(a) The social debate surrounding the work of delivery persons ("Riders") and the various related court decisions in Spain (declaring that the aforementioned delivery persons are, actually employees), led to the enactment of Royal Decree Law 9/2021 and, subsequently, Law 12/2021, which amends the Labor Act so that product delivery or distribution work carried out within the framework of digital platforms is now presumed to be employment
(b) No
(c) No(b) No
(c) No
The social debate surrounding the work of Riders and the various related court decisions in Spain (declaring that the aforementioned delivery persons are actually employees) led to the enactment of Royal Decree Law 9/2021 and, subsequently, Law 12/2021, which amends the Labor Act so that product delivery or distribution work carried out within the framework of digital platforms is now presumed to be employment.
The European Commission published a proposal for a directive to give greater protection to platform workers on 9 December 2021, which is currently being discussed in the Council of the European Union and, if adopted, it will impact all EU member states. For more information, please see our client alert here.
In addition, Law 14/2022, released on 22 December 2022, has added a new criminal offense against employees' rights (new paragraph 2 in Section 311 of the Spanish Criminal Code), which is the establishment of illegal employee conditions, by means of employment circumstances different from the employment contract, or maintaining the same against an administrative injunction or sanction.
Such addition rightly raises the issue of the misclassified contingent workers, the so-called "fake freelancers" ("falsos autónomos") in Spain, and, because of such misclassification, the establishment of illegal employment conditions (i.e., less favorable employment conditions).
Reclassified contingent workers would be entitled to all ordinary employment rights (including severance rights), and they could claim overdue salary amounts and benefits, subject to a one-year Statute of Limitations.
In addition, labor authorities could impose the following sanctions on the company:
(i) An administrative fine ranging between EUR 3,750 and EUR 12,000 per reclassified contingent worker for failure to register them before Social Security
(ii) Disqualification from contracting with the public administration, and other accessory sanctions, such as the loss of, or prohibition from accessing, specific public benefits and discounts on contributions related to employment and training programs
The company would also need to consider right-to-work implications if an individual (non-EU foreign national) is reclassified as an employee.
Administrative sanctions for the company ranging between 100% and 150% (depending on the economic loss caused to the Spanish tax authorities) of the amount of contributions not paid in the previous four years.
The company could face the following administrative sanctions:
(i) The payment of the contributions not paid in the previous four years, plus a 20% surcharge for late payment and interest
(ii) An administrative fine amounting to between 100% and 150% of the value of contributions not paid in the previous four years for failure to duly pay contributions to the Social Security General Treasury
(iii) The company could be liable for any damages caused by failing to properly contribute in the past, and for the lack of proper social security coverage (e.g., damages and surcharges for accidents, and damages to future pensions). The sanctions (which can include those in (i) and (ii) above) will depend on every case and the applicable statute of limitations.
Yes, the company could be liable for a corporate criminal offense if employees facilitate the tax evasion of contingent workers and the company omits tax revenues and fails to pay corresponding taxes that exceed EUR 120,000 per year.
In addition, Law 14/2022, released on 22 December 2022, has added a new criminal offense against employees' rights, which is the establishment of illegal employee conditions by means of employment circumstances different from the employment contract, or maintaining the same against an administrative injunction or sanction.
The company could be liable for a criminal offense if it omits tax revenues and fails to pay corresponding taxes that exceed EUR 120,000 per year and if the employees facilitate the tax evasion of contingent workers. The criminal offense may result in imprisonment between one to five years and a monetary penalty of between 100% and 600% of the underpaid tax. An aggravated criminal tax offense would exist when the undeclared tax due exceeds EUR 600,000 per year, or when the criminal offense involves fiduciary instruments that seek to hide the identity of the taxpayer or criminal organization. An aggravated criminal offense may result in imprisonment between two to six years and a monetary penalty of between 200% and 600% of the underpaid tax.
In addition, the administrators of the company or the managers in charge of the service could be liable for a criminal offense involving the employees' rights if the company established illegal terms and conditions for the employees by means of employment circumstances different from the employment contract, or maintained the same against an administrative injunction or sanction. This could be punishable by imprisonment between six months to six years, and a criminal fine of six to 12 months (with aggravation, i.e., violence or intimidation, a six-year to nine-year prison sentence, and a criminal fine of 12 to 18 months). For this purpose, the imposable fine is calculated by multiplying the number of days of the sentence by the amount of daily fine imposed, which, for individuals, can be from a minimum of EUR 2 to a maximum of EUR 400.
