Argentine Supreme Court Confirms the Validity of Hiring Contractors

With Mr. Ricardo L. Lorenzetti, Elena I. Highton de Nolasco and Carlos F. Rosenkrantz’s votes, the Argentine Supreme Court ( “CSJN” after its Spanish acronym) confirmed the validity of contracts hiring services within Argentine legislation and disallowed, as arbitrary, the prior ruling issued by Room No. VII of the Argentine Labor Court of Appeals (“ Room No. VII”).

Background

The plaintiff, a medical surgeon, initiated his claim against the Civil Association “Hospital Alemán” (“Deutsches Hospital”), Civil Society Associated Physicians (“MASC,” after its acronym in Spanish) and Mr. R.F.Hess (doctor), grounding his claim on the lack of proper registration of an alleged labor relationship he states took place between him and the sued institutions.

On September 30, 2013 Room No. VII, with Ms. Estela Milagros Ferreirós’s vote, adhered to by Mr. Néstor Miguel Rodríguez Brunengo, confirmed the adverse ruling issued in the prior first instance court against both sued instititutions, while ratifying the existence of an informal labor relationship. Ms. Ferreiros grounded  her vote on the fact that: “…the contract that rents services no longer exists in any legal field:  if someone wishes to try use it, that would be introducing an unconstitutional behavior”.

The three codefendants filed the relevant extraordinary remedy of appeals and, when it was rejected,  then filed a claim with the CSJN, which was accepted.

The CSJN’s ruling

Considering prior precedents (“Cairone Mirta Griselda & others vs Sociedad Italiana de Beneficencia en Buenos Aires – Hospital Italiano in re dismissal”, February 19, 2015; “Pastore, Adrián vs Sociedad Italiana de Beneficencia en Buenos Aires Hospital Italiano in re dismissal”, February 19, 2015; “De Aranoa Fernando Eduardo vs Federación de Círculos Católicos de Obreros in re dismissal”, July 14, 2015) the CSJN ratified the effect in contracts hiring services.

The CSJN stated that such contract bond was still effective up until the time when the parties were connected, as Section 1.623 of the former Civil Code was still applicable and pointed out that the current effectiveness of said contracts is undisputed as it is included in Section 1.251 (and related sections) of the current Argentine Civil and Commercial Code.

Furthermore, the CSJN highlighted that the contrary understanding held by Room No. VII contradicted Section 23 of Labor Contract Law No. 20.744 given that the referred Section states that it is possible to produce evidence to break the existing presumption in favor of considering that there was a labor relationship. The possibility of considering that the relationship that took place was of a different nature other than a labor one was admitted.

The CSJN stated that the Room No. VII ruling was merely dogmatic and lacked legal grounds.

In addition, the CSJN stated that Room No. VII had entirely overlooked the particularities of the relationship between the parties. The CSJN stated that Room No. VII did not consider, among others, the following aspects:

• That the plaintiff was a partner in a civil association set up by doctors exercising at the Deutches Hospital;
• That said association – of which the plaintiff was part – produced a Manual of guidelines containing policies that rule relationships between associate doctors and the Deutsches Hospital, policies that indicate:
  • Physicians had direct intervention in the work organization;
  • Deutsches Hospital was not entitled to willingly introduce changes to the policies that doctors were to observe in terms of performing their medical tasks;
  • Doctors were entitled to determine the compensation and would jointly (along with Deutsches Hospital) undertake the risks involved in case their medical tasks would not be achieved, as they agreed to collect their fees only if the medical task was, in fact, carried out;
• That the plaintiff issued invoices;
• That invoices issued by the plaintiff were not continuous and that their amount would vary from month to month;
• That the Argentine  Tax Authority (“AFIP,” after its acronym in Spanish) carried out an inspection and considered there was no labor relationship;
• That Deutsches Hospital would pay the plaintiff’s fees on a sole unique basis, once collected by medical insurers;
• That throughout seven years of this scheme, the plaintiff made no claim whatsoever;
• That the plaintiff did not provide proof of paid leave of absences or vacations.

Upon the lack of consideration of these aspects, the CSJN concluded that the Room No. VII ruling did not prove to be a reasonable derivation from legal standards, thus it was an arbitrary ruling, which is why the extraordinary remedy of appeals was accepted and the case was returned to the original court for the issuance of a new ruling.

Mr. Lorenzetti, in a joint vote, reaffirmed his criteria contained in the “Cairone Mirta Griselda & others vs Sociedad Italiana de Beneficencia en Buenos Aires – Hospital Italiano in re dismissal” case stating that courts should not ignore the legal, social and economic consequences that may derive from the application of labor legislation on cases not included within their scope, as well as the existing repercussion on all the professional hiring system, on account of the uncertainty and trespassing of legal certainty this entails.

We refer to last November 2017, when a bill aiming to amend the Argentine Labor Contract Law was introduced to Congress [see Labor Reform: Bill Submitted to the Argentine Congress], seeking to create, among other changes, a new figure: “autonomous professional economically related worker”. The CSJN’s backing of contracts hiring services should be taken into account when analyzing the  figure of the “autonomous professional economically related worker” and the statements contained within the applicable legal framework.