New Labor in Venezuela As I was sitting there at work searching around on the internet, I came across an interesting article. It just so happened that I was also thinking to myself that I need to come up with a topic for my international business paper. I wasn’t out there looking for the topic too hard at the moment so once I seen this article that that caught my attention, I knew that this was going to have some weight on the decision I made for my paper topic. The title of the article which I found on Yahoo was, “The Top 10 hardest countries to do business in.” Low and behold the number one country on the list that was the hardest to do business in was Venezuela. This peaked my interest, so I began a search on some of their international laws to see what it is about Venezuela that makes it so hard to do business in. Thus, this brings me to the beginning of the paper. As I began my search for the difficulty of business in Venezuela I came across a plethora of information related to the international business world and why their laws can cause problems for foreigners to do said business in their country. There is so much that relates to what our papers are supposed to be about in fact that I have to choose a select few in order to not write an entire novel for this paper. So what I would like to do in this paper is speak about a few of the laws and issues in Venezuela in some detail, but I would like to focus the majority of the paper on their new labor law which recently came into effect because it applies to native born citizens as well as foreigners’. Not only that but it really changed the way the labor in Venezuela is dished out, and for the better. One of the first things I came across when I started researching this talked about government contracts in Venezuela. The first sentence stated, “The regulatory and legal environment in Venezuela is becoming increasingly complex, and a significant feature for domestic commercial activities. To do business in Venezuela, insight into how the Venezuelan government works is vital.” (Baker & McKenzie) A huge part of Venezuelan society is corruption, at the street level in a lot of parts but mostly the corporate level which is what I want to discuss for a moment. Let’s take a look into Venezuelan corporate corruption that has shaped the nation into what it is today, and what it’s trying to distance itself from. Hugo Chavez became the president, or authoritarian as most Venezuelans seen him in 1998. In his thirteen year rule the management of Venezuela’s national wealth went from bad to horrible. Roughly a trillion dollars in their national income was pilfered or wasted on unnecessary projects that were quite costly. The money was also distributed to unworthy Venezuelans in various forms like hand outs that were used to buy temporary wellbeing for public officials mainly, or it was utilized to buy political influence for Chavez himself within his hemisphere as well as the entire world. Now there is a new and corrupt social class that has begun to emerge in the replacement of the old Venezuelan middle class. This new corrupt class is made up of various government contractors, armed force officers, relatives and friends of anyone who is in power within the state, and members of the government bureaucracy. Venezuela today is centred around four main corruption points called the “hot beds” of corruption. The first hotbed for corruption is located in the presidential palace of Miraflores, which happens to be the centre of operations for the president. The corruption the exists here is mostly political although a fairly large amount of cash is kept on the premises as well. This is supposed to be used as necessity dictates but as most know that is not always the case. This point was illustrated in 2010 when Cuban bodyguards were sent to the central bank to get five million dollars in cash for a trip that Chavez was going on abroad. The funny thing is, the money never made it to the presidential palace, which was only located two blocks away. The oddity here: The money was never recovered. The palace is where power gets abused, Electoral regulations become changed in favour for the government, illegal financing and bribing of friendly leaders and officials happens, and it happens to be the place where the Cubans control sensitive intelligence matters. The fact of the matter is that the major political corruption in Venezuela just so happens to take place in the most political palace in Venezuela, go figure. The next so called hot bed exists in the La Campina, which is the headquarters of Petroleos de Venezuela, PDVSA. Corruption here is mostly generated in the forms of contracts that haven’t been bided on rather assigned to friends of the regime. Kickbacks and hand outs are also customary. The government also ignores the major and minor scandals of the PDVSA, such as contracting of offshore drilling rigs illegally and the use of employee pension funds for less than reputable reasons. The third hot bed exists in the defense ministry and the national guard of Venezuela. There was even a report by the United States Government Accountability office made against this very division. Congress informed everyone of increasing corruption among the Venezuelan military, especially including the National Guard. It was said that corruption had reached the ministerial level of the government. The last hotbed would be that of the Ministry of Finance. The finance of the country had been eradicate and irregular. They played criminally with dual exchange rates, which in turn made finance ministers and bankers and broker’s instant millionaires. They had parallel funds operating without accountability. Working outside the laws and regulations of the nation and promoted hyper corruption. They eliminated the autonomy of the Central bank thus diverting funds directly into the hands of the executive branch, which is used for political purposes (Coronel). So what does corruption have to do with international law and/or business? The reason why I spoke briefly about how corrupted Venezuela is, or was for that matter, is because of the impact that it used to put on people