According to the provisions set forth in Article 24 of the Political Constitution of Peru, every person who works has the right to receive such remuneration as will assure him and his family physical and spiritual wellbeing. Therefore, the remuneration paid to employees for the work or services they perform for an employer should be understood to be a fundamental right.
That’s why paragraph 6) of Article 648 of the Code of Civil Procedure provides that the remuneration cannot be attached if it does not exceed five Procedural Reference Units (10% of the Tax Reference Unit-UIT), and that only one-third of the excess can be attached. Said article makes it clear that in order to guarantee the payment of alimony, up to 60% of the employee’s remuneration can be attached, subject only to the deductions required by law.
Concerning this matter, on September 7, 2015 the Constitutional Court, as the highest-ranking authority for the interpretation and control of the Constitution, issued a resolution in connection with Court File N°00422-2013-PA/TC, pursuant to which it resolved a conflict between an employee, an employer and a financial institution. As a matter of fact, the Constitutional Court resolved that the financial institution could not collect loan payments through payroll deductions if the employee was also paying alimony and both debts exceeded 60% of the employee’s remuneration.
The case is summarized follows: the employee received a loan from a financial institution and agreed to have the loan payments collected through payroll deductions, in accordance with the provisions set forth in the agreement that the financial entity signed with the employer. It should be pointed out that paragraph 1 of section three of said agreement provided that the employer had to assess the repayment capacity of the applicant in order to make sure that deductions from his monthly remuneration, including monthly loan repayments, would not exceed 30% of the employee’s monthly remuneration.
The Constitutional Court resolved, in the resolution we are commenting here, that the aforesaid agreement had set a limit on the employee’s indebtedness capacity, for which reason, considering the courtordered alimony payment, the deductions being made by the Company exceeded the limit set forth in the agreement, thereby
affecting the employee’s right to fair remuneration
After the agreed payroll deductions started to be made, a court ordered the attachment of 60% of the employee’s remuneration to pay alimony, that is, honoring the limit set in paragraph 6) of Article 648 of the Code of Civil Procedure. However, the employee argued that the employer was additionally collecting loan payments through payroll deductions to pay the financial entity, first for 30% of his monthly remuneration and then, through an addendum to the agreement, for 45% of his net income, which, in practice, represented almost 100% of his remuneration.
The Constitutional Court resolved, in the resolution we are commenting here, that the aforesaid agreement had set a limit on the employee’s indebtedness capacity, for which reason, considering the court-ordered alimony payment, the deductions being made by the Company exceeded the limit set forth in the agreement, thereby affecting the employee’s right to fair remuneration.
The Constitutional Court further resolved that the financial entity would no longer be entitled to collect the loan payments through payroll deductions, for which reason it had to resort to other mechanisms available in the legal system to have the employee pay his outstanding debt.