When structuring their businesses, companies must keep in mind that employment liability cannot be avoided by hiring personnel through their company affiliates or related entities. Although the incorporation of one or more companies within a business group is an activity protected under the Constitution, employment law pre-empts corporate law from defining who the employer is within a multi-company holding. The Labour Code has its own definition of 'employer', based on different parameters from those used by corporate law.
Based on a recent Santiago Court of Appeals decision, union federations do not have the standing to bring claims to challenge a business group's decision to structure itself as it finds fit, even if it results in the avoidance of employment liabilities. Standing rests only on company unions and the employees themselves.
Statutory regulations based on the 'reality principle' (ie, substance prevails over form) provide that different companies with different names and tax identification numbers should be considered part of a multi-company employer if they share a common employment management or direction. Relevant factors in this determination also include exclusivity and similarity of business purpose among the respective companies.
Fines of up to £39,675 may also apply if the existence of multiple companies under a common employment management is found to be a scheme to avoid compliance with employment rights (eg, allocating profits in one company but hiring employees in another).
For further information on this topic please contact Ignacio Garcia or Fernando Villalobos at Porzio Rios Garcia by telephone (+56 22 729 0600) or email ([email protected] or [email protected]). The Porzio Rios Garcia website can be accessed at www.porzio.cl.
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