Let's wiki the Labor Law

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And then the fat lady sang
And then the fat lady sang

“It used to be simple,” my friend Armando is telling me. “I used to be able to play around with the shifts depending on the changes in demand. Sometimes, when I had the pizzeria, there were two good days followed by three bad days. Knowing those were coming, I could ask my guys to either stay home or do double shifts. Now … I can’t do that anymore.”

Armando is showing me his new restaurant. It’s pretty small compared to the pizzeria he used to own. In the other one, he had a partner with deep pockets, an old friend from school who turned out to be a coke addict and, ultimately, a most unreliable partner. Now, he’s trying his luck on his own. You can smell the fresh paint on the walls. I wonder how he put the place together in the middle of Guarimba-geddon.

It’s late on a Monday afternoon in Maracaibo, and Armando won’t be opening today. After he tells me about the shifts, I give him a quizzed look.

“The Labor Law, man. Every worker gets two consecutive days of rest per week. They have to be consecutive, no ifs, ands, or buts. When you own a small restaurant like myself, those are enormous costs. I can’t hire more waiters, and I certainly can’t fire them. It’s a nightmare.”

I ask him what he’s doing about it.

“I ask my guys to come to work and rest on non-consecutive days. But in order to do that, I have to pay them under the counter, because they know that what I’m doing is illegal. But it’s the only way. The worst part is that, if they get pissed at me, they could report me and I could end up in jail.”

The Organic Labor Law for Workers and Workerettes is a massive piece of legislation, one of the last “gifts” Hugo Chávez bestowed our long-suffering Republic. Back in May of 2012, in the heat of the populist orgy we like to call “the election of 2012,” Chávez signed into law a back-breaking, business-busting, nuts-cracking tour de force.

The actual effects of the implementation of the new Labor Law are one of the least reported pieces of the chavista puzzle of horror. It’s a shame, because its effects appear to be hugely important.

The restrictions it places on businesses are enormous. For example, workers are basically free to not report to work, and you can’t do anything about it. Thanks to the law, severance payments went through the stratosphere. And then there is the little tidbit about the consecutive shifts which, in a business such as Armando’s small restaurant, can be the death knell.

Now, I was going to do some digging and start writing a long, detailed post on the Labor Law, but chances are I’ll get it wrong.

So instead, I think we should use the unique features of the blog’s comment section and wiki the hell out of this thing. So, tell me: what are the worst aspects of the Labor Law? Are there any good things about it? And, in your personal experience, what has been the most frustrating?

Feel free to shoot off in the comments section. After we’re done, I’ll compile the most vivid experiences and put them together. Oh, and do include links if you can.

1 COMMENT

  1. Living in a country with long paternity leaves I am on the changes regarding this. However, Chavistas keep sending all the burden to the employers and I just don’t understand why. Like the whole “guardería” thing. So I fail to see how this is gonna improve the quality of life for parents. In Sweden we have 18 month shared paternity leaves at 80% of your salary. But that is completely paid by the state, and not by the companies. Problems? well you can have productivity problems and you may need to hire a substitute employee, but what I have seen, the work is redistribute and then the person assumes his/her role back. So monetary? Doesn’t seem so.

    I don’t know, there seems to be interesting ideas but all implemented in such a bad way that they don’t work. Meanwhile, there will still be women discrimination because of the possibility of pregnancy and illegal pregnancy test when hired.

    On other topic, what I have seen when I have been in Venezuela, seems like the most affected area is commerce. The whole change of the jornada laboral has forced a lot of stores to either hire more or to close an extra day of the week. There is zero flexibility regarding this. And that lack of flexibility on the work force is gonna end up closing tons of businesses.

      • Absenteeism is a reality everywhere. What we haven’t done here is acknowledge it as a fact of life. Back in grad school (in the US) my manufacturing system classes included how to plan strategies for absenteeism.

        I also think the 40% is a bit too high. What I have heard from large companies is more between 20 – 10% which is pretty standard.

        • Wait, so are you saying the Labor Law has *not* increased absenteeism? ‘Cause that’s the opposite of what I have heard.

          • Hard numbers without naming names about where I work: Big enterprise, with HUGE employee engagement: absenteeism has gone up close to 12% in the last year. Operative word being “up”. Total close to 30% in some departments.

