Outsourcing - Joint and several liability

On February 3, 2006 the National Court of Appeals in Labor Matters decided in Plenary Decision No 309, in the case "Ramírez, Maria Isidora vs.Russo Comunicaciones e Insumos S.A. et al in re: dismissal", that article 705 of the Civil Code is applicable to the liability principle of article 30 of the Law of Employment Contract.

What does this imply? That workers employed by contractor or subcontractor companies may demand payment of their claims in full from their employer and moreover, from all the joint and severally liable parties (the user companies), or may demand payment from any of said parties and in the event that the entirety has been claimed from one of the debtors and it should prove insolvent, the worker may then claim from the remaining companies (conf. article 705 of the Civil Code).

On the other hand, article 30 of the Law of Employment Contract sets out (without going into further detail regarding this norm that has given rise to so many interpretations) the joint and several liability between the user company and the contractors, in the event of contracting work or services in their own activity and specific to the main businesses.

Until the Plenary Decision was passed, the different Rooms of the Court of Appeals had differing positions in relation to the possibility of workers filing a claim against the joint and severally liable party when action was not taken against the principal obligor.

One of the positions held that in order to enforce the legal basis of the joint and several liability set out in article 30 of the Law of Employment Contract a suit had to be brought against the principal obligor (the employer) as the joint and several liability established by the Law of Employment Contract differs and is incompatible with that established in the Civil Code.

Another criterion held that for the legal basis of joint and several liability it was indistinct as to whether a suit was brought against the main obligor (the employer) in that the principles to be applied are those set out in article 705 of the Civil Code ruling that the creditor can demand performance of the obligation from each and every one of those parties obligated to payment.

In the decision under consideration, the Attorney General and the majority opinion adhere to this second position. Among the legal grounds held by the Attorney General’s office can be found that referring to the fact that Labor Law is not self-sufficient, nor does it have full autonomy and when a labor law norm states “joint and several liability”, it is making a reference to the guidelines set out in the Civil Code.

Moreover, the decision mentions that the Supreme Court in the decision "Audelia Cabezas et al vs. Sanz y Cía. et al" has settled the issue in that the Court found for the arbitrariness of the decision that rejected the claim filed by a worker against a joint and severally liable party, on the grounds of abandonment of action against the employer, and has held that such a criterion "...implies setting aside the normative solution that is provided for the case".

As of now, the Plenary Decision has set down mandatory doctrine for the judges of Labor Law Courts in the sense that it is to be accepted that employees of contractors or subcontractors file suit directly against the companies using the services irrespective of the company employing them.