PANEL ON MONEY, PEOPLE, AND GOODS: GETTING WHAT YOU NEED IN AND OUT OF THE HOST COUNTRY PEOPLE
| Jurisdiction | United States |
(Sep 2015)
PANEL ON MONEY, PEOPLE, AND GOODS: GETTING WHAT YOU NEED IN AND OUT OF THE HOST COUNTRY PEOPLE
Núñez, Muñoz y Cía. Ltda. Abogados
Santiago
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ANDRÉS VERDUGO is senior of-counsel in the law firm of Núñez, Muñoz y Cía. Ltda. Abogados, in Santiago, Chile. Mr. Verdugo was Vice President & General Counsel for Kinross Gold Corporation-Chile's operations, development, and exploration projects between 2009-2012, and Vice President, Legal & Corporate Affairs for Teck Resources Inc. in Chile from 2007-2009. Previously, from 2003-2007, he served as Vice President, Corporate Affairs for Aur Resources Inc., South America, and General Manager for Aur Resources Chile Limitada. From 1998-2009, Mr. Verdugo worked as General Counsel for Empresa Nacional de Minería-ENAMI-Chile, a government-owned mining company in the business of the processing plants, smelters, and refining of copper and mining development for small- and medium-sized mining producers. From 2001-2004, he was a professor for the Program on "Negotiation and Disputes Resolution," of the Universidad Alberto Hurtado, in affiliation with the Sellinger School of Business and Management, Loyola University Maryland, Baltimore, USA, and other Jesuit universities in the U.S. Between 1994 and 1998, Mr. Verdugo was the Director of Legal Affairs for Cambior Inc., Andes Region, a Canadian mining producer with development projects and exploration projects in Argentina, Peru, and Chile. Between years 1990 and 1993, Mr Verdugo was the Chief Legal Counsel at the Foreign Investment Committee, Government Agency of Chile. Mr. Verdugo obtained his law degree from the University of Chile, School of Law (1985); his MBA from the Sellinger School of Business and Management, Loyola University, Maryland, Baltimore (1997); and a Diploma in advanced negotiation, Creating Values in Deals and Disputes Workshop, from Harvard Law School, Massachusetts, 2001.
Getting your People and Contractors into Chile1
1. Introduction
In Chile, in the last 30-40 years, a number of large size mining operations have been developed from construction and start-up into production.
The largest deposits are owned and operated by Codelco, the Government owned company, but the investment has been overtaken by the largest mining companies from Canada, USA, Australia, UK, Japan, Poland, among other countries. The foreign mining companies have invested more than 100 billion dollars in Chile since 1974.3
One of the recently developed large scale mines that started to produce copper and molybdenum in July 2014 is the Caserones Project, which is owned by Japanese companies in a contractual mining company named SCM Minera Lumina Copper Chile.
The Caserones peak workforce reported 18,000 workers in the shift turnover system during construction. The camp is located at 2,050 meters above sea level (m.a.s.l.) and provided food, recreation and office space. It hosted an average of 9,000 workers per shift at the peak construction phase. As of October 2014, the employee workforce was 600 workers, and the contractors' workforce was 4,500 workers. It is expected that the workforce will be reduced in 2015 to a maximum of 2,100 workers, including contractors.
Another copper and molybdenum mine that was inaugurated in October 2014 and is now in production is Sierra Gorda SCM, a joint venture between the Polish company KGHM and the Japanese company Sumitomo. During construction, the peak workforce was 16,409 people. Today, the workforce is of 1,401 workers, plus 3,478 contractor workers.
This document will briefly refer to the mobilization of people into a hypothetical large scale mine in the Atacama Region of Chile, similar to the above two developed mines, the "Oceana Gold" case study, (hereinafter the "Project").
In the next pages I will refer to the rules and procedures of attracting and retaining the local or ex-pat workforce. In case of ex-pats and foreign contractors that are needed for the Project, I will refer to working permits, visas, and secondment agreements between the parent foreign companies and local subsidiaries. I will address in general terms the
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regulations on payment of wages and other benefits, pension plans, health programs, tax implications, vacations, holidays and other related matters for all workers, local and ex-pats.
