Companies with PEO services in Spain: Bordering on illegal transfer of workers?

A business model that is legal in other countries, but which in Spain clearly borders on the limits of the illegal transfer of workers, are the so-called PEO companies. So-called PEOs (professional employer organizations) offer a pool of services, including the provision of workers for foreign companies.

Specifically, a situation that is starting to occur in Spain is that hiring workers in Spain but who provide their services for foreign companies (British, American, Asian…), with the workers reporting directly to the directors/managers of these foreign companies.

In some cases, these workers even receive social benefits (such as stock options) from the foreign company.

As this is a relatively recent model in Spain (although it has begun to spread because of Covid19 pandemic), we will have to see how it evolves in the future, but in SincroGO´s opinion, we understand that it constitutes an illegal transfer of workers, with all the repercussions that this entails for companies that decide to use this type of service.

What is meant by the illegal transfer of workers in Spain?

In Spain, the Supreme Court has repeatedly ruled on cases of illegal transfer of workers (among the most recent rulings, the SC ruling of 2 December 2021).

There is an illegal transfer of workers when the company that hires the worker does not really bring its organization into play, meaning its own material and organizational resources – which is what justifies the fact that we are in the field of lawful contracts under Article 42 of the ET and not in the field of unlawful transfer under Article 43 of the Workers Estatute (ET) – and, consequently, exercises real and effective management and disciplinary power over the hired worker.

In this sense, the Supreme Court has made it clear that the fact that the transferor company (i.e. the company that hires the worker) is the one that pays the worker’s wages and registers the worker with Social Security does not indicate that the illegal transfer does not exist.

And, finally, the fact that the transferor company also hires certain middle managers who give orders to the allegedly illegally transferred workers, but that, in reality, these middle managers receive their orders from the senior managers of the transferee company, i.e. that they themselves – these middle managers – may in turn be illegally transferred workers, is no obstacle to the possible existence of the illegal transfer”.

Likewise, in terms of PENALTIES, it should be remembered that art. 8 of the LISOS classifies as a very serious offence the transfer of workers in the terms prohibited by the legislation in force.

In this sense, the concurrence of the illegal transfer of workers necessarily requires the existence of a triangular relationship, involving the transferor company, the transferee and the workers affected by the prohibited trafficking of labor, as we have held, as the Supreme Court points out, in STS 18 May 2021, rcud. 646/2019, among many others.

Consequently, the very serious infringement, regulated in art. 8.2.c LISOS, occurs when the illegal trafficking of workers takes place between the transferor and the transferee company, thereby involving both companies and the workers affected.

Assignment through a duly authorized temporary employment agency (ETT)

It is true that Art. 43.1 ET authorizes the transfer of workers, but only when it is carried out through duly authorized temporary employment agencies, if it is done under the terms established by law.

In this sense, the Supreme Court has ruled that when the temporary employment agency transfers workers to the user company without respecting the legally established terms, this also constitutes a very serious offence, in accordance with art. 8.2 LISOS, which punishes as such the illegal transfer of workers, whoever is responsible for it (SC ruling of 2 December 2021).

Our assessment

SincroGO would like to alert companies (Spanish or foreign) that are considering using a PEO service consisting of having workers hired by a Spanish company but who are going to provide services for a foreign company of the risk they run of being denounced and sanctioned for the illegal transfer of workers.