Disputes February 2019
FALSE SELF-EMPLOYED: OCCUPATIONAL ANTI-FRAUD MEASURES AND AD HOC PENALTIES
By Juan Carlos Lombardía
The concept of “false self-employed” is news today. Not only media cases such as Deliveroo or Uber, but also for being one of the more usual fraudulent practices within labour relationships, with an estimated volume between 100,000 and 200,000 cases in Spain.
I. WHAT IS MEANT BY FALSE SELF-EMPLOYED?
A false self-employed is such person who, fulfilling the characteristics of an ordinary employment relationship, is fraudulently registered with the Special Regime of Self-Employed (RETA, as per the acronym in Spanish). Such circumstance implies for the company short-term cost saving, but also a risk of serious financial consequences.
The aforementioned characteristics of an employment relationship are established in article 1 of Royal Legislative Decree 2/2015, of 23 October, approving the Redrafted Text of the Workers’ Statute Law:
- Voluntary: the provision of services is carried out voluntarily by the employee.
- Remuneration: it is adjusted to the time spent in the provision of services and not to the final outcome of the work entrusted, which is a defining note of the ordinary employment relationship.
- Employment by a third party: the employee is indifferent to the fruits, risks, organisation and resources.
- Subordination: it is the most significant characteristic to determine the employment nature of a legal relationship. The provision of service is developed within the management and organisation scope of the employer.
The distinction between an ordinary employment relationship and a false self-employed is sometimes confusing, the distinctive elements of the existence of a false self-employed being those below:
- Timing determined by the employer.
- The employee provides his/her services with the material means of the company.
- The remuneration is regular and for a fixed amount.
- The employer instructs the employee on his/her duties.
- Integration of the employee within the company organisational chart.
- The provision of services is carried out at the company facilities.
However, the circumstances of each specific situation must be analysed to determine if it is a correct legal relationship between the businessman and the self-employed or if, otherwise, we are dealing with a fraudulent employment relationship.
II. CONSEQUENCES FOR BEING QUALIFIED AS A FALSE SELF-EMPLOYED
As explained above, recognition of the existence of a concealed employment relationship under the concept of the false self-employed may imply certain negative consequences for the company:
- In the event of termination of the employment, the employee may claim against the company before the Labour Jurisdiction for the unfairness or nullity of the dismissal, as well as for the amount that could have accrued from the existence of an ordinary employment relationship.
The qualification of the dismissal as unfair will hence allow the company to opt between (1) the reinstatement of the employee, paying the employee the back pays as of the dismissal date until the notice of the judgment declaring the unfairness, or (2) payment of the compensation for wrongful dismissal, consisting of an amount equivalent to 33 days of salary per year of service with a maximum of 24 monthly payments, the periods of time shorter than one year being monthly pro-rated. In the event that the employment is earlier than 12 February 2012, the employer shall pay the amount equivalent to 45 days of salary per year of service with a maximum of 42 monthly payments until 12 February 2012, and of 33 days of salary per year of service from then on.
On the contrary, the qualification of the dismissal as null will oblige the company to immediately reinstate the employee, paying all back pays as of the dismissal date until the date of the reinstatement, notwithstanding the possibility of being sentenced to pay the relevant compensation for the damages caused to the employee.
Royal Legislative Decree 5/2000, of 4 August, approving the redrafted text of the Act on Labour Infringements and Penalties (hereinafter LISOS as per its Spanish acronym) provides for the fact of not requesting the registration with the Social Security of employees joining the company, as a serious infringement, establishing a monetary penalty consisting of fines with a minimum range from 3,126 to 6,250 Euros, a middle range from 6,251 to 8,000 Euros and a maximum range from 8,000 to 10,000 Euros. These penalties will be imposed for each of the employees affected.
- The Social Security may claim from the company the payment of all unpaid contributions for a 4-year term. In addition, non-payment of the contributions collected for all concepts by the General Treasury of the Social Security means a very serious infringement, sanctioned pursuant to the LISOS with a fine of a minimum range from 100.01% to 115% of the amount of the unpaid SS contributions and other concepts of joint collection, including charges, interests and costs; a middle range from 115.01% to 130%; and a maximum range from 130.01% to 130%.
III. INNOVATION ON DETECTING AND PENALISING FALSE SELF-EMPLOYED
Both the Labour and Social Security Directorate and the Government have recently introduced measures to try to eradicate or, at least, detect and reduce the volume of false self-employed.
On the one hand, the Strategic Plan of the Labour and Social Security Directorate for the period 2018-2020 have provided for the following lines of action:
1) Preparation of protocols and guides of action which allow detecting work performed by false self-employed.
2) Joint establishment of a new detection system under cross-matching of data with the State Agency of Tax Administration and the General Treasury of the Social Security.
