Chile moves to reduce the maximum work week, but many doubts remain

Tomás Garnham

Guerrero Olivos, Santiago

tgarnham@guerrero.cl

Reduction of working hours in the context of Chile’s economic growth

Working time regulations have always been an essential part of employment law and, according to the Organisation for Economic Co-operation and Development (OECD) data, there is a clear trend towards working less hours along with economic growth. In the case of Chile, a country with approximately a US$31,000 gross domestic product (GDP) per capita and with a 45-hour maximum workweek, Law 21.561 (the ‘Law’) approved in April 2023 to gradually reduce the maximum work week to 40 hours, was generally accepted to align the country to such a trend.

In April 2024, the Law began to be enforced progressively by reducing the maximum workweek to 44 hours, with a later cut to 42 hours in 2026 and finally a cut to 40 hours per week in 2028. The Law also amended the Labour Code to restrict exempted employees and provided new alternatives regarding overtime and the distribution of working hours.

The exemptions and the role of the Labour Inspectorate

One of the most controversial aspects of the Law has been the reduction of exempted employees according to the new Article 22 of the Labour Code, who shall be allowed to work without a working time schedule. Prior to the Law, exempt employees who were in executive positions, those working for different employers, working without a direct oversight, employees working from home and those working outside the employer’s facilities were permitted. The reform significantly reduced exempted employees, leaving only some executive positions and employees working without a direct oversight provided that such classification was supported by the job description.

The Law gives an unprecedented role in this matter to the Labour Inspectorate, which with some controversy surrounding this exemption, will be allowed to modify the employment agreement regarding the classification as such of a subject who had traditionally been under exclusive judicial review. While the parties will still be allowed to go to an employment court for a final ruling on this matter, the administrative authority’s decision is likely to be a strong precedent. In this context, prior to the enforcement of the Law, employees, unions and employers have been expecting an opinion from the authority providing a guideline to implement the required changes of this new regulation.

Regarding the classification of exempted employees, the Labour Inspectorate issued opinion No 84/4 in February 2024, on which the authority highlighted the right to a reasonable limitation of working hours quoting international law sources such as Article 7(d) of the International Covenant on Economic, Social and Cultural Rights 1966 and Article 7(g) of the Organisation of American States Protocol of San Salvador 1988, both ratified by Chile, to provide a restrictive interpretation of the exempted categories.

In summary, the Labour Authority accepted that employees in executive positions within the company will be allowed to remain exempt provided that they act as legal representatives and have been granted executive authority within the company. This restriction seems to be excessive considering that the Law expressly mentions managers and administrators with executive powers, so the requirement of legal representation has not been mentioned for managers in the applicable statute.

Regarding the exempted category of employees due to working without direct oversight according to their job position, the Labour Authority briefly mentioned that, according to the current technologies, exerting an oversight is possible even in remote working conditions, so the only argument remaining to exempt an employee is to consider that a specific task or service presents such a restriction that oversight through lawful means by the employer is not feasible. In other words, unless oversight and control are impossible using lawful means, the employee should not be exempted from a working time regulation.

Again, the Labour Inspectorate seems excessively restrictive in determining if it is possible to work without a direct oversight from an employer. The authority has not considered criterion that are usually used to define whether an employee truly works without a direct oversight, such as autonomy, hierarchical seniority, level of compensation, the nature of the job position or any other technical aspects of modern-day work. The authority has not considered that, in several areas of the market, employers are focused on the achievement of goals rather than in the number of hours worked by the employee, focus that is also valued by employees that can enjoy more flexibility and autonomy on the distribution of their own time. While opinion No 84/4 acknowledged that such classifications should be reviewed on a case-by-case basis, this interpretation of the statute is concerning because, as we have mentioned, the Labour Authority will have a key role in the controversies that may arise in the following months. If the authorities decide to enforce such restrictive criterion, we are expecting a high level of litigation around this matter from employers claiming that their employees should remain exempted of the working time regulations.

Such guidelines from the authority are not the only controversial opinion issued by the Chilean Labour Authority. In opinion No 235/08, issued less than ten days before the enforceability of the first stage of the Law, the authority alerted employers by declaring that the reduction from 45 to 44 hours of maximum workweek required companies to reduce this hour in one specific day thus forbidding a proportional reduction of the maximum working hours along the full week. This opinion goes against the express text of the Law, which requires employers to agree with their employees or unions on a new distribution of the working hours but allows them to reduce progressively when the parties could not reach an agreement.

Conclusions

The Law provided a few innovations which were, in general, celebrated but that are also considered to fall short in addressing new issues in modern employment relations. Since April 2024, employees are permitted to choose to compensate their overtime work with additional vacation days avoiding additional costs to overtime hours and the Law also allows employees, unions and employers to agree on work shifts exceeding the weekly maximum provided that such limitation is not surpassed in an average of four weeks. On the other hand, the Law did not provide any tools regarding new trends in working time regulations such as on-call work-shifts or asynchronous working, which remain in high demanded from employers and will certainly be a growing part of the workforce in the coming years.