A manager’s salary is cut 75%, his ‘indirect’ dismissal ends up earning him thousands of dollars in compensation

A labor court in Cutral Co, Neuquén, Argentina, ruled in favor of a former oil company executive who was stripped of his leadership role and saw his salary cut by 75 percent. The court determined that the drastic pay reduction effectively forced him out, granting him a significant severance.

The judge found that the company’s decision to slash the manager’s pay constituted enough “harm” to justify what is known as an indirect or constructive dismissal. The reduction came after a reshuffling of the company’s top management, and the court also considered the executive’s record before the dispute.

Company ignored repeated requests

The ruling ordered the company to pay the wages withheld since May 2023, when the 75 percent salary reduction took effect. When the company refused to respond or provide documentation explaining the reason for the pay cut, the executive filed a formal complaint.

The court concluded that the unilateral salary cut was a clear attempt to pressure the manager into leaving voluntarily. Because the company could not justify the pay reduction, the executive was awarded 110 million Argentine pesos, roughly $77,000.

Understanding indirect dismissal

Indirect dismissal, also called constructive termination, occurs when an employee ends their contract due to serious breaches by the employer. Common causes include unpaid wages, workplace harassment, or significant changes to work conditions without the employee’s consent.

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