Draft Decree of the Ministry of Labor seeks to regulate outsourcing and labor Intermediation

Although the draft regulation aims to ensure labor formalization and the protection of labor and union rights, by defining indicia, presumptions, and measures to combat illegal subcontracting, it contains certain provisions that may, in our view, exceed the regulatory powers of said ministerial portfolio.

Below, we set out the most relevant aspects that should be taken into account regarding said document.

Definitions of outsourcing and labor intermediation

The draft provides that labor outsourcing constitutes a mode of organization of production, whereby a person, entity, or organization entrusts to a third party the performance of certain parts, segments, or operations of its productive process, in exchange for a determined price, with the third party assuming such performance on its own account and risk, with its own organizational means and with managerial, technical, administrative, and financial autonomy.

For its part, it states that labor intermediation is that which is intended for the provision of personal services by workers of a contractor, and in favor, directly, of a contracting party. It is, therefore, the assignment of workers on mission to provide services to companies or institutions.

Labor intermediation with temporary services companies

The draft Decree states that user companies may not contract temporary services companies to cover their permanent needs, as it considers that such companies are only authorized to cover the temporary and exceptional needs provided for in article 77 of Law 50 of 1990. This would constitute a new exception to the grounds already set forth in the Law.

Likewise, it reaffirms that, once the term or the conditions of article 77 of Law 50 of 1990 have been met, the user company may not continue addressing the need with the same or another temporary services company, and, consequently, must hire workers directly.

Lastly, the draft Decree provides that the proportion of workers on assignment hired through temporary services companies may not exceed ten percent (10%) of the total headcount of each department of the user company.

This 10% proportion is novel, and, at the same time, unusual, given that no law, regulation, or case law had previously established a numerical-percentage limit regarding the maximum total allowed of workers hired through temporary services companies.

Enhanced presumption of an employment relationship

The draft Decree establishes an enhanced presumption of the existence of an employment contract when a company uses third parties to perform permanent activities of its business.

Likewise, it provides that the existence of illegal labor outsourcing is presumed when one or more contracting parties or beneficiaries and their contractors or service providers lack their own organization and a specialized productive structure for the performance of the contract or assignment and/or when their personnel are under the dependence of the contracting party or beneficiary of the services.

What does this mean in practice?

Currently, to prove the existence of an employment relationship with the beneficiary company or a contracting party, the worker must evidence the existence of the essential element of the employment contract, namely, subordination, which may be exercised through actions of direction and control over the activities carried out by assigned personnel or a contractor, the exercise of disciplinary authority, among others.

However, if the Decree were to be approved, in the event that a third party (contractor, union, temporary services company, cooperative, etc.) performs permanent core functions, it would be automatically presumed that the real employer is the beneficiary or contracting company, and it would be for the latter to prove otherwise, not the worker; therefore, it is concluded that the burden of proof would be shifted.

Preventive measures, corrective measures, and sanctions

When it is evidenced that an employer is engaging in illegal outsourcing or intermediation practices, the Ministry of Labor may adopt the following preventive and corrective measures, without prejudice to the measures that other administrative or judicial authorities may take:

1.     Order for direct hiring of personnel.

2.     Suspension or termination of irregular civil or commercial contracts.

3.     Regularization of labor and social security conditions.

4.     Temporary suspension of activities.

Additionally, the Ministry of Labor may impose successive fines of up to 5,000 SMMLV for each infraction while the illegality persists. Furthermore, in the event of repeat offenses, such fine may be increased by up to fifty percent (50%) over the amount initially imposed, and the temporary suspension of activities may be ordered for up to six (6) months, depending on the seriousness of the conduct and the magnitude of the harm caused.

While it is true that this is a draft Decree, and therefore may be subject to modifications and adjustments, it is very important that employers and contracting parties assess, from now on, the impacts that the approval of this regulation may generate in their activities.

For further information on this or other labor matters, please do not hesitate to contact us.