A disguised employment relationship, also known as false self-employment, arises when a person who should legally be employed as an employee is instead required by the company to register under the Spanish Special Scheme for Self-Employed Workers (Régimen Especial de Trabajadores Autónomos – RETA) and, consequently, to pay their own self-employment social security contributions.

This is known as a disguised employment relationship or employment arrangement in circumvention of the law. It is an unlawful situation in which the contracting company seeks to avoid registering the worker as an employee with the Social Security system and, in the event of dismissal, to avoid paying severance compensation on the basis that an employment relationship formally “does not exist”. This provides certain advantages for the employer while placing the worker at a disadvantage. The main disadvantages for workers in this situation include the following:

1. The worker may lose the right to paid annual leave or remuneration during sick leave, as well as entitlement to leave of absence or reduced working hours, unless otherwise agreed between the parties.
2. The worker may lose the right to severance compensation in the event of dismissal because the employment relationship has not been formally recognised.
3. The worker assumes various tax obligations as a self-employed person, including VAT (IVA) and personal income tax (IRPF) obligations. Consequently, instead of receiving a payslip, the worker must issue invoices to the company in order to receive payment for the services provided.
4. In some cases, the company does not provide the worker with the necessary equipment and materials, meaning that the worker must use their own resources to perform their duties.
5. The worker is not subject to the minimum wage protections applicable to employees, with the company determining the remuneration payable for the services provided.

Any worker who provides services for a company and is unjustifiably dismissed may claim the corresponding rights against the employer, provided that certain requirements are met. In this regard, it is particularly important to take into account both the date on which the company notifies the worker of the dismissal and the date on which the dismissal takes effect, as the statutory time limit for claiming recognition of the employment relationship and challenging the dismissal is 20 working days.

Before bringing court proceedings to seek recognition of the employment relationship and challenge the dismissal, the worker must submit the corresponding conciliation claim (“papeleta de conciliación”) before the Mediation and Arbitration Service at the place where the services were provided. This is a mandatory prerequisite for bringing a claim before the competent Spanish Labour Court (Juzgado de lo Social).

Once the conciliation claim has been submitted, the proceedings may be concluded at this stage if the company and the worker reach an agreement recognising the existence of the employment relationship and the dismissal. If no agreement is reached, the worker may file the corresponding claim for recognition of the employment relationship and challenge the dismissal before the Labour Court with jurisdiction over the place where the services were provided.

The following characteristics should be taken into account when seeking to establish the existence of an employment relationship between a worker and an employer before the Labour Inspectorate or the courts:

1. Voluntary and personal provision of services (“intuitu personae”): the worker performs their duties within the company in the same manner as an employee, under comparable conditions and circumstances.
2. Organisation and direction by the company: the worker performs their duties under the instructions of a manager or superior and within the organisational structure of the company. This reflects the element of dependence inherent in an employment relationship. If the worker were genuinely self-employed, they would not normally be subject to the company's instructions in the same manner and would be able to organise their work freely and independently.
3. Equipment and resources: the company provides the worker with the materials and resources required to perform their duties, such as computers, a workplace, a corporate email account, etc.
4. Orders and instructions: the worker does not perform the work independently but follows the instructions given by the company and may be subject to disciplinary measures for failing to comply with them.
5. Remuneration: the company pays the worker for the services provided, whether by bank transfer, cash or other means. The remuneration may vary from month to month or consist of a fixed monthly amount.
6. Exclusivity: the worker does not perform services for other companies. Where the worker is subject to a fixed working schedule, it is common for them to be unable to provide services to another employer and therefore to work exclusively for the company concerned.
7. Client portfolio: the client portfolio belongs to the company rather than to the worker.

A commercial services agreement between a company and a worker may be financially advantageous for the employer, as it can enable the company to avoid certain costs, including Social Security contributions, severance compensation in the event of dismissal and other indirect expenses such as work equipment, tools and training courses.

If the existence of an employment relationship is recognised, the company may face additional consequences. The Spanish Social Security authorities may claim unpaid contributions for up to the previous four years, together with a 20% surcharge for late payment and any applicable penalties. Likewise, the company may have been required to withhold the corresponding personal income tax (IRPF) amounts from the worker's remuneration and pay them to the Spanish Tax Agency.

If you have provided or currently provide services to a company as a self-employed worker but the circumstances described above apply to your situation, please do not hesitate to contact us so that we can analyse your individual case. We will review the available documentation and the relevant requirements in order to assess how your rights may be successfully asserted before the competent authorities.

Author:

María Santos
Lawyer
CEO, Partner, Legal Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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