          • It has, of course. The labor law has created a more difficult set of constraints. Some stupid, like these shifts rules, some rightful but poorly implemented, such as maternity and paternity leave and, or course, inamovilidad. This last one does increases absenteeism.

            Here is some data on one of the most industrialized countries.

            http://businessjournal.gallup.com/content/117376/employee-disengagement-plagues-germany.aspx

            I honestly wish we had better labor laws. Like harodani says “better implemented”. There is a huge lack of empathy for workers and entrepreneurs. The former carry huge risk and stress and the first have to do in many case a hazardous, soul sucking stuff.

            In the end what’s sad is that this law makes running a company harder, without actually transferring benefits to workers.

            As an example, here is a manufacturing cell. Please watch this video and imagine doing this all day long:

            Take a part out, put it on the next machine, take the next part out, put it on the next machine…. forever.

          • It looks like the government is about “worker’s rights just for the sake of it” and, as with this and other type of policies, they never think about sustainability. I am on in the worker’s rights wagon but it cannot be translated in losing jobs and closing companies. And let’s say that those things don’t happen… your company keeps producing… I don’t see absolutely any incentive to hire more people. Worker’s rights are also about the right of having a job. This law fails miserably at creating new jobs.

          • I think it did , the worker gets their two consecutive days , and then if they please they can take the day before it claim they´re sick , they would risk a warning , but that´s not enough to fire them because they have to get three in a month . So basically they can get a free paid vacation every month if they please. This only teaches them to keep on coasting and never add up to anything in life . This is why most foreigners think us venezolanos are lazy ..

  2. Know of a factory which manufactures mass consumption items , of the kind we all use , their production processes involve following a long series of different sequential steps so that if one of them is stopped the whole productive chain stops working , . Every part of the process has its specially trained specialists workers , if one of them doenst come to work , that part of the process cant be operated and the whole productive chain has to be stopped , idling production . all others workers are left with nothing to do wasting large amounts of time and money . meantime the product inventory falls and sometimes a shortage happens , same thing where a batch of products is dependent on a particular item which ceases to become available or if a machinery breaks down and there are no parts to repair it with . for example plastic or cardboard containers or bottle caps. So if one worker just doesnt come to work one day , its not just his work which is wasted but all the factory workers who are idled . At the same time the workers are encouraged to feel that they deserve a raise so high that would leave the company broke and take actions to pressure management into giving them raises that cant be paid unless you are run the business like a philantropic organization .

    The company has responded by going into a minimal production mode , They dont have to let people go because those you can let go, being administrative or professional level employees are leaving the company in droves ( 30% in just the last few months) on their own initiative , , many of them to emigrate to other countries . In short Worker absentiism not only affects the cost of paying the malingeering worker that cant be fired but the whole productivity of a factorys workforce .

    Why is this happening?? , is it because the work conditions required a change and the govt wants to assure justice is made in work management relationships ?? Of course not !! these licenses for worker abuse of their employers , these freebies that the govt grants all workers rest on two considerations , one , the view that capitalist employers are blood sucking meanies who must be punished for their capitalist sins ( makes a bully feel great when he causes someone weaker than himself some harm) and second because its good political propaganda to give people benefits ( even abusive ones) which make the regime look good and help canvass their sympathies as the workers friends . For this regime Political gains trump over economic necessity every time !!.

    • Our workaround for the machine operators is to pay minimum, but include piecework incentives for each component of the projects. Since all are different, more or less, with the remanufactured parts being designed and built, we can get away with it. Moreover, since these incentives are partially bid upon, the operators are motivated to produce as quickly as possible; not being there means they get paid, but they make maybe 25% to 33% of what they normally would. Unsurprisingly, absenteeism for us is relatively low.

      Of course, there seems to a large number of random holidays at times, which makes things difficult. And it is becoming moot since we can’t get raw materials any more (sheet metal, aluminum, manganese, steel or iron). We idle more from materials than anything else and we have a 6 month backlog on projects, which sucks since they are bid with inflation eroding any sort of gains.

      And I abhor preparations with a passion.