trying to do business within the country. Whether the impact for the foreigner was helpful or harmful would depend on who it was of course. Sometimes it made doing business very difficult for certain groups of people, all the while making business very easy on the people who were doing the type of business that they wanted at the time. The good news, if that’s what you want to call it, for those trying to do business legally the right way within the country, is that the country has been evolving and changing to be more friendly towards the workforce. Since Chavez left office in 2013 when he passed away, the country officials who were on the ethical side of the line vowed to not let themselves be put in the same situation as they were in prior. Because of this they started making changes for the better. Signs of this change were coming though even before Chavez left office due to pressure from the right people. The New Organic Labour Law for Male and Female Employees (New O.L.L.) came into force on May 7th of 2012. This new labour law applies to any and all employment services that are provided in the territory of Venezuela. The law also doesn’t care if you are from Venezuela or if you are from the United States, or any other country in the world for that matter. Under traditional case law, parties cannot choose a different law to govern the employment relationship like you were able to do in the past. There is however, a possibility of applying a more favourable law when foreign benefits for employees are similar and superior to the Venezuelan ones, which was also not recognized in the past. The New O.L.L. also applies to employment services provided outside of Venezuela if entered into a contract while in Venezuela. Unless of course like stated above that the parties choose a law that is more favourable to the employee when compared to that of the New O.L.L. labour benefits in Venezuela. So what all does the new labour law include and how is it more beneficial to the employees of the country, foreign or not? That’s what we are going to find out in the upcoming portion of the paper. There are many parts to the New O.L.L. of Venezuela, starting with age restrictions. Children under the age of 14 used to be able to work without any paperwork but now a special permit is required in order for them to seek employment. They have tried to come close to adopting the child labour of that of the United States. The New O.L.L. has a variety of Nationality restrictions which becomes extremely important to the topic at hand. There are certain employees that must be Venezuelan. These employees include: Foreman, Personnel managers, Captains of ships or airplanes, Industrial relations managers, and any employee who exercises similar functions to those I have listed above. A note to add to this restriction is that in 2000 Venezuela made it so that any foreign individual who enters Venezuela for other than recreational purposes must obtain a business, labour, industrialist, or investor visa. What does this mean for the New O.L.L.? Say one of the directors of a company is a foreign national; he/she would be required by the Commercial Registry to get a Visa to incorporate the company. If a foreign individual is considered an employee of a Venezuelan-based company, he/she must obtain a non-resident employee visa before even entering into the country. And, in order to even apply for the visa, this employee must apply for a work permit first from the Ministry of the People’s Power of Labour and Social Security. In addition to all of the above, an employer’s workforce must be at least 90% Venezuelan from top to bottom, and the wages paid to foreign employees cannot exceed 20% of the total payroll. There are however, like with anything else, a few temporary exemptions to the nationality rules listed above. These exemptions would include: If the foreign national is a refugee, if the foreign national is an immigrant under the control of or contracted by the National Government of Venezuela, When the Minister verifies that there are insufficient Venezuelan personnel to meet the demand for the particular kind of work, and if the activity requires special technical knowledge and Venezuelan personnel is not available. Now that we know all of the nationality restrictions of the New O.L.L. that are required to work in Venezuela let’s take a look at how one would begin to work in Venezuela, if they had all the properties listed above in their planned company and workforce. There are no available Venezuelan state grants and/or incentives available for employing people, unless it was contractually agreed upon by all of the parties involved. The visa that is recommended for an employee hired whether temporary or on a permanent basis is called the non-resident employee visa. As stated previously though the visa is dependent on obtaining a work permit. After the work permit is approved, the company in question must apply for the visa from the Administrative Service for Identification, Migration, and Foreign Nationals of the People’s Power of Internal Affairs and Justice (SAIME). Once SAIME approves the application, the employees must attend the Venezuelan diplomatic post that has jurisdiction over where the employee’s place of residence, in order for the visa to become attached to the employee’s passport. The cost of both the permit and the visa are hard to estimate because they change often. As for the time frame of each, the permit to work usually takes The Ministry of the People’s Power of Labour and Social Security about 30-90 days to process it, and it takes the SAIME roughly 20 days to approve the visa application. After all of this is complete and the foreign national becomes employed in Venezuela, he/she is required to get a Venezuelan ID card from the SAIME so that he/she can obtain legal status. This usually takes between five and ten days to finish up. So now we’ve went through how one begins the process to work in Venezuela and what it takes to get them to the point of actually being in the country and doing work. Now let’s take a quick look at how the employment relationship is governed and regulated. There