I. Creation and Object

On October 24th the Legislative Power passed a law creating the Labor Credit Guarantee Fund with the purpose of covering the contingency of insolvency of the employer, and which will be administered by the BPS (Banco de Previsión Social – Social Security Bank).

II. Protected workers and workers excluded from the scope of the new law.

The benefits regime established by the law includes all workers in the private sector, except for the following workers who were expressly excluded:

a) Workers who have a kinship bond by affinity or consanguinity up to a third degree with the employer, or with members of the management bodies of the company or institution.
b) Senior management workers, such as directors, general managers and anyone with decision-making powers over substantial issues of the employer activity.
c) Workers constituting a work cooperative with the purpose of giving continuity to the enterprise where they used to work, provided that the Judge has designated it as the depository of the assets of the company, with faculties of precarious use of the same.

III. Fund Financing

The law creates a special contribution of social security of 0.025% of the items that constitute taxable matters with the purpose of financing the benefits to pay the labor credits due to the employer's insolvency.

IV. Labor credits guaranteed by the Fund and maximum coverage limit

The Fund will guarantee up to the equivalent amount of 105,000 IU (USD 12,850) the collection of the following credits:

a) Salaries or wages generated in the six months immediately following the date of termination of payment or last salary paid.
b) Vacations, amounts for the best enjoyment of the annual vacation, bonuses generated in the last two years prior to the date foreseen in the previous section.
c) Compensation for legal termination.
d) A fine of 10% provided for in article 29 of Law 18,572, only regarding credits provided in the preceding paragraphs.

V. Essential requirements to access the collection of labor credits through the Guarantee Fund

In order for the BPS, through the Fund, to pay the worker the labor credits established by the law, the latter must accredit: a) the insolvency of the employer; and b) the verification of the credits, both according to the judicial procedures provided for that purpose.

On the other hand, each time the BPS pays labor credits through the Fund, they will subrogate in the rights and actions of workers who have received such payments, for the nominal amounts paid, plus their accretions (monetary update, legal interest and fine). Therefore, the BPS may appear in court in the same place and with the same rights as the worker holding the labor claim.

Montevideo, October 2018