified dismissal occurring prior to the expiration date of a fixed-term contract shall entitle the employee exclusively to the corresponding statutory dismissal compensation (seniority and notice), computing as seniority the length of service the employee would have reached upon the contract’s expiration date.

Section 103 bis. Social Benefits

The list of non-remunerative social benefits is expanded to include employee meal services, within the employer’s establishment or at nearby food-service establishments during the contracted working day, contracted by the employer (subject to regulation).

Sections 104 and 104 bis. Methods for Determining Remuneration — Tips

Wages may be set by time or by work performance; in the latter case, by unit of work, individual commission, or collective commission.

Tips shall in no case be considered part of the employee’s remuneration, even if they are customary in certain activities.

Through collective bargaining, individual agreement, or unilateral employer decision, dynamic salary components—temporary supplements, fixed or variable—may be incorporated into the employment contract, in excess of the conventional wage.

Section 105. Complementary Benefits

In addition to social benefits, the following complementary benefits lack salary nature:

• profit-sharing schemes and stock option plans;
• reimbursements of expenses documented by receipts, related to: (i) use of a company vehicle or the employee’s vehicle, under parameters established by ARCA; (ii) travel expenses; (iii) use of public passenger transportation for commuting to and from the workplace, per day actually worked;
• the loan for use (comodato) of employer-owned housing located in neighborhoods or complexes surrounding the workplace, or the lease and/or provision of housing by any title, when the employee did not have prior ties to the location before entering into the employment contract;
• expenses arising from the use of mobile phone service and internet for work purposes, in whole or in part, within the limits established by the enforcement authority.

Finally, the reform authorizes the payment of wages in foreign currency.

Section 133. Maximum Withholding Percentage

Employers must continue to act as withholding agents for solidarity contributions imposed by collective bargaining agreements on covered personnel (not affiliated with the union), but subject to a maximum cap of two percent (2%). Above this cap, employers must obtain the employee’s consent.

Section 139. Pay Slips

Digital pay slips are authorized, together with the possibility that the employee’s signature evidencing receipt of the monthly pay slip may be digital or electronic.

Section 154. Vacation Leave

The annual vacation period between October 1 and April 30 of each year is maintained; however, the parties may, by mutual agreement, take vacation leave outside that period. Likewise, by agreement, vacation may be taken in minimum segments of seven (7) consecutive days.

Vacation leave must be granted, at least once every three (3) years, during the summer season.

Section 197 bis. Working Time and Overtime

The employer and the employee may agree on an overtime compensation scheme, whether through payment of premiums, compensatory time off, or a time bank, establishing a method for recording hours actually worked and hours available for the employee’s use.

Section 210. Justification of Non-Work-Related Illness

Medical certificates submitted by the employee to justify absences due to illness or non-work-related accident must be issued by licensed physicians and include the diagnosis, treatment, and the number of days of work rest.

In the event of a discrepancy between the initial diagnosis and the employer’s medical examination, the parties may resort to a medical board at an authorized public institution or request an opinion from public or private institutions of recognized prestige and technical solvency; in the latter case, the cost of the intervention shall be borne by the employer.

Section 245. Unjustified Dismissal — Seniority Severance Compensation

The new text of Section 245 seeks to provide clarity as to the definition of the salary base used to calculate seniority severance compensation, establishing that the calculation shall take into account the remuneration “earned and paid in each calendar month,” excluding non-monthly payments such as the annual bonus (SAC), vacation pay, and bonuses not paid on a monthly basis.

Only those items that were paid at least during the last six (6) months shall be included; and for variable items (commissions, overtime, etc.), the average of the last six (6) months—or the last year if more favorable to the employee—shall be used.

The salary base may not exceed the applicable collectively bargained cap and, as a minimum, may not be less than sixty-seven percent (67%) of the normal and customary monthly remuneration.

In order to fund this severance compensation—or the payments agreed under a termination agreement (Section 241 of the LCL)—employers may opt to establish a termination fund or system, the cost of which shall always be borne by the employer, whether or not integrated with Labor Assistance Funds.

The compensation provided in this section constitutes the sole remedy available in the event of termination without cause.

Its receipt entails the definitive extinction of any judicial or extrajudicial claim related to the dismissal, including claims of a civil, contractual, or non-contractual nature, and no actions may be brought outside the special regime established by this law.

Section 248. Compensation in Case of Death

In the event of the employee’s death, the following beneficiaries shall receive compensation equivalent to 50% of the seniority severance compensation under Section 245 of the ECA: (i) the spouse or the deceased’s cohabitant; (ii) minor children; and (iii) adult children holding a disability certificate.

