New Legislation on Employment Contracts and Subcontracting Anticipated in 2018

After a reasonably quiet year for employment law reform in 2017, legislative changes are expected in 2018 regarding subcontracting and employment contracts.

Outsourcing non-core functions like office cleaning and catering has been a major business strategy in recent decades in both the private and public sectors, enabling organizations to become more streamlined, lighten their management workload, and gain efficiency. This has, however, brought with it a number of labor conflicts, often around the uncertainty of the legal definition of subcontracting, and because of differences in working conditions between outsourced and regular employees.

Employment laws applicable to subcontracting are set out in Section 42 of the Workers’ Statute, which also assigns responsibilities between the principal companies and subcontractor. However, case law has demonstrated wide discrepancies, and there is a lack of clarity for employers.

Additionally, employee representatives have criticized differences in working conditions between employees of principal companies and employees of subcontracting companies, which have increased since labor reform in 2012 allowed companies more freedom to depart from industry-wide collective agreements on matters such as remuneration.

The Spanish Parliament is currently working on reform that should:

1. clarify the definition of subcontracting; and
2. require that minimum working conditions of subcontracted employees are equal to those of the principal company’s employees. This will likely apply to remuneration, hiring conditions, working time, rest periods, equality, paternity/maternity rights, and risk prevention.

Another area the government is looking at in 2018 is reform of the regulation of employment contracts, such as the types of fixed term contracts and when they can be used, which was covered in the coalition agreement between the ruling parties. However, the negotiations being conducted by the social partners (the government, trade unions, and employers’ associations) are currently in a stalemate and the outcome is uncertain.

Comment

Whilst the intention of the subcontracting reform is fair, it will probably lead to an increase in the cost of subcontracting and therefore a move away from outsourcing. Some commentators believe it could lead to an increase in “insourcing” in the future.

Written by Juan Bonilla and Ana Campos Rodríguez Tembleque of Cuatrecasas and Roger James of Ogletree Deakins