The Labor Court of Appeals issued an en banc decision1 on February 3 20062 ruling on the joint and several labor liability of contractors and subcontractors, specifically governed by section 30 of the Employment Agreement Law the ("LCT").
Currently, many companies segment the production process by subcontracting third parties. In turn, to develop the activity entrusted, the subcontractor hires employees. Section 30 guarantees credits to the employee by establishing joint and several liability of the assignor or main contractor regarding subcontractor’s labor and retirement debts.
The issue at stake was put forward to the court to discern whether section 705 of the Civil Code applies to these cases, since section 705 expressly authorizes the creditor to demand payment from any one of the joint debtors at creditor’s choice and with no need to jointly request payment to all debtors.
The majority of the judges, following the opinion issued by the Attorney General, have acknowledged that the LCT does not provide a joint and several liability specific regime; therefore, the provisions of the Civil Code should apply.
By virtue of this, employees may claim all debts to their direct employers or to the party obliged under section 30 of the LCT and may recover the whole indebtedness from any one of the debtors. Thus, in the case of services subcontractors, a dismissed employee may directly and solely sue the party that has retained their employers as a contractor, without having first to claim payment from the employer.
This decision should be taken into account by companies using these kinds of contracts, which should carefully control the subcontractor’s employees used in the activities.
1. A decision reached by all the chambers of a court of appeals acting as a single court to resolve on an issue of law that has been repetitive and subject of potential contradictory analysis and which, as opposed to the general effect of case law in Argentina, is binding for any case related to the same subject matter as if it were application of rule of law.
2. Published in the Official Gazette on February 9 2006
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