The main employment law risk is misclassification. This would imply entail the following:
(i) The employee will be deemed an ordinary employee with all the effects of this qualification (i.e., falls under the Workers Statute and the collective bargaining agreements). Reclassified contingent workers would be entitled to all ordinary employment rights (including severance rights), and they could claim overdue salary amounts and benefits, subject to a one-year Statute of Limitations.
(ii) The company could receive an administrative fine ranging from EUR 3,750 to EUR 12,000 per reclassified contingent worker for failure to register them before Social Security.
(iii) The company could be disqualified from contracting with the public administration, and other accessory sanctions could be imposed, such as the loss of, or prohibition from accessing, specific public benefits and discounts on contributions related to employment and training programs.
Misclassification risk leading to liability for not withholding wage tax and social security contributions. This risk must be analyzed on a case-by-case basis because the circumstances may be different.
The request of a self-employed contractor to be recognized as an employee before the labor courts or by the Inspectorate of Work may start a procedure leading to penalties for wrongly classifying someone as self-employed.
The main social security risk is misclassification, which may result in the following:
(i) The company may need to pay back all social security contributions from the previous four years, plus a 20% surcharge and interest
(ii) The company could face administrative sanctions of between 100% and 150% of the amount of contributions not paid in the previous four years
(iii) The company could be liable for any damages caused by failing to properly contribute in the past and for the lack of proper social security coverage (e.g., damages and surcharges for accidents, and damages to future pensions). The sanctions (which can include those in (i) and (ii) above) will depend on every case and the applicable statute of limitations.
Misclassification risk: If individuals are reclassified from self-employed workers to employees, the company is at a high risk of becoming subject to a number of duties in relation to the enrollment in the Social Security General Regime (broadly, such regime allows employees to have a higher pension than the Social Security Regime for self-employed workers). One must take into account the fact that the amount of pension received by an employee depends on the contributions their employers have made in their name. Therefore, and as mentioned, when reclassified as an employee, the company must pay the contributions of the previous four years at least to the Social Security. The company could also be liable for any damages caused by failing to properly contribute in the past and for the lack of proper social security coverage (e.g., damages and surcharges for accidents, and damages to future pensions). The employee will always be entitled to request the amount of the retirement contributions for social security. This right has no Statute of Limitations, and the longer the fake commercial relationship with the company exists, the higher the amount will be.
The main employment law risk is misclassification, which entails the following:
(i) The employee will be deemed an ordinary employee with all the effects of this qualification (i.e., under the Workers Statute and the Collective Bargaining Agreements). Reclassified contingent workers would be entitled to all ordinary employment rights (including severance rights), and they could claim overdue salary amounts and benefits, subject to a one-year period under the statute of limitations.
(ii) The company could face an administrative fine ranging between EUR 3,750 and EUR 12,000 per reclassified contingent worker for failure to register them before Social Security
(iii) The company could be disqualified from contracting with the public administration, and other accessory sanctions could be imposed as well, such as the loss of, or prohibition from accessing, specific public benefits and discounts on contributions related to employment and training programs.
Misclassification risk: If individuals are reclassified from self-employed workers to employees, the company is at a high risk of becoming subject to a number of duties in relation to the enrollment in the Social Security General Regime (broadly, such regime allows employees to have a higher pension than the Social Security Regime for self-employed workers). One must take into account the fact that the amount of pension received by an employee depends on the contributions their employers have made in their name. Therefore, and as mentioned, when reclassified as an employee, the company must pay the contributions of the previous four years at least to the Social Security. The company could also be liable for any damages caused by failing to properly contribute in the past and for the lack of proper social security coverage (e.g., damages and surcharges for accidents, and damages to future pensions). The employee will always be entitled to request the amount of the retirement contributions for social security. This right has no Statute of Limitations, and the longer the fake commercial relationship with the company exists, the higher the amount will be.
The main social security risk is misclassification, which may result in the following:
(i) The company may need to pay back all social security contributions from the previous four years, plus a 20% surcharge and interest
(ii) The company could face administrative sanctions of between 100% and 150% of the amount of contributions not paid in the previous four years
(iii) The company could be liable for any damages caused by failing to properly contribute in the past and for the lack of proper social security coverage (e.g., damages and surcharges for accidents, and damages to future pensions). The sanctions (which can include those in (i) and (ii) above) will depend on every case and the applicable statute of limitations.
Misclassification risk leading to liability for not withholding wage tax and social security contributions. This risk must be analyzed on a case-by-case basis because the circumstances may be different.
The request of a self-employed contractor to be recognized as an employee before the labor courts or by the Inspectorate of Work may start a procedure leading to penalties for wrongly classifying someone as self-employed.