Nullity of Dismissal (Ley Bustos) in Chile

How Ley Bustos works

The rule known as Ley Bustos sits in article 162, paragraphs five to seven, of the Código del Trabajo. In simple terms, an employer that ends a contract must be up to date on the worker's social security contributions: pension (AFP), health (FONASA or ISAPRE) and unemployment insurance. If it is not, the dismissal does not end the employment relationship, and the employer can be ordered to keep paying salary and benefits from the date of dismissal until the debt is cured and the employee is notified.

For a foreign company with a Chilean subsidiary this is often a hidden risk. A payroll provider misses deposits for a few months, nobody notices, and the termination of an employee triggers a claim that is far larger than the original debt. For employees it is a powerful remedy that many do not know exists. The rule applies on top of ordinary dismissal law: our page on dismissals and severance covers the base scenario, and this page covers the extra consequence of unpaid contributions.

What we handle

What the employer must show at the moment of dismissal

The law expects the employer to inform the worker in the termination notice that contributions are current, and to attach the supporting payment certificates. If the notice does not contain that information, or the certificates do not match the facts, the dismissal is exposed. This is separate from whether the reason for the dismissal was valid. A dismissal for a perfectly good business reason can still be declared without effect because of unpaid contributions.

Not every gap leads to the same result. Courts have looked closely at which contributions were missing, for which months, and whether the employer had already withheld them from pay. Recent decisions have examined whether late payment and later convalidation can limit the exposure. Because this area is actively litigated and a Constitutional Court challenge to the rules was decided in 2025, we always check the current case law before giving a view.

Convalidation and how the exposure is limited

The employer can validate the termination by paying the outstanding contributions and then notifying the employee, with proof, that the debt has been cleared. Once that is done, the dismissal takes effect and the salary obligation for the period of nullity stops, although the employer remains responsible for what accrued in between. Waiting is expensive: each month of delay adds a month of salary and related costs.

For employees the practical question is whether to claim nullity, ordinary severance, or both, and how to prove the unpaid months. Pension fund statements, payslips showing deductions, and certificates from the AFP and the Dirección del Trabajo are the core evidence. The claim has to be filed within a short statutory deadline from the termination, so it should be reviewed promptly.