Argentina’s Labour Reform Loses in Court as Judges Strike Down Severance Cap
ARGENTINA · LABOUR
Key Facts
—What happened: A national labour appeals court in Argentina declared a severance article of Milei’s reform unconstitutional.
—The article: Article 55 of Law 27.802 caps the inflation-updating of severance in pending lawsuits at 67 percent.
—Why it fell: Judges said it cuts workers’ property, breaks equality and violates the constitution’s protective clause.
—The catch: The ruling binds only this one case, but it builds a precedent other courts can copy.
—The wider war: The reform has been in force since March and already survived a union injunction in April.
—What comes next: The final word on the severance cap likely belongs to the Supreme Court.
Argentina’s National Labour Appeals Court has declared unconstitutional an article of President Javier Milei’s labour reform that limits severance payments in ongoing lawsuits. It is the third court to strike the provision, and the highest-ranking one so far.
What the court actually struck down
The ruling came from Sala I, the first chamber of the Cámara Nacional de Apelaciones del Trabajo, the national labour appeals court. It confirmed a severance payment for a worker dismissed during the pandemic.
Along the way, the judges declared article 55 of Law 27.802 unconstitutional. That is the Labour Modernisation Law that Congress passed on 27 February and that took effect on 6 March.
Article 54 of the law says severance credits must be updated for inflation plus 3 percent a year. Article 55 created a transitional regime that pays only 67 percent of that updated amount in lawsuits already running.
The chamber said the cap violates the worker’s property right, because it takes a substantial cut of a credit already owed. It also breaks the equality principle and clashes with article 14 bis, the constitution’s protective clause for labour.
A pattern is forming across the courts
Sala I is not alone. A labour court in Córdoba, with Judge Ricardo Giletta, reached the same conclusion earlier, stressing unequal treatment of workers in identical situations.
A labour tribunal in La Plata went further in a case against a restaurant. Judge Nicolás Menestrina used the central bank’s own online calculator and showed the new formula cut the worker’s payment by 35 percent.
A judge in Tucumán had already invalidated the article on his own motion. Three separate benches, three provinces, one conclusion.
None of these rulings applies automatically to every case. Argentine courts decide dispute by dispute, but copied reasoning can freeze the article in practice.
Why severance is the heart of the reform
Milei’s reform aims to cut the cost of firing, which business groups call the main obstacle to formal hiring. Almost 43 percent of Argentine workers are informal, outside labour law protection.
The law keeps the classic formula of one month’s salary per year worked. But it shrinks the base by excluding vacation pay and the aguinaldo, the thirteenth salary paid in two halves each year.
It also creates the Fondo de Asistencia Laboral, or FAL, an employer-funded severance fund. Companies pay 1 percent of payroll, or 2.5 percent for small and medium firms, to cover future dismissals.
Economy Minister Luis Caputo has named the reform a pillar of the recovery plan. A court that holes the severance mechanism weakens exactly that pillar.
The reform has survived worse before
Days after the law took effect, the CGT, the country’s main union confederation, won an injunction suspending 82 articles. A first-instance judge granted it on 30 March.
The appeals court overturned that suspension on 24 April and declared the reform constitutional as a whole. Milei celebrated on social media in his trademark all-caps style.
What is happening now is different. Instead of one big constitutional showdown, unions and workers are fighting article by article, case by case.
The government says it will appeal the adverse rulings. The unions are preparing fresh protests, and both sides expect the Supreme Court to settle the severance question.
What to watch from here
The first signal is whether more chambers adopt the Sala I reasoning. Each new ruling makes the article harder to apply nationwide.
The second is the Supreme Court’s docket. A definitive decision there would bind every labour judge in the country.
The third is political. October’s midterm elections will decide whether Milei can defend the reform in Congress if the courts keep trimming it.
For employers, the practical result is uncertainty. The cost of a dismissal in Argentina is once again a moving number.
Frequently Asked Questions
What did the Argentine court rule on severance pay?
Sala I of the National Labour Appeals Court declared article 55 of Law 27.802 unconstitutional. The article capped the inflation-updating of severance credits in ongoing lawsuits at 67 percent.
What is Law 27.802 in Argentina?
It is Milei’s Labour Modernisation Law, passed on 27 February 2026 and in force since 6 March. It cuts severance costs, extends working-day flexibility and limits strike action.
Does the ruling abolish the labour reform?
No. It applies only to the case decided, though it sets a precedent other judges can follow. The reform remains in force, and the Supreme Court is expected to have the final word.
What is the Fondo de Asistencia Laboral?
The FAL is an employer-funded severance fund created by the reform. Companies pay 1 percent of payroll, or 2.5 percent for smaller firms, to finance future dismissal costs.
How did the reform change severance in Argentina?
It kept one month’s salary per year worked but excluded vacation pay and the thirteenth salary from the base. Article 55 then capped inflation-updating at 67 percent for pending cases, which courts are now striking down.
Connected Coverage
We covered the wider economic programme in Milei’s economic overhaul in numbers and the political backdrop in Milei’s re-election bid as country risk climbs. More from the country on our Argentina hub.
Sources: Río Negro judicial desk, Buenos Aires correspondent (August 2026); Buenos Aires Times (24 April 2026); Buenos Aires Herald (30 March 2026); La Capital; Tiempo Argentino.
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