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Peru – compensation for arbitrary dismissal of director

Written by
Estudio Olaechea, one of Peru’s top firms, with 140 years of experience.
In a controversial new judicial ruling, the Peruvian Supreme Court has held that directors and managers employed in roles of responsibility from the beginning of their employment are not entitled to compensation for unfair dismissal.

On 1 September 2018, the seventh Supreme Jurisdictional Plenary in Labor and Social Security matters was published in the Peruvian Official Gazette, El Peruano. In it, the Supreme Court set out unified judicial criteria in two scenarios relating to the dismissal of a director or company manager.

  • Managers or employees in a position of responsibility in companies in the private sector that were hired for that position of responsibility or management are not entitled to payment of compensation for arbitrary dismissal if their employer terminates their employment because they no longer have confidence in that manager or employee
  • Employees who initially entered a position in which they performed ordinary functions, and then acceded to a position of trust or responsibility within the same company are entitled to compensation for arbitrary dismissal in situations where their employer prevents them from rejoining their previous job or when the employee opts not to rejoin his or her previous job.


We believe that these unified criteria of the Supreme Court are not in accordance with the provisions of Peruvian legislation since the law does not state that a management employee who entered a company in a management role from the beginning is not entitled to compensation for arbitrary dismissal.

We believe that if a management employee who entered a company in a management role from the beginning is dismissed without cause, the judges will award compensation for arbitrary dismissal and will not apply the provisions of the seventh Supreme Jurisdictional Plenary.

José Antonio Valdez
Partner - Peru
Estudio Olaechea