If two or more of the above beneficiaries concur, the compensation shall be paid in equal parts; if any of them is absent, the deceased’s adult children shall be entitled to receive it. If there are no children, the deceased’s parents who were dependent at the time of death shall receive it.

II. Labor Assistance Fund

For the purpose of assisting in the payment of severance compensation for dismissal, effective as of June 1, 2026, the so-called “Labor Assistance Funds” (Fondos de Asistencia Laboral, “LAFs”) are established, with the following general guidelines:

The LAF may only be used to pay such severance compensation in favor of employees registered at least twelve (12) months prior to the termination date of the employment relationship. Workers in the construction industry and domestic service are expressly excluded from its application.

Each employer must establish a specific allocation account per employee in one of the funds administered by any of the entities authorized for that purpose by the National Securities Commission (Comisión Nacional de Valores, the “CNV”).

The LAF accounts shall be funded with a mandatory monthly contribution of one percent (1%) for large companies and two and a half percent (2.5%) for Micro, Small and Medium Enterprises (MiPyMEs) (with the possibility of increasing in the future to one and a half percent (1.5%) and three percent (3%), respectively, subject to certain conditions), applied to the remuneration that constitutes the base for social security contributions.

Likewise, such accounts may be increased by returns and interest, voluntary employer contributions, donations, and other income.

The amount accumulated in each account does not condition the employer’s liability for full payment of its severance obligations.

An employer that demonstrates that the balance accumulated in its LAF account covers the percentages determined by the regulations may request the interruption or suspension of the monthly obligation to make LAF contributions.

Returns, interest, or any other income derived from investments made for the operation of the LAF, obtained by the employer, are exempt from income tax. This benefit does not affect the employer’s deductibility of the payments it must make upon termination of employment relationships.

The transfer of the employment contract—whether through a transfer of establishment or assignment of personnel (Sections 225 and 229 of the LCL)—shall also result in the transfer of the associated account.

III. Collective Labor Law

Significant amendments were set out to the regime for collective labor disputes, the collective bargaining agreement act, and the trade union associations act, as follows:

3.1. Amendments regarding collective labor disputes

Through amendments to Act No. 25,877, collective disputes that may affect the normal provision of essential services or activities of transcendental importance are regulated more precisely, in accordance with the following guidelines:

Essential services: at least seventy-five percent (75%) of service must be guaranteed for the following activities:

• (i) childcare and education at daycare, preschool, primary, secondary, and special education levels;
• (ii) health and hospital services, and distribution of supplies;
• (iii) production, transportation and distribution of drinking water, gas, oil, other fuels and electric power;
• (iv) telecommunications, internet and satellite communications;
• (v) waste collection;
• (vi) commercial aviation and air and port traffic control;
• (vii) transport of valuables;
• (viii) private security and custodial services.

Services of transcendental importance: at least fifty percent (50%) of normal service must be guaranteed for the following activities:

• (i) maritime and fluvial transport of persons and cargo;
• (ii) customs and immigration services;
• (iii) production of medicines and hospital supplies;
• (iv) land and underground transport of persons and goods;
• (v) radio and television services;
• (vi) continuous industrial activities, such as steelmaking, aluminum production, chemical and cement industries;
• (vii) the food industry;
• (viii) banking and financial services, hotel and gastronomic services, as well as e-commerce;
• (ix) production of goods and services in any activity subject to export commitments.

The so-called Commission of Guarantees may in the future classify new activities as an essential service or a service of transcendental importance when, for example, the interruption of a given activity not included in the foregoing list could endanger life, health, or the safety of people.

In no event may security forces provide less than one hundred percent (100%) of normal service.

3.2. Amendments to the Collective Bargaining Agreements Act

The following amendments to Law No. 14,250 are introduced:

A collective bargaining agreement whose term has expired shall only keep in force the rules regarding individual working conditions and benefits established in the relevant collective instrument. Obligational clauses (union contributions, solidarity contributions, etc.) shall only remain in force if the parties agree so. The Secretariat of Labor shall summon the signatory parties to renegotiate such clauses within one (1) year from the enactment of the LML.

Employer-chamber contributions established in a collective bargaining agreement may not exceed one-half percent (0.5%) of the remuneration of covered personnel. Those established in favor of the union may not exceed two percent (2%), except for union membership dues.

Higher-scope collective agreements may not amend or determine the content of lower-scope agreements. At the same time, company-level agreements may establish forms of articulation with agreements of different scopes and may expressly refer matters to be negotiated in the higher-scope agreement that applies.

