The rigidity of our 1943 labor legislation in the face of atypical contracts and new forms of employment has created uncertainty and legal insecurity for companies seeking to sign civil or commercial contracts for the provision of services by independent workers. This can have negative effects on economic activity and job creation.
Companies run the risk that, when they hire an independent professional for their services, the relationship may end up being considered by the competent courts as a labor relationship or a “disguised or concealed” one, with the aim of preventing the protection that the law provides.
Article 18 of the Labor Code states that “an individual employment contract, whatever its name, is any in which a person agrees to provide another with their services or to execute a work for them, under the permanent dependence and immediate or delegated direction of the latter, and for remuneration of any kind or form. The existence of this contract is presumed between the worker who provides their services and the person who receives them.”
The last paragraph of this article establishes a legal presumption, “iuris tantum,” of the existence of the employment relationship, meaning unless proven otherwise. It is the jurisprudence that has been responsible for defining the elements that distinguish a labor relationship from other forms of service contracts.
The Second Chamber of the Supreme Court of Justice has stated that “the nature of a legal relationship can be established by identifying its characteristic elements” (Resolution No. 00657 – 2008, of August 8, 2008). The following three elements have been repeatedly established as the definition of a labor relationship: a) the personal provision of a service; b) remuneration; and c) subordination.
To put it simply, a dependent worker provides their service personally, in exchange for a salary, under the orders and direction of their employer. This last element of subordination is what doctrine and jurisprudence have identified as the fundamental distinguishing element to determine whether or not a labor relationship exists.
The International Labour Organization (ILO), in the Report of the 91st session of the International Labour Conference [1] held in Geneva in 2003, noted that “any person may offer their services either as a dependent worker under an employment contract or as an independent worker under a civil or commercial contract.”
To differentiate both types of contracts, this report, based on the Code of Practice: Main criteria for determining the legal status of an employee or an independent worker in Ireland [2], established some of the characteristics of both dependent and autonomous workers, including:
Dependent Worker:
- Is under the control of another person who is responsible for giving orders about how, when, and where a job should be carried out.
- Contributes only their labor.
- Receives a fixed salary, determined by the hour, week, or month.
- Cannot subcontract the work.
- Does not provide their own materials to perform the work.
- Is not personally exposed to any financial risk from performing the work.
- Works according to a set schedule or a certain number of hours per week or month.
- Works for one person or business.
Autonomous Worker:
- Is the owner of their own business.
- Is exposed to financial risks because they must bear the cost of redoing any poorly done or substandard work performed under a contract.
- Assumes responsibility for the investments and management of the company.
- Benefits financially from good management, scheduling, and proper completion of assigned work.
- Exercises control over the work to be done and when and how it is carried out, and determines whether or not to personally intervene in the assignment.
- Is free to hire personnel, according to their conditions, to perform the work they have committed to.
- Can perform work or services of the same nature for more than one person or business simultaneously.
- Provides the necessary materials to perform the work.
- Provides the necessary equipment and machinery to perform the work.
- Has fixed premises where their business operates.
- Calculates the cost of the work and sets the price.
- Has their own insurance contracts.
- Exercises control over the working hours performed to carry out the assignment.
Although the jurisprudence of the Second Chamber recognizes these elements as distinguishing dependent labor relationships and independent worker service contracts, it has also pointed out that “it is up to the legal operator to determine, in each specific case, according to the particular circumstances that arise, whether or not a labor relationship is present” (Ruling No. 2008-000358 of April 23, 2008).
This is why companies can face a certain legal insecurity when contracting for the professional services of independent workers under a civil or commercial contract, since the economic consequences of a judicial authority’s decision that the relationship is of a labor nature can be unforeseen and burdensome.
It is also important to remember that in our legislation, the principle of the primacy of reality prevails. This establishes that in labor matters, what actually happens in reality and the real conditions in which a relationship develops takes precedence over what has been agreed upon in any document.
Workers require different employment conditions depending on whether the services they offer are provided dependently or autonomously. The lack of flexibility in labor legislation can cause companies to act cautiously in hiring to avoid future litigation. In this way, for the security of the parties, whether under civil, commercial, or labor contracts, and in order to favor job creation and the harmony of contractual relationships, the Labor Code must precisely establish the differences and limits between a labor relationship and autonomous or self-employed work.
This would guarantee legal security for companies when signing contracts and, in turn, the protection of the law for workers corresponding to each type of contractual relationship, without the need to resolve a conflict in judicial instances to determine the legal nature of said contract.
Technological advances, the diverse ways in which commercial and productive relationships develop, and new forms of employment demand a clear definition of the characteristics of both dependent and autonomous workers. This is because professional service relationships are one more type of work, which also deserves regulation from a labor perspective.
- https://www.ilo.org/public/spanish/standards/relm/ilc/ilc91/pdf/rep-v.pdf
- Ireland, Programme for Prosperity and Fairness, Employment Status Group: Code of Practice for determining employment or self-employment status of individuals (Dublin, julio de 2001): https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-on-employment-status.pdf