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2. Re-Characterisation of Independent Contractors as Employees

a. Laws and Guiding Principles

In Spain, the workers’ primary regulation, and situations of independent contractors, economically dependent autonomous workers, are regulated by the Law.

In addition, in the process of re-characterization of an independent contractor, one must also take into account the general principles of law. Indeed, the most widely used mech-anism in the re-characterization is the individual autonomy of the parties who hire the services not subject to labor legislation. The provision of work under a labor contract has to be registered, but not for a civil or commercial one. Leasing of civil rules, commercial contracts or supply transport ones are contractual types and channel the work to a legal firm which excludes the application of labor law and prevents the owner of the company from having to be registered on the RGSS as an employee working for this employer. Normally, these operations are associated with productive decentralization scenarios outsourcing and professional services tend to frame new types of work arising from the society of services and information, both highly-skilled and poorly educated.

Individual autonomy and contractual documentation are the basic elements of such nor-mally un-imposed re-characterization. Individual autonomy of the parties is to choose the type of relationship they both agree to engage in labor as including it in a civil or commercial contractual typology. The intention and the will of the parties directly regulate the content of the service and conditions govern it. Therefore, the content of the contract document expresses not only the specific content of the provision of work and the conditions under which it should be put into practice, but also, and very specif-ically, which established mandatory relationship between the parties is excluded from the rules governing wage labor, notably labor regulations, union activity and collective regulation of working conditions.

Clearly these operations, which at the time of establishment of the relationship of services excluded from consideration as labor, can cause a drastic reduction of rights for people. Nevertheless they should enjoy effective protection as workers. So, there is a possibility that these mechanisms will create a possible concealment of the existence of an employment relationship.

In short, it affirms the principle that we must address specifically how he handles the work performed for the production of goods and services in the company and not so much the content of the contract which sets the document signed by the parties as a way to qualify as providing work or outside work, which has been called the principle of primacy of reality in the qualification of labor relations. Spanish case law, consistent with this, has denied the parties the power to determine the nature of the relationship of services. It must be determined by the particular way in which the activity takes place,

which is both labor if it meets the characteristics of the employment contract described in the law. Therefore, the name that the parties give to their relationship is not binding on its nature, but it does not mean that in reality such provision cannot be defined as labor.

b. The Legal Consequences of a Re-Characterisation

In the first place, the false independent contractor should sue the employer to claim to be hired as a salaried worker by filing a claim for recognition of law to the Courts. In this situation, the false independent contractor has two possibilities: Sue the employer when he is still in the company or sue the employer since he was fired.

If the worker filing of the application while he was still in the company and finally got to show the existence of an employment relationship, the employer would be required to register as indefinite with the salary he had been receiving, plus recognizing initial seniority.

However, if the worker files the application after he has been fired, and wins the trial, it will be recognized as the existence of an employment relationship and, therefore the contract termination would be classified as null or unfair.

In both cases, if the employee has obtained a ruling in his favor, the next step would be to sue the company before inspection work to pay their Social Security contributions in the last 4 years prior to the filing of demand.

c. Judicial Remedies Available to Persons Seeking ‘Employee’ Status

Independent contractors who want to be recognized for the right to be employed persons in the trial will have to prove that there is an employment relationship and therefore, meet the characteristics of a contract of employment. This employment relationship exists when, for example, there is a specific schedule (holidays are taken, leave and rest, use of the technical and material resources of the employer and the services are provided under the direction and supervision of company staff).

First, the person who wants to be recognized as a worker should reflect the existence of an agency relationship, proving that some of the following factors concur:

The framework or hierarchical insertion into the company, the worker must follow orders, mandates and guidelines:

• subordination to the person or persons who have powers of command;
• submission to a schedule and appropriate disciplinary standards;
• monitoring which is subject to certain employees under the use of new technologies;
• monitoring of performance;
• control of timing;
• presentation of work;
• making regular reports to account the work.

Second, it must be proved that a number of signs that indicate that there is strangeness in the fruits and risks are concurring. Some of the common signs of alienation that could claim to prove the existence of an effective working relationship would include:

  • to deliver or make available to the entrepreneur products made or services performed;
  • the adoption by the employer of the decisions concerning market relations or relations with the public, such as:
    • fixing prices or rates
    • selecting clientele
    • indicating people to care
    • fixed or periodic character of labor remuneration
    • calculating the compensation or the main concepts under the same criteria that keep a certain proportion to the activity of the employer or the free exercise of professions.

Third, you should prove the remuneration for the provision of services, as Spanish law recognizes as worker just persons whose services, voluntarily rendered to another, nat-ural or legal, are paid by it. The lack of wage determines the absence of labor contract “for lack of cause”. However, it is not crucial how the remuneration is perceived: under invoices and documentation of commercial transport contracts and subject to VAT tax regime or the regime implementing autonomous Social Security.12 Neither the amount of the remuneration is a percentage of what the company bills the customer keeps its configuration as salary compensation.13

In labor law it is common to afford greater protection to the worker who is weaker party in an unequal relationship. This protection in such cases means that if there are several indications that the employment relationship is working, the company will have to fight the evidence, not with other circumstantial evidence.

d. Legal or Administrative Penalties or Damages for the Employers in the Event of Re-Characterisation

One of the damages that the employer who employs a worker as an independent contractor must bear, when in fact the provision of services between them is governed by an employment relationship, is to conduct un-prescribed contributions.

In addition, you must pay the Social Security penalties for having evaded the worker registration on the Social Security.

Any questions

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