is no written employment contract that is required unless there is going to be fixed-term or fixed-work agreements, and also when Venezuelan nationals are the ones who have been hired to provide their services abroad. All statements by the employee are presumed to be true statements if it has been proved that there is an employment relationship with no contract. This of course can be rebutted with factual evidence to the contrary. Collective agreements however are common in Venezuela especially in industries such as the oil, chemical, construction and pharmaceutical companies. Collective agreements also are common when the employer is a company with a very large number of employees. You’re ready to work, you obtain the proper permits/visa and you understand your employment relationship. Now it’s time to get to the articles of the agreement that you want to know most about if you are an employee: the wages, benefits, and everything that comes along that line. First and foremost any employee going to work in Venezuela is going to want to know if that is a national minimum wage like there is here in the United States for example. The answer to the question is yes, they do have a minimum wage, and it is increased annually. If you were to convert the Venezuelan currency to that of the American dollar the current minimum wage would be roughly $476 per month. This may seem though to the average American but when you obviously consider the standard cost of living there compared to America you would see it’s not that far off. This number of course is lower for adolescents and apprentices, not by a whole lot but a noticeable amount. Now that you know the minimum wage, a foreign national can estimate about what they will make vs. the exchange rate and cost of living. But what about the working hours? Under the New O.L.L. the working ours for day shift employees are pretty strait forward. They must not work more than eight hours per day or forty hours per week. Night shift employees are not to work more the seven hours a night or 35 hours per week. If you are a mixed shift employee like me you are not allowed to work more than 7.5 hours in a shift and not more than 37.5 hours in a week. These regulations are for the majority of the people but as we all know there have to be exceptions or things will never get done. There are employees who can work up to 12 hours per day but are required to take a one hour minimum rest period. One of these employees would be Management employees, and by that I mean people who participate in the decision-making processes or orientations of the company. Inspection employees and guards whose work does not require continuous effort also fit into this category. The only other employees that fit into this category would be as follows: Employees whose work either requires that they must merely be present, and is not continuous and/or has long periods of inactivity, or employees who remain in their posts merely to answer calls etc. The normal 7.5 – 8 hour employees listed above are entitle to at least a half hour break after five continuous hours of work, whereas shift work employees who work more than the normal time get the one hour break as stated above. In addition to all of the work time requirements, all employees must have at least one day of rest in a seven day period and the total hours worked in an eight week period cannot exceed the legal and constitutional limits of the work scheduled under the New O.L.L. So now that you know the your wages to expect and the amount of time you should expect to work, what days and holidays are you entitled to have off if you are working in Venezuela? Under the New O.L.L. in Venezuela all employees are entitled to take 15 working days of paid vacation after one year of uninterrupted service for a company. For every year after that an employee is entitled to another day of paid vacation should there be no interrupted service for them within the company. As for holidays in Venezuela the following days are considered public holidays: Every Sunday, January 1st, Maundy Thursday, Good Friday, May 1st, and December 24th, 25th, and 31st. National holidays in considered in Venezuela as paid time leave are as follows: April 19th, June 24th, July 5th, and October 12th. There is however a maximum of three extra days per year that the government can declare to be a holiday in which an employee would not be required to work. What happens if you get sick, while working in Venezuela? You’re going to get sick, that’s just a fact of life. Because of this fact of nature employees are entitled to time off due to sickness. In order for the employee to get the time off for the sickness though the must provide the employer with the medical certificate that validates that he/she was sick when on their leave within 48 hours of their absence. An employee can obtain the certificate however he/she chooses privately or not, but once they turn the certificate into the employer, it must then be authorised by the social security system. The employer is required to pay the employee’s salary for the first three days of their certified sick leave. If the employee’s sick time exceeds 12 months however, the employee’s labour relationship with the company can be ended on the grounds of the employee not being an attribute to the company. After the third day an employee is off on sick leave, the employee will receive a payment of their salary from social security which would be two thirds of their salary and/or up to five times the minimum wage. They have an online system for social security purposes which allows employers to pay employees, and then deducts the payment from the social security bill. So what happens if you are a female and become pregnant while working in Venezuela? Or even what happens if you are a male whose partner has become pregnant? What are your rights in that situation? Starting with the paternity rights of the mother, a pregnant employee is entitled to take six weeks’ leave before giving birth and 20 weeks’ leave after giving birth. During the entire period a pregnant employee receives 66.66% of their monthly salary from social