Discovering Costa Rica

In case of dismissal without “just cause,” the employer must give notice of termination, and pay for the following: unused vacation, Thirteenth Month and notice (if it was not provided), and severance payment, proportional to the total time worked by the employee.

The following are a set of financial obligations that the employer must fulfil if the employee is dismissed without mediating a “just cause.”

Compensation for Termination Without “Just Cause” 1. Termination Notice (Pre-Aviso) Before an employer can dismiss an employee without cause, he/she must notify the individual. Failure to do so could trigger additional obligations. The amount of notice depends on the length of time that the employee has worked for that particular employer. If the period is greater than three months but less than six months, he/she is entitled to one week’s notice of termination; for six to twelve months of service: two weeks’ notice; more than twelve months: one month’s prior notice. Instead of written notice, the employer may decide to pay the employee a sum of money equivalent to the salary that would have been earned during the notice period. The same is effective if the employee decides to leave voluntarily. If the employee does not give prior notice, the employee must pay the employer the amount of wages that corresponds to the notice that should have been provided. The corresponding wages for the time worked during such period may not be deducted from the vacations and Christmas Bonus. If prior notice is given either by the employee or employer, the employer is required to allow the employee one day off per week to find alternate employment. 2. Severance Pay (Cesantía) If the employer dismisses an employee without cause, or if the employee quits for a cause attributable to the employer, he/she is entitled to severance pay. This payment works as an unemployment compensation system. The employer is to subsidize the employee while he/she searches for another employment. The Code states that severance payment should be calculated according to the average salary of the previous six months and in accordance to the period labored as follows: + More than three months but less than six months: seven days wage + Six months to one year: 14 days wage + More than one year: 19.5 days wages for the first year labored up to a maximum of eight years (after the second year, see attached translation of article 29 of the Labor Code) 3. Accumulated Vacation Pay When an employee is dismissed, any unused vacation time must be paid. The amount is determined by multiplying the employee’s daily (gross) wage by the unused vacation days. If a worker is terminated before 50 continuous worked weeks, he/she has the right to be compensated with the equivalent amount of 1.25 days per each worked month. This must be paid regardless of the cause for termination.

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