CONSULTANCY

Labour protocols

Following the creation of a business or tax group, it is essential, for perfectly legitimate reasons, to establish the scope of the GROUP’S OPERATING PROTOCOL, with the aim being to avoid the group of companies being considered a single employment unit, with the need to manage the following aspects:

1. Unity of management
2. Separation of workforces
3. Separation of equities or cash units
4. External appearance as a single business
5. Provision of the common, simultaneous or successive labour of an employee in favour of several group countries under different contracts of employment with several group companies.

Unfortunately for legal certainty, it is not possible to set a fixed rule for avoiding the declaration of a group of businesses for labour purposes considering the concurrence, or not, of all or some of the five aspects mentioned in the previous section. The labour courts analyse the concurrent circumstances in each case, and decide the extent of the joint and several liability within the business group regarding all its components, through the application of the figure of the business group for employment purposes. This extension of joint and several employment liability within the business group may be declared, even with the concurrence of a single one of the aspects described in the previous section, provided this aspect in itself stresses that, besides the formal employer, there have been other legal entities or private persons within the business group that, in practice, have benefitted from the labour of the employee filing the claim.

However, the doctrine of appeal of the Higher Courts of Justice goes a qualitative step further, and expressly requires the concurrence of mens rea or fraudulent intent in the components of the business group to accept the legal grounds for the extension of joint and several liability. Accordingly, the declaration made by the group of companies for labour purposes and the ensuing context extension of the joint and several liability of the components of the business group should be informed by a positive answer to the question “have one or more of the components of the formal employer’s corporate business group benefitted from the labour provided by the employee with the fraudulent intention of avoiding their own employment responsibilities?”.

The OPERATING PROTOCOL manages to eliminate the potentially pernicious effects of an inappropriate answer to that question.