Costa Rica Law 10.971: Labour Responsibility for Public Contractors (in Force 8 Oct 2026)

Costa rica law 10971 public contractors must treat labour and social-security compliance as a condition of doing business with the State, because Ley 10. 971 is scheduled to enter into force on 8 October 2026 and reshapes the risk profile of public tenders in the country. The law ties eligibility for public contracts to a supplier’s performance of its labour duties, and it gives contracting institutions tools including exclusion from a tender, early termination of a live contract, and debarment from public procurement for a period of years. The statute was published in La Gaceta, the official gazette, and provides contracting entities a window to adapt their verification systems before the law takes effect.

For in-house counsel, procurement managers and foreign bidders, the practical message is simple and urgent, audit your payroll and social-contribution position now, before a breach becomes a bar to the market. The precise scope and wording of the law should be confirmed against the published text before relying on it.

Quick facts: Ley 10.971 at a glance

• Subject matter. A law addressing the labour responsibility of persons contracting with the State, amending Costa Rica’s public procurement framework (the General Public Procurement Law, Ley 9986).
• Publication. Published in La Gaceta, the official gazette of Costa Rica, through the Imprenta Nacional.
• Effective date. Scheduled to enter into force on 8 October 2026.
• Scope. Applies to natural and legal persons contracting with the State for the supply of goods and services, and is intended to extend to relevant subcontractors.
• Core consequence. Breach of labour and social-security duties can lead to exclusion from a tender, early termination, or debarment from public procurement for a period of years, as established by the law.
• Limitation period. The law is reported to establish a limitation period for initiating sanctions; confirm the exact term against the published text.
• Adaptation duty. Contracting institutions are given a transition period from entry into force to update their verification and pre-award systems.

Because the obligations attach to the contractual relationship with the State rather than to nationality, costa rica law 10971 public contractors obligations reach domestic and foreign suppliers alike wherever a contract is governed by Costa Rican procurement rules.

What Ley 10.971 requires of contractors

At its heart, the statute converts existing labour and social-security duties into procurement eligibility conditions. A contractor that fails to pay wages, remit contributions or maintain mandatory insurance is no longer merely exposed to a labour claim, it risks losing access to the public market. The obligations run across the contractor’s workforce and payment chain, which is why compliance should be managed as a continuous programme rather than a one-off bid requirement.

Core obligations

Contractors should remain current with their principal labour and social duties throughout the life of a public contract. In practice this means paying wages and the statutory annual bonus (aguinaldo) correctly and on time, respecting working-hours rules under the Labour Code (Código de Trabajo), keeping social-security coverage with the Caja Costarricense de Seguro Social (CCSS) up to date, holding valid work-risk insurance (riesgos del trabajo) with the Instituto Nacional de Seguros (INS), and meeting parafiscal contributions such as those to the Instituto Nacional de Aprendizaje (INA), the Fondo de Desarrollo Social y Asignaciones Familiares (FODESAF) and the Instituto Mixto de Ayuda Social (IMAS), alongside tax obligations administered by the Ministerio de Hacienda.

Who is covered

The law reaches the primary contractor and is intended to extend compliance expectations down the supply chain. For costa rica law 10971 public contractors, this means that the labour conduct of subcontractors engaged to perform part of a State contract can become a live risk for the prime. Employees, temporary staff and subcontracted workers are all relevant when a contracting institution assesses whether labour duties have been met.

Documents contractors must hold

To demonstrate compliance on demand, contractors should maintain a clean documentary trail: payroll ledgers, CCSS contribution records and certificates of good standing, INS work-risk policies and proof of premium payment, evidence of INA, FODESAF and IMAS contributions, tax payment receipts, and written employment contracts. These are the same documents a contracting entity, or an auditor, will typically request when verifying eligibility before award and during contract performance.

Triggers and listed breaches under costa rica law 10971 public contractors

The statute identifies categories of breach that can lead to sanction. Understanding both the named triggers and the scope of any non-exhaustive formulation is essential to managing risk, because a contractor cannot assume that only expressly enumerated failings matter.

