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"Temporary Employment Agency Regulations"
The legal framework governing the activities of temporary employment agencies (ETTs) was definitively established in its fundamental aspects by the enactment of Law 14/1994, of 1 June, regulating temporary employment agencies.
One of the core principles taken into account when regulating the activities of temporary employment agencies was the establishment of a set of requirements that companies wishing to carry out temporary employment activities must meet, with the aim of ensuring both the protection of the rights of workers placed through these agencies and transparency in the operations of companies exercising that corporate purpose.
To that end, and in order to enable the granting of the corresponding administrative authorisation and the development of the legal relationships necessary to carry it out, it is essential to establish both the formal and substantive aspects that should govern the relationships between temporary employment agencies and the client companies, as well as the workers engaged to be seconded to those companies, and to define the oversight role that the Labour Authorities must exercise over such activities.
A recent ruling of the Supreme Court clarifies
when a temporary employment agency commits statutory fraud
Since the introduction of temporary employment agencies under Law 14/1994, of 1 June, which at the time was strongly opposed by certain trade unions but welcomed by employer associations for the flexibility it brought to temporary hiring, there had been a broad legal consensus that the temporary employment agency was the employee's employer, the worker being assigned to the client company under a staff placement contract. This meant the client company bore no liability towards the assigned employee, except in specifically prohibited circumstances, such as replacing workers on strike or carrying out work classified by regulation as presenting particular risks to health and safety.
Similarly, where the post being filled through a temporary employment agency had previously been made redundant, the company requiring temporary workers had the option of hiring them directly, thereby becoming the employee's employer, or placing an order with a temporary employment agency. In the latter case, the agency assumed all obligations arising from the employment relationship, including responsibility for the dismissal or termination of the employment contract.
A landmark ruling of the Social Chamber of the Supreme Court, dated 27 June 2006 and subsequently affirmed in later decisions, established the doctrine that illegal staff leasing may also occur even where the arrangement has been carried out through a temporary employment agency (ETT) by means of a worker-placement contract, specifically in cases where the client company requested the engagement of the employee in breach of the law (fraude de ley), that is, where none of the grounds permitting fixed-term employment were actually present.
Those grounds are: a specific project or service, a temporary increase in production, and cover for an absent employee (interinidad). The consequence is that if the employee was not engaged on one of these grounds, or if the reason is not set out in sufficient detail, the employee may bring a dismissal claim at the end of the final contract. Such dismissal must be classified as unfair, entitling the employee to compensation of 45 days' salary per year worked, with the ETT and the client company jointly and severally liable, on the basis that both companies are responsible for the legal breach, the client company because it is the entity where the breach actually occurs, and the ETT because it is the formal employer of the worker supplied.
This line of case law departs from the previous tendency to absolve client companies, which had given them greater legal certainty when an ETT acted as intermediary in the engagement, and will mean that whenever a company engages a employee (whether directly or through an ETT), it must be satisfied that one of the grounds permitting fixed-term employment is genuinely present, for example, a temporary increase in workload during a seasonal sale period, and may not use fixed-term arrangements indiscriminately to avoid taking on permanent staff.
Finally, it is worth noting that under this new judicial doctrine, when calculating the compensation for dismissal to which the employee is entitled, all periods during which the worker has worked for the client company are taken into account, both the period during which the worker was engaged directly by that company, and any earlier period during which the worker was supplied through an ETT under a worker-placement contract. This results in higher dismissal compensation awards in these situations.
Our firm is at your disposal should you require any clarification regarding the requirements to be met in order to avoid unlawful secondment of workers.
