I. MODAL CONTRACTING IN PERU
Labour relations in Peru may be protected by either an indeterminate term contract or a modal contract. However, the subscription of either type of contract is not discretionary. Within the framework of labour stability, labour relations in Peru are intended to be permanent. Therefore, labour legislation protects indeterminate-term contracts, with the use of fixed-term modal contracts being subsidiary.
In this sense, the Sole Ordered Text of Legislative Decree No. 728, approved by Supreme Decree No. 003-97-TR, Law of Labour Productivity and Competitiveness (hereinafter LPCL), in addition to regulating the specific cases of modal contracts, requires the fulfilment of formalities for modal contracts. Article 77 of the LPCL regulates the denaturalisation of modal contracts and the recognition of an indefinite term employment relationship in case of non-compliance.
II. CONTRACT FOR THE COMMENCEMENT OR INCREASE OF ACTIVITIES: DEFINITION, CASES AND ISSUES
The LPCL defines the contract for the commencement or increase of activities as follows:
The Second Chamber of Constitutional and Social Transitory Constitutional and Social Law of the Supreme Court of Justice of the Republic, on its part, through the fifteenth ground of the Labour Cassation N° 14337-2014 ICA, defines this type of contract as that legal negotiation entered into between an employer and a worker, with the purpose of hiring workers for a maximum term of three years to attend new activities of the company, which is classified as the beginning of an activity, or if it is the case when the company increases the activities that already exist, being called as its very name indicates, by increase of activity.
As indicated above, we can verify that this type of modal contract is expressed in four cases: i) the start of a new business activity; ii) the subsequent installation or opening of new establishments or markets; iii) the start of new activities; and, iv) the increase of existing activities within the same company. The cases referring to the increase in activities (cases ii and iv) are the most problematic in terms of interpretation and application.
Now, the vagueness of the assumptions and requirements in the framework of guaranteeing the permanence of labour relations, transfers the responsibility to the conflict resolution bodies to clarify the content of the norm. Thus, in relation to the modal contract for the start or increase of activities, the Supreme Court, over the years, has generated some clarifications mainly related to the formalities of the contract and the configuration of the assumptions that support it.
In this regard, in relation to the formal requirements[1], through the aforementioned Labour Cassation No. 14337-2014 ICA (ground 15), it has been specified that in the employment contract for this type of modality, it must be clearly and precisely established[2] which activity of the employer has been increased, in order to justify the grounds for temporary hiring, and the existence of such grounds must be proven. Likewise, the referred court, through the Labour Cassation N° 33356-2019 DEL SANTA (ground 13), has established that the objective cause that supports this type of modal contract and the possible renewals, extensions or addenda, must be consistent and, therefore, what is indicated as support based on certain periods, will only support the contracts and their extensions during the same.
On the other hand, regarding the content, clarifications have recently been generated in relation to the assumption of the subsequent installation or opening of new establishments. In this regard, the aforementioned chamber of the Supreme Court, through Labour Cassation No. 7556-2022 LIMA, has clarified the correct interpretation of what is understood as "opening of new establishments". To this end, throughout its recitals, it has pointed out that the duration of the contract cannot be determined arbitrarily, but that the temporary nature of the contract must be linked to the consolidation and continuity in the operation of the company, after it has started. Thus, in accordance with the above, when the company has overcome the risks involved in the start-up, and has consequently consolidated its operation, temporary contracts are unnecessary or alien to the purpose of this contract.
Thus, as indicated, such a case must be interpreted in a narrower sense, and is basically linked to the opening of an additional establishment to the one the employer had. Under such an interpretation, changes of workers to new premises (replacing the previous ones) cannot be interpreted as "opening a new establishment", since the justification for this type of contract is related to the risks or uncertainty involved in starting a business activity, which is not present when there is only a change of premises.
III. BY WAY OF CONCLUSION
Signing the modal contract for the start or increase of activities implies special care with the assumptions of increased activities, considering that the nature of such a contract (for its 4 assumptions) is based on unpredictability. Thus, if there is no uncertainty in the sustainability of the activity and, therefore, there are no risks, there is no justifying cause.
Finally, under the aforementioned jurisprudential considerations, we see that the Supreme Court's line of decision is aimed at guaranteeing the protection of employment stability, pointing out, for the case of this type of modal contract in particular, specific considerations for the purpose of guaranteeing a correct subscription of the same.
[1] It should be noted that the Tribunal de Fiscalización Laboral of Sunafil, by means of Resolution of the Plenary Chamber N° 015-2023-SUNAFIL/TFL, has established that the correction of the objective cause of the original contract through addenda is not valid (section 6.28).
[2] This clarification has also been made by the Constitutional Court in Exp. No. 00587-2013-PA/TC (ground 3.3.3).
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[1] It should be noted that the Tribunal de Fiscalización Laboral of Sunafil, by means of Resolution of the Plenary Chamber N° 015-2023-SUNAFIL/TFL, has established that the correction of the objective cause of the original contract through addenda is not valid (section 6.28).
[1] This clarification has also been made by the Constitutional Court in Exp. No. 00587-2013-PA/TC (ground 3.3.3).