Examples of listed breaches

• Non-payment or late payment of wages or the statutory aguinaldo.
• Breach of working-hours and rest rules.
• Failure to hold or pay INS work-risk insurance policies.
• Non-payment of CCSS social-security contributions.
• Non-payment of parafiscal contributions to INA, FODESAF and IMAS.

The scope of a non-exhaustive list

The law is reported to frame these examples within a non-exhaustive list, meaning other labour and social-security breaches of comparable seriousness may also trigger consequences. The practical effect, industry observers expect, is that contracting institutions may read the trigger categories broadly and treat material defaults on employer obligations as potentially sanctionable. Contractors should therefore not interpret the enumerated items as a closed safe harbour; the prudent approach is full compliance across all employer duties rather than a checklist limited to the named breaches.

Typical detection pathways

Breaches can come to light through several routes. A worker complaint to the Ministerio de Trabajo y Seguridad Social (MTSS) can prompt inspection. Cross-checks between contracting institutions and the CCSS or INS can surface arrears in contributions or lapsed insurance. Routine or targeted audits, whether internal, by the contracting entity, or by oversight bodies, can reveal payroll discrepancies. Because detection may originate outside the contractor’s control, suppliers who rely on reactive fixes rather than continuous monitoring are likely to be most exposed.

Sanctions: exclusion, contract termination and debarment

The sanctions architecture escalates with the seriousness and timing of the breach. The same underlying default can produce different consequences depending on whether the contractor is bidding, performing a live contract, or being removed from the market. The comparison table below sets out the three principal measures and how they generally operate for costa rica law 10971 public contractors. Specific durations and procedures should be confirmed against the published text and applicable procurement regulations.

Debarment duration and calculation

Debarment under the law is set for a period of years, with the length reflecting, in practice, the gravity, scale and persistence of the breach; the most serious or repeated failures attract longer periods. Alongside this, a limitation period constrains how long after the relevant conduct the administration may initiate a sanction. Contractors should preserve records across at least this horizon, since the ability to rebut an allegation depends on retaining the underlying payroll and contribution evidence. Confirm the exact maximum debarment term and limitation period against the published statute.

Procedural steps to impose sanctions

Sanctions are administrative in nature and must follow due process. Expect a formal file to be opened, the contractor to be notified of the alleged breach, an opportunity to present evidence and submissions, and a reasoned decision. Because the consequences, particularly debarment, are severe, the procedural integrity of the administration’s decision is itself a potential ground of challenge where the process is defective.

How breaches are proved, evidence and administrative process

Proof under Ley 10.971 is expected to be largely documentary. The administration establishes a breach by reference to the records that employers are already required to keep and to the certificates that social-security and insurance bodies can issue. For contractors, the best defence is a complete, contemporaneous and reconcilable documentary set.

Standard documentation checklist

• Payroll ledgers and wage payment records, including aguinaldo.
• CCSS contribution statements and certificates of being current.
• INS work-risk insurance policies and premium payment confirmations.
• Tax and withholding payment receipts from the Ministerio de Hacienda.
• Contribution records for INA, FODESAF and IMAS.
• Signed employment contracts and time-sheets.
• Third-party audit reports and subcontractor compliance declarations.

Role of MTSS, CCSS and the contracting institution

The MTSS is central to labour enforcement and complaint handling, and its inspection findings can feed the administrative file. The CCSS and INS hold the authoritative records of contribution and insurance status that contracting institutions will cross-check. The contracting institution itself acts as the first-line verifier, both at the pre-award stage and during performance, and is typically the body that opens the file leading to exclusion or termination.

Burden of proof and administrative practice

Where official records, a CCSS statement of arrears, a lapsed INS policy, or an MTSS inspection finding, indicate non-compliance, the practical burden tends to shift to the contractor to demonstrate that its position is in fact current. This is where documentary completeness is decisive: a contractor able to produce matching payroll, contribution and payment records can rebut an adverse inference, while one with gaps in its records is exposed. How presumptions operate in a specific file should be confirmed with a Costa Rica-qualified lawyer.