The following order of precedence among agreements is established: (i) a later agreement amends, in any respect, an earlier agreement of the same scope; (ii) a lower-scope agreement prevails, within the relevant personal and territorial scope of representation, over a higher-scope agreement, whether earlier or later.

3.3. Amendments to the Trade Union Associations Act

The most relevant amendments incorporated by the TUA into Law No. 23,551 are as follows:

Assemblies and congresses: the union may call employee assemblies and delegate congresses without affecting the normal development of the company’s activities, and with the employer’s prior authorization as to their effective holding, the place (if within the establishment), the schedule, and their duration. The employer must be up to date on the payment of wages to impose such condition on the assembly.

New power of a simply registered union: from the time of its registration, trade unions shall have the right to represent the collective interests of their members within their personal and territorial scope.

Company union’s union legal status (personería gremial): union legal status may be granted to a company union when, for a continuous minimum period of six (6) months, the number of dues-paying members exceeds the number of dues-paying members within the same company of the pre-existing union association, regardless of its territorial or personal scope.

Delegates’ hour credit: employee delegates shall have up to ten (10) paid hours per month to perform their union activities, unless the collective bargaining agreement sets a higher number.

Union protection (tutela): the protection provided by Section 52 of the TUA —which prevents the employer from dismissing, suspending, or modifying working conditions—shall hereafter apply exclusively in favor of titular (principal) delegates and up to two (2) titular congress members in large companies, and one (1) in SMEs. In the latter case, protection shall apply only during the congress in question.

IV. Incentive Regime for Labor Formalization

Title XX of the LML creates the “Incentive Regime for Labor Formalization” (Régimen de Incentivo a la Formalización Laboral, the “IRLF”), under the following guidelines:

Employers covered by the LCL; construction industry employers with respect to personnel covered by Law No. 22,250; and employers under the Agricultural Labor Regime shall access a reduced employer contribution scheme for each new hire who: (i) did not have a registered employment relationship as of December 10, 2025; or (ii) was unemployed during the six (6) months prior to hiring; or (iii) whose last employment was as an employee of the public sector.

For each new hire meeting the above conditions, and for a period of forty-eight (48) months from hiring, the employer contribution shall be as follows: (i) a total rate of two percent (2%) allocated to the Argentine Integrated Pension System (SIPA), the National Employment Fund, and the Family Allowances Regime; and (ii) a rate of three percent (3%) allocated to INSSJP (Law No. 19,032).

This benefit shall not apply with respect to workers who were registered under the General Social Security Regime and who, once separated, are rehired within twelve (12) months of such termination.

Excluded from the benefit are employers who: (i) appear on REPSAL; or (ii) engage in abusive practices regarding use of the benefit. Exclusion shall operate automatically from the time any of the foregoing grounds occurs; in such case, the employer must pay the corresponding contribution differences as if it had never accessed the benefit.

The benefit shall operate automatically at the time of registering the new employment relationship, under the terms and conditions to be established by ARCA.

V. Promotion of Registered Employment

In Title XXII, the LML establishes a plan for the regularization of unregistered or deficiently registered employment relationships, under the following parameters:

Enrollment in the plan shall entail: (i) extinction of any pending criminal action for omission of payment of social security contributions, as well as forgiveness of violations, fines and sanctions of any kind related to such noncompliance; (ii) removal of the employer from REPSAL; and forgiveness of the debt for principal and interest when such debt originates from failure to pay social security contributions, up to seventy percent (70%) of the total amounts owed.

Workers included in the regularization plan may compute up to sixty (60) months of service with contributions—or the lesser number of months for which they are regularized—calculated on the basis of a monthly amount equal to the Minimum, Vital and Mobile Wage (Salario Mínimo, Vital y Móvil) or up to the declared remuneration if higher.

Regularization of employment relationships must be formalized within a maximum term of one hundred eighty (180) calendar days, counted from the effective date of the regulations for this title. Likewise, to access the foregoing benefits, the employer must first pay the total amount of the non-forgiven debt.

VI. Repeal of Laws

Finally, in Title XXVI, the LML provides for the repeal of a list of professional statutes and special laws, effective as of January 1, 2027, including, among others, the following:

• Law No. 12,908, “Professional Journalist Statute.”
• Law No. 14,546, “Traveling Salespersons in Commerce and Industry.”
• Law No. 27,555, “Legal Regime for the Telework Employment Contract.”
• Law No. 12,867, “Private Chauffeurs Statute.”

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For additional information, please contact Federico M. Basile or Manuel D'Ambrosio.

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by trsym