Supreme Court verdict a threat to wage stability

24 September 2016

It is often the case that important decisions in Peru only show up in the small print of the official gazette (El Peruano) and it takes time for anyone to pick up on their significance.

This appears to be the case of a judicial resolution, made in June but which only recently has attracted a response, enabling employers to reduce an employee’s wages without necessarily securing their prior consent.

Basing their decision on a law passed in 1941 (but apparently never revoked or amended), and two decrees passed during the Fujimori government (1990-2000), the Supreme Court has ruled that an employer may reduce the wages they pay, either by mutual consent of the employee, or not in cases where, for example, a company or a state institution finds itself in a situation adverse to its “stability or economic equilibrium”.

The ruling has set alarm bells ringing among unions and labour lawyers who see this as riding a coach and horses through existing labour contracts in which the wage levels cannot be arbitrarily altered.

Employers’ associations have long been pressing for labour ‘flexibilisation’, enabling them to adapt more easily to fluctuations in market conditions. International financial institutions have also sought, so far without much success, to push for labour law liberalisation, making it easier for employers to ‘hire and fire’ at will.
One of the judges involved in the case has denied that the new verdict represents a precedent.

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