Conditions for entering into a settlement agreement

1. Background:

An employee with a fixed-term labor contract, successively renewed for 6 years, suffered a non-occupational disease during the existence of the labor relationship, which disabled him for 240 days and caused him sequelae. The fixed-term labor contract expired during the employee’s medical disability and was renewed for another six months term. Nevertheless, during this last contract, the employer notified the employee while he was not under a medical disability, that when the term of six months expired, the labor agreement was not going to be renewed. As consequence, the parties entered into a settlement agreement before the Ministry of Labor, settling future claims and disputes. Through the settlement, the parties agreed upon: (i) The amount of money that the company would recognize as a bonus to the employee upon the termination of the labor relationship; (ii) The non-existence of legal claims between the parties; and (iii) The fact that the parties declare each other free of any liability.
However, after entering into the settlement agreement, the employee filed a Tutela action requesting the reinstatement to his position at the company. The Local Judge and the District Judge ruled in favor of the employer due to the fact that they considered that the settlement conditions had been freely accepted by both parties and that it had res judicata effects. Nevertheless, by means of a constitutional review, the Constitutional Court revoked those rulings by declaring the settlement ineffective and ordering the company to reinstate the employee to his position, since he had a special health condition that was not considered in the settlement agreement.

2. Conditions for entering into a settlement agreement with employees under special health conditions:

Under the grounds that employees with special health conditions are eligible for a special labor protection, the Constitutional Court considered that for entering into settlement agreements with employees that present these circumstances it is mandatory to expressly indicate such conditions in the settlement minutes in order to acknowledge the Ministry of Labor that these are the conditions for settling. The purpose of this mandate is to guarantee the special labor protection. Therefore, the Constitutional Court determined the conditions for entering into termination by mutual consent with these kind of employees, which are:

1. To obtain the special authorization granted by the Ministry of Labor to terminate the labor contract, regardless of the fact that the termination is made by mutual consent.
2. To inform to the Ministry of Labor the reasons why the employee is under a manifest weakness situation.
3. To confirm the employee’s acknowledgement of the rights that assist him.

As mentioned, all of these conditions must be expressly indicated in the wording of the settlement minutes. Furthermore, the Ministry of Labor shall authorize such termination, taking into account the information provided.