New Full Bench Decision from the Labor Court of Appeals as regards Section 8 of Law 24,013.

In re “Vasquez, María Laura c/ Telefónica de Argentina S.A. y otro s/ Despido” the Labor Court of Appeals gathered to decide the following question: “If, with regard to the first paragraph of section 29 of the Labor Contract Law (“LCL”), it is established that the employee has been directly employed by the company in which it render services, is the severance established in section 8 of Law No. 24,013 applicable, regardless of whether the employment agreement has only been registered by the intermediary company?”.

1. Legal opinion of the Full Bench Decision

The National Labor Court of Appeals set out with a majority of its members that: “When, pursuant to the first paragraph of section 29 of the Labor Contract Law, it is considered that an employee has been direct employee of the company user of his/her services, the severance established in section 8 of Law No. 24,013 is applicable, regardless of whether the employment agreement has been only registered by the intermediary company” (Full Bench Decision No. 323 dated June 30, 2010).

Please be informed that the majority vote received only 11 votes from the total of 20 that were part of the decision.

Also, it is worth noting that the analyzed Full Bench Decision is mandatory only for the National Labor Court of Appeal of the City of Buenos Aires and for the labor circuit courts of the City of Buenos Aires. Consequently, its opinion does not apply in jurisdictions other than this one.

2. Cases referred to in the Full Bench Decision

The Full Bench Decision refers to workers that, hired by third parties in order to provide them to another company, are considered as direct employees of that other company which is the real user of the work performed by the employer.

By this, the Full Bench Decision regulates a situation that arises from the registration of a labor contract by a third party intermediary which is not the real company that enjoys the work of the employee.

As for the facts analyzed in the Full Bench Decision, we can say that the claimant was an employee of a temporary services agency who was assigned to provide services in Telefónica de Argentina S.A. Telefónica was not able to prove that the worker was not designed to meet a company’s real and temporary demand for work, therefore Telefónica could not demonstrate that it was complying with the legal grounds necessary to use this type of contract.

3. Analysis of the Full Bench Decision

Firstly, we shall take into consideration that section 29 of LCL provides that: “Those employees hired by third parties with a view to supplying them with enterprises, shall be considered as direct employees of those using their services. In such an event, and whatever the act or stipulation agreed upon between the contracting third parties and the enterprises for which the employees supply or may have supplied services, they shall be severally liable for all the obligations stemming from the employment relationship and the social security system. The workers hired temporary service companies authorized by the competent authority to render services in the terms of section 99 of LCL and section 77 to 80 of Law 24,013, are to be considered in a relationship of employment, with a permanent continuous or discontinuous nature, with said concerns.”

Further, section 8 of Law 24,013 provides: “The employer who does not register a labor relationship shall pay the employee in such situation a severance payment equivalent to one quarter of the remuneration accrued as of the beginning of the employment relationship, calculated with values adjusted in accordance with applicable laws. In no case shall this payment be less than three times the monthly salary amount, pursuant to Section 245 of LCL, as amended.”

Therefore, the fine provided by the section mentioned above equals to 25 per cent of all the remunerations accrued as of the date the employee started rendering services for the user company.

Such fine punishes, both the total and partial, deficient registration of employment relationships, and is applicable only when the employee claims its registration during the employment relationship and further, if such claim is also sent to the tax authority (AFIP) within 24 hours as of the claim was made to its employer. 

The Court of Appeals based its decision on the following grounds, pursuant to the primacy of reality and protector principles: 

a) An employment agreement has not been registered when the registration is not carried out by the real employer but by a person unconnected with the labor relationship who is not part of such relationship.

b) The fact that a registration exists that is performed by a person who assumes a condition they do not possess, is not valid to transfer the sanction established in section 8 of Law 24,013.

c) Law 24,013 establishes a sanction addressed to the “employer”; the law has wanted the “employer” to be the one that registers the employee and no other, since the purpose of the law is regularization of the employment and the fight against the non-registered work by the person who has the legal obligation to do so, discouraging evasive practices.

d) The company that uses the services is the true, single and real employer (the one that is obliged, likewise, to pay the remuneration and perform the corresponding withholdings). The intermediary, regardless of whether it is jointly and severally liable, is not the employer; therefore, the registration of the labor relationship on its behalf is false and does not fulfill the requirements of Law 24,013. The company using the services is included in the description of “the employer that does not register a labor relationship” and therefore, is a debtor of the severance established in section 8 of Law 24,013.

e) Some of the votes of the majority considered that the labor relationship registered by intermediaries inserted by the direct employer was fraudulent, illicit and clandestine, when purporting to place a third party as one of the main players of the employment agreement in order to relieve the employer’s liability. Moreover, Dr. Fernández Madrid in his vote expressed that the presence of a particular means of fraud is evident as the companies are used as intermediaries by the direct employer in order to simulate a fragmented labor relationship with the arising damages for the employee.

f) In other votes it was considered that the registration performed by the intermediary party was irrelevant, as it had not been performed by the real employer who used the services; as they understood that if the employee is not included in the registers of the company that uses his/her services as a dependant employee, no technical registration exists pursuant to Law 24,013. The main fact is not that the employee is registered by the intermediary, but that he/she is registered by the real and true employer.

4. Situations that are excluded from the application of the Full Bench Decision

The following cases would be excluded from the application of the Full Bench Decision:

a) Employees hired by temporary services agencies in compliance with the last paragraph of section 29 of LCL: the exceptional circumstances provided for in the last paragraph of section 29 of LCL have not been analyzed in the Full Bench Decision. This exception is only set when two requirements are fulfilled jointly: i) the hiring employer is an authorized temporary services agency; and ii) the labor services requested by the user company are qualified or may be qualified as temporary.

We shall take into consideration that section 29 of LCL sets forth that the employer who hires a worker through an authorized temporary services agency shall be jointly liable for labor obligations and shall retain from the payments made to the temporary services company the corresponding withholdings and contributions that should be made to the social security system.

b) Outsourcing: in accordance with the provisions of section 30 of LCL, to outsource is to hire employees only to perform work or services that are part of the regular and specific activity of the establishment by which they are hired.

This situation implies a joint responsibility from the user company (not a direct responsibility) for the labor and social security obligations with respect to the employees affected by the contract.

5. Conclusions

a) Companies may continue hiring staff through temporary services agencies, to the extent that the tasks performed are temporary and not permanent.

b) When the tasks to be performed by the hired personnel exceed or do not constitute casual employment (i.e., a temporary solution), the user companies are directly liable for the severance payment provided by section 8 of Law No. 24,013.

c) When given the assumptions mentioned on the Full Bench Decision (point c) above), the tax authority (AFIP) may determine and claim the user company has debts corresponding to withholdings and contributions that should have been made to the social security system. However, we believe that there are strong and reasonable arguments to defend against such claims if the withholdings and contributions have been duly paid, although they were paid on behalf of the intermediary company.

d) Companies may carry on outsourcing their specific work activity without entering into a liability greater than or different from the one provided by section 30 of LCL.