It is very common for Chilean employees to sue their employers.
Most lawsuits, however, do not make it to the courts: as employees tend to win most cases, most employers choose to settle. The employees know this and, as a result, it is common for threats to be made to pressure the company to pay them more. The expectation is that all threats will be settled out of court and quickly.
The risk of employee lawsuits, furthermore, can’t be outsourced. In other words, even if there is an intermediary company hiring the employee—then the de facto employer is still responsible.
Take, for example, the classic case of a hotel wanting to hire someone to clean the guest’s rooms. If the hotel hires a cleaning company, and that cleaning company stations an employee to work from that hotel—then the hotel is the de facto employer, even though the employee is technically employed by the intermediary company. If the employer ever sues his employer, then he has the choice of which one to sue—or he can sue both, and if one doesn’t pay, the other will be responsible. This double responsibility is known as the responsabilidad solidaria.
Different companies have different levels of information-sharing with employees, in order to minimize these risks. Our preferred solution is to only hire employees who are 100% trusted—and then share all information openly with them.
In reality, however, many companies hire employees of varying levels of trustworthiness; in those cases, the employer must be very careful as to the employee’s knowledge, in order to minimize the risks of being sued.
Indemnizacion for Illegally Hired Workers
If an employer fires an employee who had been working illegally, i.e., without a formal contract, and that employee sues the employer, the employer will have to pay all of the health insurance and retirement contributions for the entire duration of the illegal labor engagement, as well as full salary until those contributions are paid.
When an employee sues, the mandatory first step legally is to go to conciliación obligatoria—a session where the employer and employee try to come to an agreement. This takes place at the Inspección de Trabajo. If no agreement is arrived at, then a trial follows.