A ruling issued on April 15, 2026 by the Santiago Court of Appeals, in case Rol No. Laboral-Cobranza-3993-2024, systematizes the requirements of the business needs ground under art. 161, first paragraph, of the Labor Code. The court dismissed the nullity appeal filed by the dismissed employee and, in doing so, expressly ruled out that the law requires an extreme situation or the company’s total non-viability. What is required is different: objective, technical, or economic grounds that make the separation of one or more workers necessary.
What happened
The case reached the Santiago Court of Appeals after a worker filed a nullity appeal against the first-instance ruling, which had rejected his claim and upheld the dismissal. His central argument: the ground under art. 161 of the Labor Code requires the facts to be beyond the employer’s will, and the invoked need to be serious, permanent, and not temporary. The Court rejected that interpretation. It noted that the hypotheses in art. 161 are not exhaustive and may include analogous situations of a technical or economic nature. It then systematized the three requirements arising from the rule for the ground to apply: that there be a technical or economic situation; that it be objective — that is, not depend on the employer’s discretion or relate to a particular worker’s condition; and that such circumstance make the separation of one or more workers necessary. The facts established at first instance, which were not in dispute, included: the closure of various warehouses, a debt of $3,266,828,168 as of January 2024, a reduction in the company’s taxable base, an internal restructuring with the effective elimination of positions, and the dismissal of other workers within the same process. The plaintiff’s position was eliminated. In that scenario, the Court considered that the legal requirements were met. The decision rule was straightforward: once restructuring derived from market changes, economic losses, and warehouse closures was proven, the dismissal was justified. It was not necessary to prove a financial catastrophe.
What it may mean for your company
The ruling clarifies a frequent area of dispute. The argument that the ground under art. 161 only applies when the company is on the verge of bankruptcy, or when dismissal is a "last resort" measure, has no support in the rule. The Court expressly states this: art. 161 does not require business non-viability. This has practical consequences in both directions. If you are the employer, the ruling reduces exposure in unjust dismissal lawsuits, so long as the workforce reduction process is documented. A real restructuring, an objectively verifiable economic adjustment, or the closure of a business unit can support the ground without needing to show that the company could not continue operating. The issue is not the extreme severity of the situation: it is that the facts be objective and that the worker’s separation be their reasonable consequence. Even so, the ruling also highlights where the employer’s weakness lies: in documentation. The Court gave weight to the fact that the economic and organizational background was proven — identified debt, date, closed warehouses, eliminated positions, other workers involved in the same process. The ground is not built with a well-drafted dismissal letter; it is built with the corporate record supporting it. There is another angle. If you are the worker — or advise one — the ruling narrows the room for nullity arguments. The requirement that the need be "serious, permanent, and incurable" is not in art. 161, and the Court so declared. The strategy will need to focus on challenging the objectivity or the causal link between the economic facts and the specific dismissal, not on the severity threshold of the company crisis.
What you can do
If your company currently has — or expects — workforce reduction processes for economic or organizational reasons, the concrete risk is that the dismissal will be declared unjustified due to insufficient evidence, not necessarily due to lack of cause. Three concrete actions:
- Document before acting. Before formalizing the termination, gather the technical or economic background that supports it: balance sheets, sales reports, restructuring reports, internal communications about area closures. The ground is supported by evidence, not by narratives.
- Establish the chain between the facts and the eliminated position. Art. 161 requires that the economic or technical circumstance make the separation of that worker necessary. If the position still exists or if the process does not coherently affect other positions, the objectivity of the ground weakens. The design of the process matters.
- Review the documentation file for each termination. If you have recent dismissals under this ground with insufficient documentation, it is advisable to assess exposure before claims are filed. The limitation period for an unjust dismissal claim is 60 business days from the separation (art. 168 of the Labor Code).
If you need to review your termination processes in light of this ruling, or assess the documentary strength of an ongoing workforce reduction, schedule a meeting with our team: https://calendar.app.google/f13cTubrP12uveuBA This content is informational and does not constitute legal advice for a specific case. Primary source: Santiago Court of Appeals, Rol No. Laboral-Cobranza-3993-2024, ruling of April 15, 2026.