PANAMA Law and Practice Contributed by: Rafael Rivera, Javier José Vallarino, Juan Vallarino, Karen Y. Tejeira and Carolina Lino, BDO Legal Panama
Resignation Resignation can be voluntary or justified. In the case of resignation, the employee must issue a letter of res - ignation duly stamped by the Ministry of Labour; for voluntary resignation, 15 days’ notice must be given to the employer. Severance and Seniority Premium All employees with an indefinite employment con - tract are entitled to receive a seniority premium of one week’s salary per year of service or its proportional amount, regardless of the reason for termination. Severance compensation for employees with an indefinite employment contract who started employ - ment after 14 August 1995 is calculated as follows: • 3.4 weeks for every year worked or its proportional amount, during the first ten years; and • every year thereafter shall be compensated with one week’s wages for every year of service. Severance compensation for employees with an indefinite employment contract who started employ - ment before 14 August 1995 is calculated as follows. • For less than one year of service, compensation is equivalent to one week’s salary for every three months worked. Compensation must not be, in any case, less than one week’s salary. • For a labour relationship of one to two years, com - pensation is equivalent to one week’s salary for every two months worked. • For a labour relationship of two to ten years, com - pensation is equivalent to three weeks’ salary for each year worked. • For a labour relationship exceeding ten years, compensation is equivalent to one week’s salary for each year worked. For employees hired under a fixed-term contract, when the employment relationship is terminated with - out justified cause before the expiry of the employ - ment contract, the employer will be legally obliged to pay the employee severance equivalent to the remain - ing salaries due until the end of the employment term.
Collective Dismissal Collective dismissal is permitted for economic rea - sons such as bankruptcy, reduced production, or depletion of resources, but requires prior authorisation from the Ministry of Labour. If no decision is issued within 60 days, the dismissal is deemed justified by law. The Ministry may intervene to protect employees and ensure business continuity. If company assets are insufficient to cover labour obligations, the Ministry is responsible for determin - ing and overseeing the liquidation of assets to satisfy employee claims. 4.5 Employee Representations In Panamanian labour law, employees are not required to be represented by any individual or entity. How - ever, if a labour union exists and the employee is affili - ated with it, the union is authorised to represent the employee before the employer and/or the administra - tive labour authority. If an employer intends to make decisions that collec - tively affect the workforce and a union is present, such matters must be submitted to the union for review. Furthermore, if the employer wishes to modify any terms previously established in a collective bargaining agreement, such changes must be negotiated with the union(s) representing the employees. The union also has the right to negotiate a new col - lective bargaining agreement with the employer. The union, or a unified group of workers seeking to negoti - ate employment conditions or a collective agreement, must submit a written request addressed to both the employer and the administrative labour authority. If no agreement is reached, the labour authority may inter - vene to facilitate conciliation. Should conciliation fail, the workers have the legal right to initiate a strike. If both parties reach an agreement, a collective bargain - ing agreement will be executed.
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