How Much Can Severance Pay Be Reduced? The Vizzoti Ruling
In “Vizzoti, Carlos Alberto c/ AMSA S.A. s/ Despido,” the Argentine Supreme Court (CSJN) held that applying the salary cap set by Article 245 of the Employment Contract Law (LCT) is unconstitutional whenever it reduces the severance base by more than 33% of the employee's real salary. In that case, severance must be calculated on at least 67% of the employee's best normal and habitual monthly pay. It's one of the most-cited labor rulings in Argentina, and it still governs how courts and the SECLO calculate severance for higher earners today.
1. The Facts Behind the Case
Carlos Alberto Vizzoti worked for 26 years as medical director of AMSA S.A., earning a monthly salary of ARS $11,000 at the time of his dismissal without cause. The employer calculated his severance using the cap set by the Healthcare Collective Bargaining Agreement N° 122/75 — just ARS $1,053 per month. That cap cut his real salary by 89.4%, gutting the constitutional protection against arbitrary dismissal guaranteed by Article 14 bis of the National Constitution.
2. What the Supreme Court Decided
The Court granted Vizzoti's extraordinary appeal and set out principles of constitutional hierarchy that still apply:
- Protection against arbitrary dismissal: Article 14 bis requires severance to reasonably and proportionally repair the harm of job loss — not a merely symbolic amount.
- A confiscation limit: drawing on tax-law doctrine, the Court found that cutting more than 33% of a worker's real pay through a collective-bargaining cap is confiscatory and unconstitutional.
- A 67% minimum base: Article 245 itself was not struck down. Only its strict application is unconstitutional when the cap would reduce the base by more than a third — in that case, the base must be at least 67% of the real salary.
The Rule Courts Apply
The salary base for seniority severance cannot lose more than 33% of the employee's best normal and habitual monthly pay. When the collective-bargaining cap would cut more than that, the base must be reconstructed at 67% of the real salary.
3. Who Vizzoti Protects Today
Labor courts and the SECLO in Buenos Aires apply this rule directly to:
- Managers and non-union staff: executives, supervisors, and professionals whose salaries far exceed the union pay scale.
- Union employees with above-scale pay: workers with high commissions or specialty bonuses that push their salary well past the collective agreement's average.
Vizzoti Is Not a New Severance Formula
Vizzoti doesn't replace the Article 245 severance formula — one month's salary per year of service. It only limits how far a union salary cap can shrink the base used in that formula. If your salary falls within the collective agreement's scale, the cap usually never comes into play.
The full, official text of the ruling is available in the Supreme Court's case-law repository (Fallos 327:3677), decided on September 14, 2004. If you were dismissed while earning above your union's salary scale, our severance and dismissal practice applies the Vizzoti doctrine to recalculate your compensation correctly.