Payroll and social-security audit checklist for costa rica law 10971 public contractors

The single most effective risk-management step is a structured payroll and social-security audit (auditoría de nómina) completed before bidding and repeated throughout contract performance. The checklist below is organised by contribution type and is designed for in-house counsel, compliance officers and external auditors. It is advisory and should be adapted with local legal input.

CCSS, contributions and employer records

• Confirm every worker is registered with the CCSS and that reported salaries match actual pay.
• Obtain an up-to-date CCSS certificate of being current (estar al día) and reconcile it against internal payroll.
• Verify there are no arrears, payment plans in default, or unreported workers.
• Sample individual contribution records against employment contracts and time-sheets.

INS, work-risk insurance

• Confirm a valid INS work-risk (riesgos del trabajo) policy covers all workers, including temporary staff.
• Check that premiums are paid and the policy period aligns with the contract term.
• Ensure declared headcount and payroll match the policy basis.

Taxes and withholding

• Verify employer tax obligations and payroll withholdings are calculated and remitted to the Ministerio de Hacienda.
• Retain payment receipts and reconcile them to the payroll periods.
• Confirm the entity is in good standing for tax purposes.

INA, FODESAF and IMAS contributions

• Confirm parafiscal contributions to INA, FODESAF and IMAS are calculated on the correct payroll base.
• Check payment timeliness and retain supporting evidence.
• Reconcile parafiscal payments against the CCSS-reported payroll to catch discrepancies.

Subcontractor payroll verification

• Require each subcontractor to supply its own CCSS and INS certificates and recent contribution evidence.
• Build periodic re-certification into the subcontract (for example, before each payment milestone).
• Document the verification so the prime can demonstrate active oversight.

Red flags

• Workers performing the contract who do not appear on CCSS records.
• Reported salaries below actual remuneration.
• Lapsed or underscoped INS policies.
• Repeated late parafiscal or tax payments.
• Subcontractors unwilling or slow to provide compliance certificates.

A sample document request to a subcontractor or payroll function might ask for: the latest CCSS certificate of being current; the INS policy and proof of premium payment; the most recent payroll run and aguinaldo calculation; INA, FODESAF and IMAS payment confirmations; and tax payment receipts for the relevant periods.

Managing subcontractors and supply chains

Because the prime contractor can be exposed to consequences arising from the labour conduct of its supply chain, subcontractor management is a core compliance discipline under Ley 10.971. The objective is to push compliance obligations down the chain contractually, to retain the right to verify them, and to hold financial levers in reserve if a subcontractor falls short.

Sample contract clause drafts

• Flow-down obligations. Require the subcontractor to comply with all labour and social-security duties on the same terms imposed on the prime, including CCSS, INS, INA, FODESAF, IMAS and tax obligations.
• Compliance warranties. Obtain representations that the subcontractor is current on all contributions and insurance at signing and throughout performance.
• Audit rights. Reserve the right to audit payroll and contribution records on reasonable notice and to require periodic certificates of good standing.
• Indemnities. Provide for indemnification against losses, exclusion or debarment caused by the subcontractor’s breach.
• Retention and guarantees. Hold retention amounts or require performance guarantees that can be drawn down to remedy non-compliance.
• Payment transparency. Tie staged payments to delivery of up-to-date compliance evidence.

These drafting points are advisory and do not constitute legal advice; every clause should be reviewed and adapted by a Costa Rica-qualified lawyer before use.

Due diligence steps for foreign companies

Foreign bidders should not assume that unfamiliarity with the Costa Rican contribution framework offers any shelter, the law applies to contractors to the State for contracts governed by Costa Rican procurement rules. Before tendering, foreign companies should map their local employment and contribution footprint, confirm registration with the CCSS and INS for any workers deployed locally, and verify that any local partners or subcontractors are current. Where work is performed through a local entity or joint venture, the compliance of that entity should be diligenced with the same rigour as the bidder’s own.

Responsibilities of contracting institutions: the adaptation period

Ley 10.971 does not place the entire burden on suppliers. Contracting institutions are required to update their verification systems within the transition period set by the law, meaning their processes should move from paper assurances to active, cross-referenced checks.