  3. As a lawyer and person who has worked a bit on this field, the worst aspect is not the labor law itself (which is pretty damaging and a heavy burden) but the annual decrees of inamovilidad, which are the ones responsible for the absenteeism and the impossibility of dismissing even the worst of workers. Actually, even within the parameters of the law, you can fire someone by paying the indemnifications set for ther, it’s the decree that has the most pernicious effects. Before 2012, the decrees only protected workers who made less than 3 minimal wages, but since that date it has included all workers, which takes you to the absurd situation of not being able to dismiss a key manager or employee. Just not issuing the decree again will do wonders for the productivity of the country, LOTTT notwithstanding.
    About the law itself, the worst part have been the shifts and the two consecutive days off, which has affected the services industry greatly, few people have noticed but, apart from shortages, thanks to the new labor law is that you see bigger lines in supermarkets.

    • These Labor Laws are beyond illogical.. they are simply insane. Any monkey with half a brain would immediately comprehend that they place way too much burden on the employers, already mortally wounded by other gems like the “liquidacion doble”.

      Even the uneducated, inept Chavistas probably realize the immense aberration of such laws in any kind of economy with any sort of chains of production. Evidently, it triggers rampant inflation and bad quality, as the cost of your product increases exponentially with bad workers who can’t be fired.

      So why are these retrograde, draconian labor laws in place? In other words, since we’re talking about CorruptoZuela, who benefits from these inane economic legislature? Los sindicatos? Unions, paying off the politicians and dictators who enable such decrees. That’s my best guess. Unions in Venezuela are quite powerful, if memory serves. Their leaders bribe everyone, if you’ve ever been in business in Venezuela with any large scale project with any sizeable workforce. They are huge leeches that need to be greased regularly.. And in turn, to remain in power and elected, for $$$, they propose such horrible laws. The politicians get billions, and pass them. That’s my best guess, any ideas? I doubt it has anything to do with any idealistic, socialistic rebolucionario mumbo jumbo of equality and worker protection from the jefecitos burgueses.. No, in Vzla it’s always about $$$, and who can steal the most of it as fast as possible.

    • “Actually, even within the parameters of the law, you can fire someone by paying the indemnifications set for ther”
      Pure theory. What Inspectoria del Trabajo is going to authorize a firing??????

      • “What Inspectoria del Trabajo is going to authorize a firing??????”

        None. We have been told by labor ministry Inspectors, for years now, that the order from the top is no firing is to be authorized, PERIOD. EVER. NO MATTER WHAT.

        We had a case where we captured on video, plain as day and fully identifiable, one of our workers threatening another with a knife. Tried to have him fired, no dice.

        When workers know you can’t fire them, some take advantage of this and simply show up, punch their card and while the time away.

        Out of 180 employees, we have about 10% that simply sit around all day doing nothing.

        You can offer them a 4x or 5x dismissal package or put up with them.

        The remaining employees actually do want to do a good job, and be productive, so in that sense we are blessed.

        Before this latest iteration of the law, back in 2010, we had a situation where one worker who worked nights and weekends was complaining of having to work overtime.

        He introduced a complaint in the local labor office and the Inspector came out to our place to do her “fact finding”.

        I happened to be there when she came in and we had a “hearing”. Since our process is a 24x7x365 process we are “exempt” from overtime limits, as long as we filed notice with the “Inspectoria”. We had not filed notice (ignorance).

        I told the inspector that we would file the paperwork right away. The employee wanted to file a complaint and stated we should hire more workers.

        I then asked the worker if was willing to make up the overtime to his fellow workers out of his pocket, as well as making up the difference in the “utilidades” payments at the end of the year and the differences in the bonuses (both of which are calculated using actual money paid [Salario Integral] and not stated salary).

        The Inspector actually laughed and asked the employee if he was going to do as I suggested, that is, pay his fellows any money they would stop receiving since overtime would be at an end.

        We asked his fellow shift and department workers what they thought and if looks could kill, that employee (the complainant) would not be around today.

        Case closed, appropriate papers filed.

        Last year we gave the employees union evidence that this worker was living beyond his means.

        Turns out he was stealing from the union’s bank account.

        He resigned. Haven’t seen him since.

