Contents of this guide
The general rule and its exceptions
Article 211 forbids the employer from ending an open-ended employment relationship without a just cause provided by law and without following its formalities. Article 212 lists who falls outside that rule, that is, who may be dismissed without invoking a cause. The Code is in Spanish and the provisions below are paraphrased:
- workers with less than two years of continuous service;
- domestic workers;
- permanent workers of small agricultural, livestock, agro-industrial or manufacturing companies, under the headcount limits set in the article;
- workers on ships in international service, and apprentices;
- workers in retail sales establishments and in companies with five or fewer workers, except financial, insurance and real estate establishments.
For that group, article 212 requires, in addition to the article 225 indemnity, notifying the dismissal thirty days ahead or paying the notice. The probation period is another case: article 78 allows it to be agreed in writing for up to three months when the job requires special skill, and during that time either party may end the relationship without liability.
The article 213 causes and what is paid in each case
Article 213 groups the just causes into three sections. Disciplinary causes (A) include, among others, presenting false documents, violence or insults against the employer or coworkers, disclosing secrets, serious breaches of honesty, intentional damage, disobeying clear orders, unjustified absence (two Mondays in a month, six in a year or three days in a month), sexual harassment and notorious lack of performance measured with previously approved systems. Causes not attributable to the worker (B) cover, for example, inability in the first six months, a retirement or disability pension and force majeure. Economic causes (C) include bankruptcy, closure of the business and a proven decline in activity.
| Type of termination | What the text requires | What is paid |
|---|---|---|
| Disciplinary cause (A) | Written notice with specific causes (art. 214). If disputed, the employer must prove the cause. | Seniority premium (art. 224). No indemnity if the cause is proven. |
| Cause not attributable (B) | Written notice (art. 214) and respect for the deadlines of each cause. | Seniority premium (art. 224). |
| Economic cause (C) | Prove the cause before the administrative authority; if it does not rule within sixty calendar days, the employer may proceed (art. 215). | Seniority premium and indemnity (arts. 224 and 225). |
| Without cause, excepted worker (art. 212) | 30 days’ notice or its payment. | Article 225 indemnity, premium and notice. No back pay. |
| Unjustified dismissal | The worker may ask for reinstatement or the indemnity (art. 218). | Indemnity, premium and, if there is a lawsuit, capped back pay. |
| Pregnant worker or worker with union protection | Just cause and prior court authorization (arts. 106 and 383). | Depends on the outcome of the proceeding. |
The seniority premium is provided for open-ended contracts whatever the cause. In section C, the employer must also follow the dismissal order in article 213: lowest seniority first, with preference for Panamanians over foreigners and for union members over non-members.
The dismissal letter
Article 214 requires the employer to notify the worker beforehand and in writing of the date and the specific causes of the dismissal. The employer cannot later allege causes other than those in the notice. Panama Outsourcing’s guide on what dismissal is and its note on why the dismissal letter matters develop the formalities from the company’s practice. A checklist of what the letter should contain and be backed by:
- Identify the worker and the position. Along with the start date, which determines whether an article 212 exception applies.
- State the date the dismissal takes effect. Article 214 expressly requires the date.
- Describe the cause with concrete facts. It is prudent to include facts and dates and not only the article number, because the employer is limited to the causes notified and must be able to prove them.
- Place the cause in article 213. Disciplinary, not attributable or economic, because payments and prior steps depend on it.
- Gather the evidence before notifying. Attendance records, communications, evaluation reports and the disciplinary paperwork that supports the fact.
- Check whether the worker has special protection. Pregnancy, union protection, or ongoing vacation and sick leave require extra steps.
- Keep proof of delivery. A copy signed by the worker or a record of the notification.
Panama Outsourcing’s website presents a labor-legal advisory service that, according to the page itself, reviews contracts, internal regulations, payroll and templates for disciplinary processes. That is the kind of paper trail a letter needs.
Notice: what the text says
The Labor Code text is narrower than what is often repeated. In articles 210 to 229 N, notice owed by the employer appears only in article 212, for the excepted workers: thirty days ahead or the equivalent payment. The period starts from the pay period following the notification. In those cases no back pay arises for unjustified dismissal, unless the employer invokes an article 213 ground and fails to prove it, and no surcharges apply.