Suggested verification workflow

A robust pre-award workflow would require bidders to submit current CCSS and INS certificates, cross-check those certificates against the issuing bodies’ records, flag arrears or lapsed policies, and repeat the verification at key performance milestones. The practical effect is likely to be more frequent and more granular pre-award and in-contract checks than contractors have previously encountered.

Minimum data points to check

• CCSS status of being current and absence of arrears.
• Validity and scope of the INS work-risk policy.
• Evidence of tax good standing with the Ministerio de Hacienda.
• Parafiscal contribution status (INA, FODESAF, IMAS).
• Subcontractor compliance declarations where relevant.

Remedies, appeals and practical next steps if accused

If a contractor faces exclusion, termination or debarment, the response must be both procedural and evidential. Sanctions are administrative decisions, so the first line of challenge lies within the administrative process, with judicial review available thereafter.

Administrative remedies and timing

A contractor should respond promptly to any notification, present documentary evidence of compliance, and pursue the available administrative remedies within the applicable windows. Because missing a deadline can forfeit a defence, confirm the precise remedy periods for the specific procedure with a Costa Rica-qualified lawyer at the outset.

Judicial review possibilities

Where administrative remedies are exhausted or the decision is legally defective, contentious-administrative judicial review (jurisdicción contencioso-administrativa) is the route to challenge the sanction before the courts. Grounds may include procedural irregularity, insufficient evidence, or disproportionate duration of a debarment.

Practical crisis-response checklist

• Preserve all payroll, CCSS, INS, tax and parafiscal records immediately.
• Reconcile the challenged position against official certificates.
• Assess whether corrective action, bringing contributions current, can resolve the matter before escalation.
• Decide, with counsel, whether to negotiate corrective measures or contest the sanction.
• Meet every administrative deadline and keep a clear record of all communications.

Practical pre-bid checklist for costa rica law 10971 public contractors

1. Obtain a current CCSS certificate of being current.
2. Confirm a valid INS work-risk policy covering all workers.
3. Reconcile payroll against CCSS-reported salaries.
4. Verify tax good standing with the Ministerio de Hacienda.
5. Confirm INA, FODESAF and IMAS contributions are current.
6. Check aguinaldo and working-hours compliance.
7. Collect subcontractor compliance certificates.
8. Insert flow-down, audit and indemnity clauses in subcontracts.
9. Organise and retain all documentary evidence for at least the applicable limitation period.
10. Obtain legal sign-off from a Costa Rica-qualified lawyer before submitting the bid.

You may also wish to consult our Costa Rica public procurement practice page and our Costa Rica employment & labour practice page for related guidance, and to review our resource on how to prepare for government tenders.

Conclusion

For costa rica law 10971 public contractors, the scheduled entry into force of Ley 10. 971 on 8 October 2026 marks a decisive shift: labour and social-security compliance becomes a gateway to the public market, and failure can mean exclusion, early termination, or debarment. The contractors best placed to compete will be those that treat payroll and contribution compliance as a continuous programme, auditing CCSS, INS, INA, FODESAF, IMAS and tax positions, documenting everything, and extending the same discipline to their subcontractors.

With contracting institutions required to upgrade verification during the transition period, the practical message for every bidder, domestic or foreign, is to put compliance evidence in order now and to seek sign-off from a Costa Rica-qualified lawyer before tendering. To discuss your exposure, contact our Costa Rica public procurement lawyers.

This article is for general information only and does not constitute legal advice. The scope, durations and procedural details of Ley 10.971 should be confirmed against the official published text. Sample contract clauses and checklists are advisory and must be reviewed by a Costa Rica-qualified lawyer before use.

Sources

1. Imprenta Nacional de Costa Rica, La Gaceta (official gazette)
2. Ministerio de Trabajo y Seguridad Social (MTSS)
3. Caja Costarricense de Seguro Social (CCSS)
4. Ministerio de Hacienda
5. Contraloría General de la República (CGR)
6. Instituto Nacional de Seguros (INS)