        • That’s the thing, according to the LOTTT if you are fired, it should be settled before a Labor Court, that at least guarantees more impartiality and means of defense (Labor Courts are the only efficient ones in Venezuela). The inamovilidad decreto gives the Inspectoría jurisdiction to hear the claim, instead of the courts where you have no means of defense or proving if the dismissal was justified. My point is that the worst enemy of labor productivity in Venezuela is not the LOTTT itself, which is very draconian, but the annual inamovilidad decrees that give the Inspectorias jurisdiction to hear the claims.

    • cacr210,
      Do you know how many days consecutivley a worker can miss with no excuse? Is there a limit per week or month?
      Does the worker get paid for days missed?
      If you hire someone is there a grace period before they become permanent?
      Can a person be dismissed if he/she comes in drunk?

      • The grace period is one month and it generates severance pay (prestaciones). It used to be three months with no severance pay, but this was abused by the service industry and other low-skill areas (think shoe salespeople and waiters), that avoided severance pay by routinely firing workers when the three months were up.

      • It used to be that 3 unexcused absences could result in firing for cause, but I am not sure if that is still the case. You are not obligated to pay for unexcused absences.

        Yes, you can theoretically fire someone for being impaired on the job. However, you must prove they are impaired and to do so means testing. If a person refuses to be tested there is nothing that says they are obligated to submit to it unless it is specifically mentioned in their employment contract.

    • How does this law not apply to Cadena Capriles? They keep firing journalists. Or is it that they resign?

      • They are probably are negotiated, they offer you a cajita feliz, thats the usual way o settling with a worker, you pay them the law indemnification for unjustified dismissal plus the salaries until December and they usually signed a resignation. Usually the worst workers (thieves, reposeros) are the ones who demand more.

  4. “The Labor Law, man. Every worker gets two consecutive days of rest per week. They have to be consecutive, no ifs, ands, or buts.
    Even in the oil field? I worked schedules from 6 days on-6 days off to 28 days on-28 days off.

    In my student days, I worked at a state-run institution on a 35 hour week, which when translated into 24/7 coverage meant a work cycle of 5 days on and 3 days off. I was once requested to work on a day off, which I was glad to do for the time and a half hourly rate. That stretched into working all my days off, and working 13 days straight. I was glad to do so, as I needed the money, and because the semester hadn’t yet begun, it wasn’t interfering with my studies. Repeat: this was done at a state-run institution.

    Such inflexible labor laws can only harm.

  5. “As a lawyer and person who has worked a bit on this field, the worst aspect is not the labor law itself (which is pretty damaging and a heavy burden) but the annual decrees of inamovilidad”.

    My thoughts exactly-

  6. I think a great article remains to be written about the 10 months or so leading up to Oct 2012 election. The massive orgy of spending, the insane populist laws and giveaways. Public spending almost doubled from the previous 10 months, much of it coming on cash from china in return for future oil (giving away your country’s future, finite natural resources in return for short term popularity buying cash….what a statesman!).

    People who speak of democracy can’t seriously think a fair election can be held when presidents can manufacture economic booms during their re-election campaigns…too bad Chavez wasn’t around when the money ran out.

    • “…too bad Chavez wasn’t around when the money ran out.”
      Why do you think the castros ordered to have him killed in la habana in 2012?

      • Ha, you never know…but his death at that point was more helpful to the absurd “Cult of Personality” orchestrated around him to bolster regime legitimacy than if he had stayed around for massive economic distress.

        Reminds one of how Che’s death was probably more helpful to the Castros, and certainly to his own myth, then his continued existence.

  7. Venezuelan Labor law= endless summer workers can do whatever they want with this law they can skip a week of work or just sit around the office and do nothing. its like every company in vezuela has to transform into a MINISTERIO.

  8. Too bad these employee-protecting laws were not in place when the biggest employer of them all, PDVSA, decided to fire more than 20000 of its own employees for political reasons.

    • But according to chavista philosophy, the law is only for the “pendejos maricos”, that is, for everybody who doesn’t belong to the supreme aryan race.

  9. I’ve never understood the unemployment statistics for Venezuela, all of which, as far as I have seen, appear to include informal workers among the “employed”. That is, people working under the table, as per your example. Last I checked, and someone please correct me if I am wrong, that was roughly 40% or upward of the workforce.