3) Design of a system to detect conduit companies that currently encourage this type of fraud.
On the other hand, Royal Decree-Law 28/2018, of 28 December, for the re-valuation of public pensions and other urgent measures in the social, labour and employment scope, has introduced a new section in article 22 of the LISOS, which considers the communication of the cancellation in a Social Security regime of salaried workers as a serious infringement, provided that they continue with the same labour activity or maintain the same provision of services, by unduly registering them with a self-employed regime to this end.
This new serious infringement is provided for a penalty, per salaried worker fraudulently transferred to the self-employed regime, consisting of a fine with a minimum range from 3,126 to 6,250 Euros, a middle range of 6,251 to 8,000 Euros and a maximum range of 8,001 to 10,000 Euros.
This measure is aimed at preventing the creation of new self-employed and, particularly, arises as a result of the minimum base for contributions of self-employed being now below the minimum base of the general regime, which could undoubtedly boost the use of such modality.
RIGHT TO DIGITAL DISCONNECTION: A NEW STEP TOWARDS BALANCING WORK AND FAMILY LIFE
By David García-Feliu
New technologies certainly have a strong impact, not only on the society in general, but also on employment relationships, thus obliging to be constantly adapting both legislation and case law and the legal operator concept itself.
To this end, several new measures within the labour scope have been introduced under Organic Law 3/2018, of 5 December, on Personal Data Protection, which came into force on 7 December 2018. This law is aimed at, as explained in the law, recognising and guaranteeing a range of digital rights of citizens pursuant to that set forth in article 18.4 of the Spanish Constitution.
Particularly, article 88 of the aforementioned Organic Law regulates and recognises for the first time in Spain the right to digital disconnection of employees out of their working hours in order to respect their rest time, permits and holidays, as well as their right to personal and family privacy.
However, the right to digital disconnection is not absolute, since the same must be exercised considering the nature and purpose of the employment, its application being conditional on that established in the collective negotiation or, on a subsidiary manner, that agreed between the company and the Workers’ Legal Representatives.
In this regard, the same article 88 of the Organic Law on Personal Data Protection and guarantee of digital rights establishes that the employer, prior discussion with the workers’ representatives, shall prepare an internal policy for its employees defining the modalities to exercise the right to disconnection, as well as the actions towards training and awareness of personnel on a reasonable use of technological tools to prevent the risk of computing fatigue.
In addition, special mention is made to the need to preserve the right to digital disconnection for employees performing their services totally or in part under the modality of remote work or working from home related to the use of technological tools for professional purposes.
Therefore, the right to digital disconnection has been incorporated into the Redrafted Text of the Workers’ Statute Law under a new article, 20 bis, which sets forth as follows:
“Workers are entitled to privacy in the use of digital devices made available by the employer, to digital disconnection and privacy against the use of video-monitoring and geolocation devices in the terms established in the legislation in force on personal data protection and guarantee of digital rights.”
Similarly, the right to digital disconnection is recognised for public officers by means of the incorporation of section j) bis, in article 14 of the Redrafted Text of the Basic Statute of the Public Officer Act.
In this regard, employment regulation on the new reality of computing use must be complemented with the development of internal policies and contractual clauses correctly defining the limits of the so-called digital disconnection.
However, in no event must communications of the company to the employee be understood as a resounding prohibition, since on many occasions the nature of the job justifies the weighing and proportional use of the right to digital disconnection. It is frequent the case of employees who, due to performing their jobs under the on-call modality, must keep their location devices to, if required, cover an extraordinary need of the company (and which are associated to a certain financial compensation).
In this case, regulation on digital disconnection is considered as an inspiring principle in employment relationships, which must allow employees performing duties in ordinary working hours to set limits in the access and availability to their professional obligations.
Before this legislative innovation, some of the major companies have already introduced in their relevant Collective Bargaining Agreements or Company Agreements, regulations on this issue to ensure the appropriate rest of their employees.
After the effective application of the digital disconnection has come to public attention, many companies have decided to implement in their internal policies basis regarding balancing work and family life, which prevent the computing wear of their employees.
In recent years, the truth is that high levels of stress and alleged burn out are being suffered in jobs particularly associated to qualified office work that requires a high degree of coordination and monitoring. We must add the fact that, as in other social aspects, globalisation and the international factor of business inevitably implies that a great number of professionals on duty must adapt their availability to the different working time of their clients, line managers, collaborators, suppliers, etc.
In this regard, the right to digital disconnection of employees must not be understood as a limitation for the company management, to which this right also applies, but as a tool to improve the productivity levels associated to a better labour environment and establish positive dynamics within the organisation. Similarly, the fact of defining the working time of employees is an essential factor to prevent such human resources that develop the specific professional activity, from losing efficiency and efficacy.