For dismissal for a just cause under article 213, those articles establish no notice. Conversely, article 222 does regulate the notice from a worker who resigns without cause: fifteen days in writing, or two months for a technical worker, and one week of salary owed to the employer if not given.
If the dismissal proves unjustified
Under article 218, a dismissed worker on an open-ended contract may ask the conciliation and decision boards, or the labor courts, for reinstatement or payment of the article 225 indemnity. If the employer does not prove the just cause or the prior resolution authorizing it, the ruling grants back pay capped at three months from dismissal for those hired after Law 44 of 1995, and five months for those already working when that law took effect.
If reinstatement is ordered, article 219 leaves the employer the option to end the relationship by paying the indemnity with a surcharge: 25 percent for workers hired after the law, provided the employer is not up to date on the severance fund, and 50 percent for those already working. The worker’s window is short: article 221 sets a limit of sixty working days from separation for a claim of reinstatement or indemnity with back pay, and one year for a claim of the indemnity alone.
Workers with special protection
Article 106 allows a pregnant worker to be dismissed only for a just cause and with prior court authorization, processed as a summary labor proceeding. If dismissed without it, she has twenty days from notification to present a medical certificate and demand immediate reinstatement. Article 383 likewise requires authorization from the labor courts, based on a just cause, to dismiss a worker with union protection, and article 60 prohibits, on pain of nullity, communicating measures or sanctions under the Code while the worker is on sick leave or vacation.
Article 217 adds that the employer may, before notifying a dismissal for the causes in sections A, B and item 1 of C, ask the labor courts for prior authorization. It is an optional route that reduces risk when the cause may be contested.
Panama Outsourcing, S.A. invites visitors on its website to request a personalized consultation to learn each company’s specific needs, with a contact form and its office on Avenida Camino Real and Calle 68 Oeste.
This content is informational and does not replace the advice of a labor lawyer or the Ministry of Labor and Labor Development. Reforms after Law 44 of 1995 should be confirmed in the Gaceta Oficial before applying a specific case. For other payroll costs, Radar has guides on Social Security Fund contributions and the minimum wage.
Frequently asked questions
What are the just causes for dismissal in Panama?
Those listed in article 213 of the Labor Code in three groups: disciplinary, not attributable to the worker and economic. Any reason not in the law is not a just cause.
Does a dismissal have to be in writing?
Yes. Article 214 requires prior written notice of the date and the specific causes of the dismissal, and the employer cannot later allege causes other than those notified.
How much notice is required for a dismissal in Panama?
Thirty days or its payment, and only when workers excepted by article 212 are dismissed without cause, such as those with under two years of service. For dismissal for a just cause the text provides no notice.
What happens if the dismissal is unjustified?
The worker may ask for reinstatement or the article 225 indemnity. If the employer fails to prove the cause, the ruling grants back pay up to a cap of three or five months, depending on the hiring date (article 218).
Can a pregnant worker be dismissed?
Only for a just cause and with prior court authorization (article 106). Without it, the worker can demand reinstatement by presenting a medical certificate within twenty days of the notification.
Related articles
- Social security contributions in Panama: what the employee pays, what the employer pays and what changed
- Minimum wage in Panama: how it is set, regions, sectors and how it is calculated
- Taxes a company pays in Panama: income tax, ITBMS, dividends, Notice of Operation and payroll
Sources
- Labor Code, Cabinet Decree 252 of 1971, text with reforms up to Law 44 of 1995: articles 211 to 213 (page 44), 214 and 218 (46), 221 and 222 (47). Compilation headed by the Ministry of Labor and Labor Development, hosted by the Judicial Branch.
- Labor Code, article 106, pregnant workers, article 383, union protection, article 78, probation period and article 60, nullity during vacation and sick leave.
- Panama Outsourcing, labor-legal advisory, request advice, what dismissal is and why the dismissal letter matters.
- Radar Panamá, social security contributions, minimum wage and taxes a company pays.
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