Leading Case: Civil Damages for Unregistered Employment

A case involving a sales supervisor who rendered services for eight years without formal registration at a company engaged in residential construction was brought to court. After serving notice to her employer in June 2024, the plaintiff deemed herself constructively dismissed and filed a claim for unregistered employment. She challenged the constitutionality of the Bases Law 27742 and requested the application of the repealed penalties for improper registration under Laws 24013 and 25323. Alternatively, she sought compensation for damages arising from the lack of formal recognition of the employment relationship.

In its ruling, the Court upheld the claim, finding that the plaintiff had indeed worked under an employment relationship and awarded severance for dismissal without just cause. At the same time, it rejected the constitutional challenge to the Bases Law and confirmed the repeal of the statutory fines.

Nevertheless, the Court held that the lack of registration had caused both economic and moral harm warranting compensation. It awarded damages equivalent to 12 monthly salaries for lost income, pension contributions, and social security coverage, plus four monthly salaries for moral damages.

A particularly significant aspect of the ruling is that liability was extended jointly and severally to the company’s shareholders and directors. The judge found that they had personally participated in the decision to maintain the clandestine employment relationship. Accordingly, the court pierced the corporate veil and departed from the Supreme Court’s restrictive standard on personal liability for directors, as established in “Oviedo.” This ruling broadens the exposure of corporate officers and shareholders to labor claims related to registration breaches.

This precedent introduces considerable uncertainty into the labor market and heightens legal risk. Although the Bases Law eliminated fixed statutory fines, courts have now opened the door to civil claims for damages, which may result in higher and less predictable liabilities for employers.

In this case, the civil route proved to be a potentially more burdensome remedy than the repealed statutory fines, which had previously been capped. Furthermore, the extension of liability to shareholders and directors increases the personal risk for company officers, who may be held jointly liable if direct involvement in the management is proven.