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The Concept of Salary under Dominican Law
Thursday, January 11, 2018

The salary under Dominican law is not limited to the financial compensation regularly paid to employees for their services. Instead, under Dominican law, the salary also includes all fixed benefits that employees recurrently receive from their employer (e.g. cost of living, diet, telephone, gas and others).

Moreover, under Dominican law, upon termination of a labor contract, the employer must pay to the employee the severance provided by law. The two main factors taken into consideration when calculating the employee’s severance package are the duration of the contract and the “ordinary salary”. In a global and changing business world, with diverse employment areas, it is important to understand the concept of “ordinary salary” in order to avoid errors in the calculation of severance.

According to article 192 of the Labor Code, ordinary salary is the financial compensation that employers pay to employees in exchange for the services they rendered, including the monetary amount and other benefits regularly offered to employees.

The Supreme Court of the Dominican Republic[1] has established different concepts of salary. In 1991, the Supreme Court held that bonuses are not part of the ordinary salary[2]. Then in 2004[3], the Supreme Court recognized that the amount paid to employees for meals, housing, transportation, gas and others should be considered as part of the ordinary salary when they are paid in a regular and permanent basis. More recently, in 2015, the Supreme Court held that any regular, permanent and invariable monetary payment is part of the ordinary salary.[4]In conclusion, benefits paid regularly such as telephone, gas, and others are part of the ordinary salary, while other irregular payments such as bonuses, commissions and all other benefits, financial or otherwise, as well as reimbursed expenses are not part of the ordinary salary.

The Supreme Court currently requires three conditions to be satisfied for payments to be considered part of the ordinary salary:

  1. The payment is a direct consequence of the ordinary service provided by the employee;
  2. The payment is given in a regular basis to the employee; and
  3. The payment covers up to a month.

Although decisions rendered by the Supreme Court are not binding, and even though the Labor Code does not specifically require these conditions, they are applied as a matter of law because they have been established by Supreme Court’s decisions. If a lower court eventually decides to change the criterion, it must clearly justify and explain the reasons why it will not respect the “unity of jurisprudence”. However, in practice, the Labor Courts decide the matters on case-by-case basis to determine whether or not a monetary benefit may be considered part of employee’s ordinary salary. In the majority of the cases, the Courts apply the Supreme Court’s precedents mentioned above.

It is important to note that under Dominican law, any of the parties may terminate the contract, with or without legal liability[5]. The labor contract can terminate with liability for one of the parties due to a given reason or for no reason. The party that unilaterally terminates the contract (e.g. dismissal undertaking by employer[6], or by employee), should pay or receive the acquired rights established under law (i. e. Christmas salary, vacations and a proportion of the annual benefits reported by the employer to the National Tax Authorities – which is determined under a formula based on the employment length). If the particular reason is not justified, that party should also pay the time period of the prior notification and the severance assistance. The labor contract can terminate without liability for one of the parties due to an impossibility to execution, by mutual agreement or with the conclusion of the service (in case the contract is for a particular time period or job).

[1] Supreme Court’s precedents are not binding under Dominican law.

[2] Decision number 19 issued on October 9, 1991 by the Supreme Court of Justice. A similar conclusion was reached in 2012. See Decision number 148 issued on March 21, 2012 by the Supreme Court of Justice.

[3] Decision issued on May 26, 2004 by the Supreme Court of Justice.

[4] Decision number 50 issued on February 25, 2015 by the Supreme Court of Justice.

[5] Article 67 et seq. of the Labor Court.

[6] Employer can unilaterally terminate the labor contract when the employee has incurred in serious or inexcusable fault, as robbery, absences without leave and others according to article 88 of the Labor Code.

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