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WHEN DOES SUBCONTRACTING ONE’S OWN ACTIVITY TO THIRD PARTIES BECOME AN ILLEGAL ASSIGNMENT?

By May 20, 2022 No Comments
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The boundaries between subcontracting one’s own activity to third parties and illegal outsourcing are blurred and dangerous. Not knowing them is a risk that can be very costly in terms of labour and criminal liability, non-compliance with occupational risk prevention regulations and administrative sanctions deriving from the transfer of workers. It is true that subcontracting one’s own activity to third parties is a production organisation model which, according to Tirso Gracia, founding partner of Galibier Legal, “is increasingly present in the business world with the rise of project work plans”. And this is due to the fact that there is a tendency to look for greater specialisation, innovation and differentiation for the usual outsourcing services which are unrelated to the main activity of the company (such as cleaning services, security, IT, etc.).  Likewise, other technical profiles are also included within these outsourcing categories to perform some other specific company projects. However, these profiles must follow certain prior considerations in order not to be interpreted as an illegal transfer of workers.

Over time, labour jurisprudence has been establishing, in its decisions, the conditions and parameters that contractors must take into account in order to enter into a contract with another company. Thus, they should prevent this new contractual relationship from being classified as an illegal transfer of workers. It includes aspects ranging from the very constitution of the company and its corporate purpose to the organisation of the workers themselves.

 

Clear differences

Whereas in outsourced work (legal situation) there are two companies in the real and legal sense of the term, in the case of the transfer of workers (illegal situation) there is a fiction. In other words, in fact, there is only one company, the contracting company. Thus, the latter’s contribution is limited exclusively to providing the human resources. It only formalises the employment contracts of the employees who in practice will depend on the organisational structure of the main company as a mere interposed contractor.

Therefore, as Tirso Gracia reminds us, “the law is clear and prohibits contracting workers to transfer them to other companies, except when the legal requirements for Temporary Employment Agencies are met”.

 

Types of responsibilities

Criminal: The offences are defined in Title XV of the Spanish Criminal Code (“Crimes against workers’ rights”, art. 311 and following), and are punishable by imprisonment of 6 months to 3 years and a fine of 6 to 12 months.

Labour: employers who infringe the law are jointly and severally liable for their obligations to employees and to the Social Security.

 

Some details to bear in mind

Failure to comply with Occupational Risk Prevention regulations includes possible surcharges on future benefits for accidents at work, together with the corresponding penalties.

In the event that the existence of the illegal transfer is detected, it will be the employees who are the object of the illegal traffic who will choose which staff they belong to.

The illegal transfer of workers at the administrative level is considered a very serious offence, as set out in the Spanish Criminal Code (Article 8.3 of Royal Legislative Decree 5/2000), and punishable by a fine of between 6,251 and 187,515 euros.

 

10 recommendations for subcontracting one’s own activity to third parties

The subcontracted company must always be valid and legally constituted for the performance of the activity corresponding to its corporate purpose.

There should be no exclusivity obligations for either party.

In addition, the subcontractor must appear on the market as an expert in outsourcing services and must thus add value to the product.

It is therefore crucial that the subcontractor has its own organisational structure, i.e. a hierarchy of management and middle management that coordinates and organises all staff activity.

Therefore, the managers of the main company or service user may never direct the work of the subcontractor. “In this way, the staff of the main company cannot give orders, direct or organise the structure of the subcontracted company. Nor can they fix its working calendar, holiday shifts, timetables, substitutions, or control their activity by means of their own mechanisms. All of this must always be the responsibility of the subcontractor itself”, explains Tirso Gracia, founding partner of Galibier Legal.

Thus, those in charge of the main service provider can only verify and examine, at specific times, the correct execution of the outsourced service.

Moreover, quality control is the sole responsibility of the subcontracted company or any other external company that may be determined.

However, in addition to the necessary human resources, the subcontractor must have the ownership of all the materials necessary for the correct development of the activity, from its own installations and machinery to the elements for personal use such as computers or mobile telephones.

Last but not least, it is always advisable that the object of the outsourced activity should be a specific, fully identifiable project, with autonomy and distinct from that of the main company’s own activity.

Thus, the subcontractor must invoice for said project or production units and never for hours of work. There are many other considerations to take into account, but those mentioned are the fundamental ones.