A very frequent query made by international corporations is the possibility of having an employee in Argentina with an employment agreement applying foreign law and without having a registered local entity in Argentina.
This kind of employment structure may create high employment liabilities as well as tax and social security debts with the tax authorities.
The general rule is that all employees who work in the Argentine territory must be registered within the payroll of an entity duly registered according to Argentinean Law.
The purpose of this article is to provide the reader with a brief overview about the steps to follow in order to become an employer in Argentina, and the contingencies that may arise for not properly register an employment relationship in Argentina.
Argentine labor law contains the so called "territoriality principle"1 set forth in Section 3 of the Argentine Labor Contract Law No. 20,744 ("LCL").
According to such principle, any employee rendering services in Argentina is subject to Argentine labor law in general, and to the LCL provisions in particular, regardless of such employee's or the employer's nationality or the place of original execution of the employment contract.
Additionally, the LCL provides that its provisions shall be considered mandatory and, thus, may not be amended or waived by the parties (Sections 7 and 12 of the LCL).
On a related matter, local Rules of Labor Procedure, codified by means of Law No. 18,345, are also public policy and set forth that, whenever an Employee works in the City of Buenos Aires, the competent judges shall be, at the defendant's sole option, those located: (i) at the place where the Employee worked; (ii) at the place of execution of the employment contract; or (iii) at the place where the defendant has its domicile. Taking into account the materially employee-protective nature of Argentine labor judges, it would be highly likely that the Employee, in the hypothetical event of a conflict, would choose to litigate in Argentina.
Consequently, it is relevant to note firstly that Argentine labor law and jurisdiction would apply to the Employee's services rendered in Argentina and any agreement between the Company, the Argentine Entity and/or the Employee stating otherwise would be null and void. Therefore, in the event of a conflict, an Argentine judge would hear the case and would decide according to Argentine law.
Pursuant to Argentine...