We will explain (i) the main occupational and social security risks that exist when hiring other companies to avoid making an illegal subrogation of workers, (ii) how to avoid subrogation in labour and Social Security debts when hiring and/or subcontracting, and (iii) the main recommendations.
When does illegal transfer occur?
When a company provides one or more workers to another company (main transferee), limiting itself to transferring them.
The circumstances that determine the illegal transfer, according to section 43.2 of Statute of Workers Rights Act are:
- The transferring company does not exercise the functions inherent to its status as a business undertaking.
- The company transferring employees lacks a stable activity or an organization of its own (which is fictitious, or if real, it does not have sufficient personal and material resources)
- Other circumstances: the transferee exercises sanctioning powers, controls the provision of work (vacations, shifts, creating the same schedule, shift and tasks as the workers of the main company, use of same uniforms, training), gives orders to the workers of the transferring company, provides the material resources, the activity is being performed in their workplace, workers are credited to third parties as being part of its staff, it is the sole client of the transferring company, etc. The more characteristics that are fulfilled, the easier it will be for the worker to obtain a favourable judgement.
In short, there will be an illegal subrogation of workers when the person who is really acting as a businessperson is not the formal businessperson.
What are the consequences of an illegal transfer?
The consequences of illegal transfers are:
- Affected workers choose between being automatically considered as permanent workers in the transferring company or in the transferee company, with seniority being counted from the beginning of the illegal transfer if the transferee company is chosen.
- In the event of dismissal, it is possible to claim the illegality of the subrogation of workers and the affected employee may sue both companies, while the transfer subsists (otherwise it will be understood that it was consented). The company may be sanctioned for infringing sections 8 and 18 of the legislation on labour infringements and penalties, applying fines of up to € 187,515; and criminal liability may be incurred (section 312 of Criminal Code).
- The affected worker will have the right to acquire the rights and obligations existing in the transferee company that would correspond to him/her in the same professional group and seniority, and the Collective Agreement corresponding to that company will be applicable.
- The transferring company and the transferee company must be jointly and severally responsible for obligations assumed towards workers, since the transferee will be liable during the year following the end of the assignment of salary payments that the transferring company had pending with its workers, the Tax Administration and Social Security.
Are there events in which the transfer is legal?
- Temporary Employment Angencies,
- A transfer by an agricultural cooperative to the agricultural holdings of its own partners,
- Transfer by special work centres for disabled workers to work in ordinary companies through a special employment relationship.
When are we facing an external contract?
The recourse to the external contracting of an activity that totally or partially constitutes the main activity developed in the market for its integration in the productive activity is allowed by contracting or subcontracting (section 42 Statute of Workers Rights Act), requiring functional, organizational and material independence. To differentiate it from illegal transfer, the following criteria are used:
- Technical justification of the external contract: maintenance of its organization, control and direction of the activity as well as assumption of risk.
- Autonomy in its object: the external contract has the purpose of developing tasks that the principal does not perform (inherent or indispensable for its purpose)
- Contribution of own means of production (own structure, workers and work tools, etc.).
The following is recommended for the main company:
- Collect negative certification for non-payments in the General Treasury of the Social Security where it is determined that the contractor is up to date with payment of Social Security contributions. Otherwise, the latter will be jointly and severally liable for the pending obligations throughout the term of the contract.
- Request the contractor or subcontractor, in advance, to provide a copy of the forms TA-2, evidencing the registration of workers in the Social Security (section 5.1 Royal Decree 5/2011), making periodic checks, to avoid infringement of section 22.11 the legislation on labour infringements and penalties.
- Request the contractor or subcontractor to provide the certificate from the tax administration confirming that it is up to date with its tax obligations. In case of failure to provide the certificate, the principal employer’s liability will be limited to the amount of the payments made without having received the certificate.
In the process of subrogation of workers, we recommend strict compliance with the obligations of verification of registrations in the Social Security, the obtaining of the negative certification for non-payments in the General Treasury of Social Security, and the certificate of the Tax Administration evidencing that all tax obligations have been fulfilled, as well as the periodic verification that the contractor has no overdue salary payments with its workers. Also ensure the organizational, functional and material independence between both companies.