    It seems to me that rather than try to formalize a massive informal sector, which would bring people within the ambit of at least some minimal protections (health and safety, non-discrimination, minimum wage, caps on hours etc), and also make them taxpayers and therefore probably more interested in what kind of watch the Minister of Justice is wearing and where the Prosecutor General takes her vacations, what the regime did was deliver a benefit to people in larger organizations which already have the ostensible benefit of union representation.

    I say ostensible benefit, because of course the Venezuelan government has taken away free collective bargaining, essentially rendering independent trade unions without status and unable to bargain agreements and enforce their rights. And it is the same CNE that oversees union elections that did such a great job helping Maduro get elected.

    It is a mistake to see this regime as too friendly to the worker. What is on paper, like everywhere else (i.e. criminal law), is no reflection of actual practice, and what is on paper has not solved the problem of formalizing a massive underground economy, open to abuses. Do those people selling cookies at the toll booths outside Valencia get two consecutive days off? I don’t think so. Do they get access to fresh water, meal breaks and a washroom? I don’t think so. Is the government aware of these informal workers and the people who employ them? Of course. You can see them at every speed bump on the way to Sabaneta, the cradle of the revolution, selling cheese, toys, some kind of treacle soaked cracker. I guess LOTT and the powers that be just think this is chevere.

    I’m still waiting to see a workplace investigation report on the explosion that practically blew up a village at the Amuay refinery. What does LOTT have to say about that? What did the workplace investigation committee do in that instance? What has been done to prevent a re-occurrence?

    It is absurd, when you think about it. You can blow up your workers with impunity if you are connected to the government, but if a cashier at a private grocery store does their work standing up, like they do in most of the western world, all hell will break loose.

    The worst offender in terms of compliance is, from what I have seen, ministries and government agencies. The labour law is all a dream in someone’s head, and what you have in practice are arbitrary measures by the state used to squash dissent and to enrich a relatively small group of enchufados, and I don’t know how you wiki that.

    • I concur. Estamos buscandole 5 patas al gato!!!!

      the reality is that non ending back to back yearly Inamovilidad decrees , and the draconian labour law, as well as ll other legals and para legal, fiscal and para fiscal measures this regime promotes have a simple root motivation, Social control.

      The communist state needs a dependant populace easier to control, that independent healthy private employers. Period.

      The day we have a change of regime, and more importantly a change of economic culture, towards competitiveness, things will change.

  10. Here’s something I’m wondering – how do banks deal with the Labor Law? What happens if, say, the vigilante en la sucursal de Los Palos Grandes doesn’t show up for work?

    • My understanding is that security guards are exempt from the no-outsourcing rule, since security companies have to comply with several requisites and also that security guards are even exempt from the daily work-hours limit, and may be still, to their dismay, required to pull 24×24 shifts (24 hours of work and 24 hours of rest).

      From that premise (which is subject to clarifications from more knowledgeable sources), banks deal with it by outsourcing it to security companies, who are bound by contract to provide the service no matter what. How do security companies deal with it though? I’m not sure, it may be that a security guard that doesn’t work his shifts gets a meager pay, and the real money is in the overtime/guardia/shift pay.

  11. I’m not a hardcore opposer of LOTTT. My position on it can be best summed up as: there used to be much abuse from the business side, and is has been replaced with promoting abuse from the worker’s side, instead of promoting a balance.

    For example, take severance pay. Waiters had been complaining about restaurants hiring personnel only to fire them three months later, failing them at the trial period to avoid severance pay. This made low-skill employment in the service industry highly unstable. It was replaced with a one month trial period that does generate severance pay. This provision doesn’t seem unfair to me.

    On the overtime, it is a health concern that workers should get some rest. And lots of minimum wage workers were not getting any, there plenty of cases of management pressuring workers to work overtime and even 7 days a week, only to either underpay/ignore the overtime, or pay it with delay, or many other tactics to get way more than 42 hours a week from employees. Unfortunately, the law dealt with this in an overly inflexible way. If I recall correctly, a hard weekly limit on overtime was replaced by a hard daily limit, which means that if Monday-Wednesday are slow days and Thursday-Friday are good days, the business loses the overtime quota for Monday-Wednesday (when it’s not needed) since they can’t be rolled over to Thursday-Friday. There’s also some restrictions on lunch hours, which have made more business close down at noon. This provision has hurt the economy, companies have a smaller time window function, clients have a smaller time window to be serviced, workers are making less money because the overtime cap is overzealous, etc.

