OUTSOURCING IN LATIN AMERICA

Transcription

1 OUTSOURCING IN LATIN AMERICA 6 Key Questions to Consider

2 Are there any specific laws or regulations in your jurisdiction regarding outsourcing contracts? Based on legislation or case law, in your country, is there joint responsibility between the company that hires the service and the outsourcing company that hires the personnel? HIRING COMPANY OUTSOURCING COMPANY LAWS & REGULATIONS Act This mainly occurs when there is an outsourcing of the principal activities of the company (Act ). Law Number 6, 019/74 regulates outsourcing contracts for a period of up to 90 days. The company that hires the service has subsidiary responsibility for all the labor and social security obligations. There is several liability in the case that it has not regularly checked the fulfillment of these obligations. Chilean Labor Code Art. 183A-183AE The Federal Labor Law, Art & Art. 15(A-D). For a period over 90 days, no law, just precedent (#331).. However, for all legal purposes companies should be considered independent contractors, a concept that is expressly regulated. In the case that the services rendered are similar or inherent to the normal activities of the contracting party, they will be jointly and severally liable for all labor obligations. Both Social Security law and Labor law provide for joint liability under certain circumstances. The company hiring the service will either be solely responsible or have subsidiary responsibility. Art. 94 & 95 of the Labor code For salaries, severance benefits and indemnities corresponding to the period during which the employee was outsourced. Law No Legislative Decree No Supreme Decree No TR For the payment of the labor benefits and Social Security obligations during the time of assignment. There is also a possibility to become joint debtors in front of the unpaid employee and pension authority.

3 What are the characteristics that an outsourcing company must have in order to operate in your country? What is the minimum content of an outsourcing contract in your jurisdiction?? +? % The agency has to obtain approval from the Ministry of Labor. The company has to verify labor compliance of the outsourced company on a monthly basis. Services of a temporary nature (up to 90 days) must be registered with the Labor Ministry. Services which are not temporary (exceeding 90 days) do not require registration. Services Subcontracting Regime: no specific requirements Provisory Supply of Personnel: companies should be legal entities constituted with the sole purpose of making employees available for transitory or occasional tasks. They have to be registered at the Labor Authority, cannot have an ownership relation with the users, and have to constitute a guarantee of at least 250 UF at the Labor Authority, US$ 12,000 - approximately. The company must verify that it meets the main requirements to become an independent contractor. The company must be able to verify the existence and legal capacity of the outsourcing company. The company has to be incorporated as any other corporation or civil partnership. The company must have sufficient means in order to be able to comply with its obligations as an employer; otherwise it will be considered an intermediary and the labor liability will shift to the client or recipient of the services. Employees require a license granted by the Ministry of Labor. Outsourcing companies must meet four conditions: i) assume the services rendered by its own account and risk; ii) have their own financial, technical and material resources; iii) be responsible for the results of their activities; and iv) employees must work under full subordination. MINIMUM CONTENT i) Supply proof of compliance with the mandatory employment and social security rights; (ii) hold the company hiring the services harmless in case of labor claims; (iii) provide the possibility for the company hiring the services to withhold payments if the outsourcing company is not in compliance with its obligations, and the company hiring the services sees a risk of being required to make payments under subsidiary liability. Under the "Provisionary Supply of Personnel Regime" the contract must contain the provisions according to article 183-N of the Labor Code which are basically, among others, the mention of the legal grounds for the supply of personnel (such as extraordinary events, period of initiation of activities, occasional increases of the activities, urgent works, medical leaves, maternity leaves, vacations, etc) and the term for the provisory supply of employees (contracts in general cannot exceed 180 days). If the above conditions are not fulfilled, employees hired for provisionary services can be deemed employees of the company that hired the service. Contract must contain a clause regarding the purpose of the agreement, in which it shall be established that the services provided by the outsourcing company will be performed under its own supervision, cost and risk; and under its own direction, control and direct and exclusive supervision and subordination. MINIMUM CONTENT However, it is recommended to include the basic elements of an employment contract. However, it is customary to include the basic content of a commercial services agreement. However, having a signed outsourcing agreement is strongly recommended. However, must include the basic elements of an employment contract. No minimum content under Services Subcontracting Regime.

4 Are there any prohibited activities or services for an outsourcing company operating in your country? Recommendations to companies that are using outsourcing services in your jurisdiction in order to prevent claims from outsourced employees: No restrictions There are no restrictions if operating under the Services Subcontracting Regime. Services that are related to the Services that are related to the (Precedent Rule # 331 of the Superior Labor Court). If operating under the Provisory Supply of Personnel Regime", the only activity or service that can be hired is the provisory supply of personnel (employees) for transitory or occasional tasks. Choose an outsourcing company that is well known in the market and that can credit multiple clients. Have a comprehensive outsourcing contract in which indemnities are clearly stated. Demand that all employees that are working for the project are correctly registered as employees. Execute periodic controls on compliance of the outsourced company. Select the outsourcing companies carefully. Have the agreement drafted in a way that the hiring company has protection against subsidiary or direct liability if the outsourcing company is deemed illegal. Conduct a due diligence report before entering into an outsourcing agreement. In order to avoid being seen as the direct employer under the law, the hiring company should avoid giving any orders or instructions to the employees regarding the manner in which their job is performed. Assess current services agreement in order to verify if recent reforms to Mexican Labor Law are complied with and also to avoid undesired contingencies such as being considered as joint employer with outsourcing companies. Enter into outsourced agreements only with real independent services providers. Comply with all the legal provisions. Verify that the Ministry of Labor has granted the correspondent authorization. If interested in an outsourced employee after a period of 2 months, employer should hire employee directly. Have an attorney verify or draft all legal documents. Establish the outsourcing contract in writing. No restrictions Activities that are related to the when they are hired through any form or entity that violates the fundamental or the labor rights of employees (Law 1429, 2010). No services related to the Services cannot cover the entirety of the company's activities Services cannot be similar or analogous to the activities performed by the company's employees It is highly recommended to request a Labor Compliance Insurance policy from the contractor. Avoid the following practices: Supplying facilities or equipment to the outsourcing company. Make all the decisions with regard to the services rendered. Give all the instructions and guidelines in order for the outsourcing company and its employees to follow. Hire outsourcing companies that only render services to the contracting company on an exclusive basis. Enter into a services agreement which only purpose is the supply of employees. Hire services in which the form of compensation is calculated by the salaries of the employees rendering services. Verify the company meets the requirements discussed in Question 3 of this document. Ensure appropriate risk insurance and health and safety measures are taken.

5 GLOBAL REACH LATIN AMERICA Funes de Rioja & Asociados Av. Eduardo Madero 942 C1106ACW Ciudad Autónoma de Buenos Aires, Argentina T E [email protected] Brigard & Urrutia Calle 70A N Bogotá - Colombia T F E [email protected] Veirano Advogados Av. Presidente Wilson, º floor Rio de Janeiro RJ Brazil T F E [email protected] Philippi, Yrarrázaval, Pulido & Brunner El Golf 40 piso 20 Las Condes Santiago C.P Chile T F E [email protected] Basham, Ringe y Correa S.C. Paseo de los Tamarindos N. 400 Floor 9 Bosques de las Lomas México, D.F. Mexico T F E [email protected] Arosemena Noriega & Contreras Tower Financial Center, 16th Floor 50th Street and Elvira Mendez P.O. Box Panama, Republic of Panama T F E [email protected] Estudio Olaechea Bernardo Monteagudo 201, San Isidro Lima 27, Peru T F E [email protected]

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