security. The way the employer pays the employee through this system is the same way in which they do if an employee is sick. A nice point to this New O.L.L. I found interesting that I don’t think the U.S. has was that for the first nine months after giving birth mothers are entitled to two 30-minute breaks per day in which they are to breastfeed their children in the workplace’s nursery. If said place of employment doesn’t have a nursery then mothers get two one hour breaks per day. This nine month period can be extended to twelve months if the place of employment doesn’t have a nursery, if it is a multiple birth or if the mother suffers from s specific health condition. What about the paternal rights of the father? This is another piece of this I like because I am a father and didn’t get any of these rights. A father is entitled to a paid paternity leave, paid from the social security system for 14 continuous days from the day of birth. I know here in America we can get F.M.L.A. but that is unpaid leave. In addition to this, which blew my mind, a father cannot be dismissed for up to two years after the child’s birth. They really have gone out of their way with this article in order to nurture and protect children, and I think it is a great idea and I wish we did that here in the states. There are also some really great benefits from the New O.L.L. for foster parents as well, which I think is a huge deal because I have friends who have had foster parents growing up and still continue to foster kids until this day. Getting benefits like they do in Venezuela here would be awesome for them. Foster mothers who adopt children that are under the age of three have the right to 26 weeks of maternity leave, from the date the child was placed in the family. What is common in this law that we have in the U.S. though is that the foster mother gets money from social security for her living maintenance and that of the child. What is really awesome though is that the foster mother is protected against dismissal from work for two years from the child’s placement, again protecting the children. For fathers who are foster parents the rights are almost identical to that of them having a child through conception. Both foster parents are entitled to one paid day of leave per month when the children are sick for the first year after placement or birth. So now that we have learned everything from age restrictions to parental rights of the New O.L.L. we can take a look at a few other important factors that come along with it, starting with discrimination. Obviously in a plan of this scope there is going to be protection against discrimination. Employees cannot be discriminated against on the following grounds: Gender, Age, Sexual Preference, Race, Religious belief, Union activity, Social Status, Political Ideology, Citizenship, Incapacity, Social Origin, or any other ground that’s not compatible with the constitutional statements. If an employee or potential employee is subject to discrimination they can file a constitutional injunction to prevent the discrimination from continuing and or resign and seek civil damages under the civil code if they are an actual employee. The same is true with sexual harassment whether you are male or female. There is no specific protection on the legal end for whistle-blowers under the New O.L.L. There are also no notice periods for an employee when their contract is terminated. Employees however are entitled to payment in the amount of seniority payments for service. But just like in the U.S. unions, employees cannot be terminated without a justified cause. If there is a layoff or mass lay off employees are entitled to receive a number of termination benefits sort of like how the U.S. is. They receive money in a reduced amount from the social security, kind of like how we have unemployment benefits. Lastly under the New O.L.L., we’ll talk about taxation for foreign nationals working in Venezuela. Foreign nationals are taxed on their net salary that they received for their services provided while in Venezuela. There is a time though when double a taxation treaty may apply, but that all depends on the employee’s tax residence. Foreign nationals are either taxed as residents or non-residents, and this is all based on the number of days of their physical presence in Venezuela. If you’re a Venezuelan tax resident you pay Venezuelan income tax on worldwide income, even if it is unrelated to Venezuelan activities. Non-residents though are only taxed on Venezuelan-source income and are not allowed to take deductions for personal expenses and tax credits. An individual is considered a tax resident when they have stayed in Venezuela for over 183 days in any given calendar year, or if they have stayed in Venezuela for more than 183 days in the immediate year preceding. Once an employee is considered a tax resident for one year, he/she will be considered a tax resident for the following year as well, even if they have stayed in Venezuela under the 183 days. Residency is only lost once the taxpayer can demonstrate that they stayed in Venezuela for under 183 days for two consecutive years, and have obtained tax residence elsewhere (practiallaw). I have highlighted a lot of various points about the New O.L.L. in Venezuela that I would want to know if I were going to be working abroad. I think they made a huge step for their country in implementing this plan compared to the previous regime. There are a lot of pieces to this agreement that I wish we had in the U.S., but like anything else there are a few things I am not too fond of. I consider this paper to be a brief narrative of the old Venezuela prior to the New O.L.L. as well as what international labor is like after the plan. If you would like more information on the New O.L.L. I have provided links at the bottom to my sources for this paper. All material I gathered about Venezuela and the New O.L.L. can be cited from the three sources I have listed below.

http://www.bakermckenzie.com/Venezuela/GovernmentRelationsContracts/ http://www.cato.org/publictions/commentary/four-hotbeds-corruption-venezuela http://us.practicallaw.com/3-503-0509