    I’m also not a fan of outsourcing workers as a way to sidestep collective bargaining agreements. There’s lots of companies (think banks, industries, etc) with really sweet benefits (housing loans, car loans, savers union, productivity bonus, daycare subsidies, etc) who hired people through outsourcing companies, to do the same job as existing employees (or recently downsized employees) but denying them collectively bargained benefits. In principle, I like the no outsourcing part of the law, the implementation might or not be shitty.

    On severance pay, it is also my understanding that the retroactive calculation is only effectively used in a limited set of cases. There’s the “old formula” from Caldera 2, in which the severance pay is basically 2 yearly salaries deposited in a trustfund monthly (now quarterly), plus interests. The new formula which is calculated at the end of the working relationship, of 1 month of the last salary per year worked. The largest of those two numbers is the one the worker gets, and most the time the largest number is the “old formula”, meaning that the law didn’t generate a massive inquantifiable passive on the companies balance sheet. Most of the time is same old-same old because the old formula wins, and with some workers (who’ve been hired since a long time) is a little bit more because the new formula wins. This provision was added because their rallying cry was the theft of workers’ severance pay, and only once they crunched numbers did they realize that workers hadn’t been screwed at all, so they added a new formula that is only marginally better in a small subset of cases.

  12. These great labor laws “protect” the worker in the short term, but make him unemployed in the long term because they make companies go bankrupt forcing them to abandon the market. Sounds good to me because these unemployed MIGHT blame the government for losing their jobs. Anyone, Venezuela might be FUBAR for the next 20 years.

  13. I think the answer would be to run the shops as collectives. If all of the employees had a part in the ownership, they would have more flexibility in arranging the man-power required for heavy and light days.

    If capitalists wishes to exploit other people’s labor, then they will have to figure out a way to do it within a respectable labor relationship, and some former business models will no longer be possible. In the US, the service-sector workers, and the food industry in particular, are some of the most exploited and miserable. It would make sense that owners in this industry would find a lot of difficulty with a dignified labor law.

    Does anybody really think that two consecutive days off is a radical stipulation? I could understand allowing a certain amount of limited exceptions (one out of three or four weeks without perhaps), with higher incentives for the workers who’s leisure time is compromised.

    • Leopold, that sounds nice, but is impractical and unrealistic. Picture yourself buying a boat. Then fishing and finding someone willing to buy all your fish. The buyer has more consumers than fish, so you buy equipment to make your fishing more efficient. You could fish more if you had someone doing the cleaning for you on the boat while you focus on the fishing. So you hire someone. You don’t want a partner, just someone to clean the boat.

      Communists would say that the person cleaning the boat is partly helping you get the extra profits, therefore deserving of the shared profits. The problem with that logic is that you are partly helping the buyer of the fish with his profits, so you should share in his profits.

      Another problem is the idea that one should pay the person cleaning more than what someone else would be willing to accept for the same cleaning service.

      What needs to be prevented is an employer taking advantage of a worker’s dependence on the job. This is achieved, not by eliminating the employer/worker relationship, but by eliminating the worker’s dependence on the job.

      • Good sensible comment from Ex . Some business or work operations demand certain of its workers to work more than the standard number of workdays or hours or either the business becomes uneconomic or disfuntional . Work at sea where round voyages are short are a good example , also justified when jobs are minimally demanding of mental or phisical effort ( watchman jobs) . In my experience people dont mind the extra work if it comes with a money incentive ( if the work isnt too demanding or exhaustive ) .Another example the system of work for residents and medics working 24 hour shifts on hospitals and clinics .is an integral part of their training .

        As a principle having a business partner who cant put extra money when needed in the life of the business is pretty nearly useless as such extra infussions of money are part and parcel of normal business (e.g. if neded to fund business growth or take care of unexpected income shortfalls) .

        Of course where work is phisically and mentally demanding then protection must be offered the regular worker to avoid its exploitation by their employer but the best protection of all is what Ex points out , an economy where if you dont like your job ( if the employer is abusive ) you can quit it and find a better one.

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