PANAMA Law and Practice Contributed by: Rafael Rivera, Javier José Vallarino, Juan Vallarino, Karen Y. Tejeira and Carolina Lino, BDO Legal Panama
work governing both corporations and limited liability companies. The piercing of the corporate veil is an exceptional legal mechanism, applicable only by court order and following due legal process. It allows authorities to disregard the company’s separate legal personality in cases of fraud or abuse, potentially extending liability to include criminal sanctions. For instance, fraudulent insolvency or liquidation intended to defraud creditors may constitute a crimi - nal offence under the Panamanian Criminal Code, punishable by five to ten years of imprisonment and disqualification from commercial activity. These provisions reinforce the importance of transpar - ency, good faith and legal compliance in corporate governance. Panama’s labour law is protective of employees, as established in the Political Constitution, which recog - nise labour as both a right and a duty. The legal system acknowledges the employee as the more vulnerable party in the employment relationship, warranting safeguards to ensure fair treatment. Collective bargaining agreements require prior union recognition and aim to balance employer-employee relations. While employment contracts are typically formalised in writing, Panamanian law presumes the existence of an employment relationship in favour of the employee even in the absence of a written agreement, where one person provides a service to another providing there is legal subordination and economic depend - ence. 4. Employment Law 4.1 Nature of Applicable Regulations 4.2 Characteristics of Employment Contracts The key characteristics of employment contracts include the following.
• Written form: employment contracts must be in writing, with certain exceptions such as domestic or agricultural work. Nevertheless, it is strongly recommended that all employment relationships be formalised in writing. This is particularly important considering that the Labour Code provides that, in the absence of a written contract, the facts alleged by the employee are presumed to be true. This legal presumption may be used by the employee to distort the facts, potentially placing the employer at a disadvantage ‒ or conversely, allowing the employer to impose excessive service obligations on the employee. • Content requirements: the employment contract must include general information about both the employee and the employer, as well as details regarding the employee’s dependents or family members. It must clearly define the services to be rendered, the place of work, the type of employ - ment term (fixed-term, indefinite, or for a specific project), the work schedule, and the date and place of execution. The contract must be signed by both parties. • Formality: employment contracts must be submit - ted for endorsement to the Ministry of Labour and Workforce Development, or to the corresponding Regional Labour Directorate based on the place of execution. This process ensures that the contract complies with all legal requirements and is duly stamped by the relevant authority. It is important to note that failure to comply with a writ - ten contract may trigger legal presumptions in favour of the employee. While an employment contract always governs and formalises a labour relationship, the existence of such a relationship does not depend on a written contract in order to be legally recognised. 4.3 Working Time Panamanian labour legislation does not establish a minimum number of working hours, which allows employers the flexibility to hire employees on a part- time or reduced-hour basis. However, the law does set a maximum working schedule, reflecting the principle that work must be compatible with the rest and well- being every human being requires. Maximum hours depend on the type of work schedule, as follows.
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