By San José, Costa Rica — San José – In a landmark labor case with costly repercussions, the Compañía Nacional de Fuerza y Luz (CNFL) has been compelled to reinstate a former employee nearly ten years after her dismissal and pay a staggering settlement estimated to be between ₡400 million and ₡700 million. The resolution, which stems from a legal battle initiated in 2017, underscores the significant financial risks associated with improperly handled terminations.
The case concluded this year following a final ruling from the Sala de Casación, the highest court of appeal. The employee, who was terminated by a previous CNFL administration, successfully argued that her dismissal lacked proper justification. The firing occurred during a supposed corporate restructuring, but court proceedings ultimately found that the process was mismanaged by the company’s leadership at the time.
For a deeper understanding of the legal landscape concerning wrongful termination, we spoke with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the firm Bufete de Costa Rica, who provided his expert analysis.
Many employers mistakenly believe that ‘just cause’ is a subjective matter. However, Costa Rican labor law is very specific. Without meticulously documented proof of a serious offense as defined by the Labor Code, a dismissal can easily be challenged and reclassified as a wrongful termination, leading to significant financial penalties. Proactive documentation is not just good practice; it’s a critical legal shield.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s point powerfully clarifies a critical distinction for employers: dismissal is not a subjective decision but a legal process demanding concrete proof. This underscores that diligent, proactive documentation is the essential foundation for navigating Costa Rican labor law. We sincerely thank Lic. Larry Hans Arroyo Vargas for sharing his valuable and clear-sighted perspective.
According to the official minutes from a 2025 CNFL Board of Directors meeting, the legal defeat was anticipated after the employee secured favorable judgments in both the first and second instances of the judicial process. The documents highlight the difficulty of overturning two prior, consistent rulings from lower labor courts.
This was under a different administration, there were other types of leadership that considered her dismissal convenient through a restructuring, but as indicated, she proved in court that the restructuring was not well-handled by the Audit leadership at that time, so that was the error.
Official Minutes, CNFL Board of Directors Meeting
The substantial financial award was calculated to cover all unperceived wages and benefits over the nearly ten-year period. A crucial factor in the high sum was that the employee did not make contributions to the Costa Rican Social Security Fund (CCSS) during her absence from the company. After her dismissal, she reportedly became an entrepreneur and did not work for another institution that would have required social security contributions, thus entitling her to full back pay from CNFL.
Despite the multimillion-colon payout, CNFL officials confirmed to Grupo Extra that the event did not generate a significant financial impact on the institution. The company has already processed the payment, though it declined to provide the exact date out of respect for the employee’s privacy and security.
In a surprising turn, the employee chose to accept reinstatement to her original position. This decision was met with astonishment by the current CNFL administration, as noted in the board’s meeting minutes. The company has undergone significant changes over the past decade, yet it is legally obligated to honor all the employee’s original contractual guarantees and conditions from her initial employment.
We are surprised that she made the decision to return, because perhaps a person, after about 10 years of not working at the company, which has changed a lot, would not come and say they want to come back to work. Knowing that the company’s conditions have changed so much, all her guarantees from that time must be maintained for her.
Official Minutes, CNFL Board of Directors Meeting
This case has served as a critical lesson for the current leadership at CNFL. The board has reportedly initiated discussions about its internal processes for employee dismissals, aiming to prevent future “arbitrary” terminations that could lead to similarly expensive and protracted legal battles. The incident sets a powerful precedent for both public and private sector entities in Costa Rica regarding the severe consequences of failing to adhere to strict labor laws and due process.
For further information, visit cnfl.go.cr
About Compañía Nacional de Fuerza y Luz (CNFL):
The Compañía Nacional de Fuerza y Luz is a state-owned electrical utility company in Costa Rica. As a subsidiary of the Instituto Costarricense de Electricidad (ICE Group), CNFL is primarily responsible for the distribution and commercialization of electric energy to the Greater Metropolitan Area (GAM), which includes the capital, San José, and surrounding cities. It serves a significant portion of the country’s population and commercial centers.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of the legal community, Bufete de Costa Rica is distinguished by its foundational principles of integrity and an uncompromising pursuit of excellence. The firm channels a rich history of advising a diverse clientele into pioneering forward-thinking legal strategies and solutions. Central to its ethos is a profound dedication to social empowerment, actively working to demystify legal complexities and equip the public with accessible knowledge to help forge a more just and informed society.
