Temporary Suspension of the effects of the Work Contract in Panama

As a consequence of the existing health crisis in our country, activities in many companies have temporarily stopped, therefore, this companies do not have the financial resources to pay their workers’ wages, but they do not want to terminate the employment relationship.

In this sense, Article 199 Number 8 of the Labor Code establishes as one of the causes of temporary suspension of the effects of the contract that entails the non-payment of wages “any force majeure or fortuitous event when it represents as a necessary, immediate and direct consequence, the temporary cessation of the activities of the company, its establishment or the work of the employer, for a minimum period of one week…”

The current existing health crisis, in light of Article 7 of the Labor Code, is a force majeure or fortuitous event that, despite being anticipated, it was not possible to avoid, since the presence of the Covid-19 virus could occur at any time in Panama.

To apply the temporary suspension of the effects of the Contract, it will be necessary to present the corresponding request before the General Directorate of Labor, who will examine the request and once the force majeure or fortuitous event has been corroborated, will order the suspension of the effects of the contract for a term of thirty (30) days, extendable for up to four (4) months.

QUIJANO & ASSOCIATES has a professional team ready to advise you in these times of uncertainty.