I will also refer to camp, medical, catering and altitude requirements, along with mandatory safety training.
Finally, the formation of unions and the collective bargaining process is something that the Project and management team will have to deal with during the development and operation of a large project in Chile, and it will be briefly addressed in this document.
2. Employment, consultants and contractors
a. Employment
Every matter relative to individual employment, for local or ex-pat employees, is ruled by the Chilean law, specifically the Chilean Labour Code ("LC") and some other complementary laws.
These rules and regulations are also mandatory for the employees working for the foreign consultants and foreign contractors that will be needed for the Project.
Every individual must have its own and separate written labor agreement signed with the employer. Therefore the terms and conditions that are provided in the employment agreement cannot be changed or modified unless both parties agree in writing. Labor rights that are granted by the labor laws cannot be waived, while the labor agreement still subsists.
The labor agreement must rule the working conditions detailing the services that will be provided by the employee, the place or city where the services will be performed, the wages and date of payment, working schedule, duration (indefinite or temporary) and benefits such as housing, food and others. In Schedule A there are two templates (double column Spanish and English) of an Employment Agreement between a Chilean employer and the Chilean worker and the second one with a Chilean professional member of the executive management team.
i. Wages and other compensations
Every form of remuneration, such as wages paid in different currencies or in-kind, housing benefit, automobile, home visits in case of ex-pats, bonuses, profit sharing, gratification and other benefits are considered as compensation provided for the employee services.
The wages and other benefits could be agreed to be paid in a daily, weekly, bi-weekly or monthly basis. In any case the term could be more than 30 days.
The payment of wages or bonuses could be done directly in cash, with bank account checks or electronic transfer to a local bank account of the employee or to one located offshore, or allocated among both (onshore or offshore).
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Income Tax. All remuneration received in Chile by an employee, local or ex-pat, for services or works performed for his/her employer in Chile must pay in a monthly basis income tax in progressive tax rates, for monthly remuneration exceeding 13,5 UTM (US$870.00), as set out in Article 43 of the Income Tax Law.4
The progressive tax rate goes from 3% to 40%.
The remuneration subject to this income tax constitutes the taxable income and is determined by deducting from gross salaries the pension and social security contributions and health that corresponds to the employee, which are withheld and paid by the respective employers.
ii. Working day schedule
The duration of the normal working schedule shall not exceed 45 hours in a week, which can be distributed in no less than 5 days and not more than 6 days a week. The normal daily working schedule cannot exceed 10 hours per day. In some cases, the working schedule can exceed 2 additional hours per day, but those 2 additional hours should be paid to the employee with a surcharge of a 50%.
These provisions of the LC relative to the working schedule are mandatory for all workers. There are some exceptions (i.e., the managers and in general terms those members of the executive team of the employer who have powers of administration and any of those employees who work without an immediate reporting superior. See Schedule A (b) form of employment agreement.
iii. Work Shifts
Article 38 of the LC provides in very specific cases and in some industries the possibility to establish working shifts including Sundays and mandatory holidays, by compensating the days and paying a surcharge to the workers.
In accordance with paragraph Six of Article 38 of the LC, in very special cases, and with the agreement of the workers, the Director of Labour Department is empowered to authorize, by reasoned decision, the establishment of exceptional distribution systems of working hours and rest periods when the working day system provided in the previous paragraph cannot be applied, given the special characteristics of the service to be performed, which is the case of a mine that runs far away from cities and towns and where the employees live with their families, and operates 24 hours a day and 365 days of a year. Prior to the authorization, the Government must audit the operation and verify if it complies with the regulations for health and safety at the mine site. Therefore, to implement a system of special working hours it is necessary to request an authorization from the Labour Department by applying for such authorization using the appropriate form for the type of operation where you want to implement the working shift.
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This authorization could be given for up to 4 years, and can be renewed by the Labour Department if the working, health and safety conditions are maintained.
The daily shift must not exceed 12 working hours, including 1 hour for meals. The most requested work shifts to the Labour Department are:
| SHIFT | DESCRIPTION OF SHIFT |
| 4×4×12 | Schedule of 4 days of continuous work followed by 4 continuous days off, with a daily shift of 12 working |
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