Fixed-term contracts in Peru: when they become indefinite

What are fixed-term contracts (contratos sujetos a modalidad)?

Under Peruvian law, employment contracts are presumed to be of indefinite duration by default. The law nonetheless allows employers to enter into fixed-term contracts, called “contratos de trabajo sujetos a modalidad”, when there is an objective cause justifying the temporary nature of the position: a market need, an accidental circumstance, or a specific project or service. D.S. N° 003-97-TR, the consolidated text of the Labor Productivity and Competitiveness Law, groups these contracts into three categories:

• Temporary-nature contracts (Article 54): for the launch of a new activity, for market needs, or for business restructuring (reconversión empresarial).
• Accidental-nature contracts (Article 55): occasional contract, substitution (suplencia) contract, and emergency contract.
• Work or service contracts (Article 56): specific-work contract, intermittent contract, and seasonal contract.

Each submodality has its own individual maximum term (for example, up to 3 years for the new-activity contract, or up to 2 years for the business-restructuring contract, per the consolidated text), but there is also an overall cap: the sum of all successive contracts with the same employer, across different modalities, cannot exceed 5 years (Article 74).

The objective cause is mandatory

Article 53 requires that a fixed-term contract respond to a real business need or to the temporary or accidental nature of the service. This means:

• The contract must be in writing and must expressly state the objective cause of the temporary hire.
• That cause cannot be invented or generic: it must correspond to what is actually happening in the employment relationship.
• If the position is actually permanent (for example, a function the company needs continuously, year after year, unrelated to a production peak or a specific project), using a fixed-term contract can be challenged as fraudulent.

What does desnaturalización mean?

“Desnaturalización” is the legal mechanism by which a fixed-term contract loses its temporary character and legally converts into an indefinite-term contract, regardless of what the signed paper says. Under Article 77 of D.S. N° 003-97-TR, this happens in these situations:

1. Continuing to work after expiration: if the employee keeps working after the contract’s stipulated expiration date or after its agreed extensions, or if those extensions exceed the maximum legally allowed term.
2. Continuing after the project or service is finished: in a contract for a specific project or service, if the employee keeps actually providing services after the project is completed, without a renewal having taken place.
3. The replaced employee does not return: in a substitution (suplencia) contract, if the person being replaced does not return to the job once the legal or agreed term has expired and the substitute employee keeps working.
4. Simulation or fraud: when the employee proves there was simulation or fraud against the rules governing temporary hiring — for example, using a “market needs” contract to actually cover a structural, permanent position within the company.

Practical consequence of desnaturalización

Once a contract is reclassified, the employee becomes an indefinite-term employee from the moment the triggering condition occurred. This has important consequences:

• The employer can no longer end the relationship simply because “the contract expired”: to dismiss the employee, it now needs a just cause recognized by law, following the corresponding procedure.
• If the employer ends the relationship without just cause after desnaturalización, that termination can qualify as unfair dismissal, entitling the employee to compensation or, depending on the case, reinstatement.
• The employee keeps the right to claim full labor benefits calculated as if they had been hired on an indefinite basis from the moment the desnaturalización trigger occurred, including bonuses, CTS and vacation and the corresponding final settlement of labor benefits if the relationship ends.

What to do if you think your contract was desnaturalizado

You can gather evidence (pay slips, signed contracts, emails, schedules) showing the real permanence of your job or the breach of the legal time limits, and then file a complaint with SUNAFIL or start a labor lawsuit so a court recognizes your status as an indefinite-term employee. It is also worth reviewing how this relates to the probationary period, since the timing of your protection against dismissal can depend on when the actual employment relationship is deemed to have started.

This information is general and does not replace specific legal advice for your case. The particular maximum terms of each submodality (Articles 57 to 71 of the consolidated text) and the rules for sectors with special labor regimes were not verified article by article in this guide.

Did you sign an internship agreement, not a contract?

A pre-professional internship agreement is governed by a different law (Law 28518) and gets reclassified differently than a fixed-term employment contract. Check pre-professional internship agreements in Peru: your rights as a practicante if that’s your situation.

Check your case

The Fixed-term contract checker tool checks the 5-year cap in article 74 and the cases in article 77 of D.S. 003-97-TR, with the text of the norm and what to do.