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 Working Document Number 28

Labour Administration and Inspection Programme

LAB/ADMIN

Labour inspection and employment relationship

Renato Bignami, Giuseppe Casale, Mario Fasani

International Labour Organization – Geneva

Copyright © International Labour Organization 2013
First Published 2013

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ILO Cataloguing in Publication Data

Bignami, Renato; Casale, Giuseppe; Fasani, Mario

Labour inspection and the employment relationship / Renato Bignami, Giuseppe Casale, Mario Fasani;
International Labour Office, Labour Administration and Inspection Programme (LAB/ADMIN).– Geneva:
ILO, 2013

Working document, 2227-7560; 2227-7579 (web pdf)

International Labour Office. Labour Administration and Inspection Programme.

labour inspection / labour administration / labour relations / role of ILO / ILO Recommendation /

comment / case study / Argentina / Brazil / Chile / France / Ireland / Italy / Spain / USA

04.03.5

The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of
material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office
concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers.
The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and
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Visit our website: www.ilo.org/publns.

Printed in Switzerland

ii
Table of Contents
Preface ............................................................................................................................................. v

1. Introduction ........................................................................................................................... 1

2. Labour administration and labour inspection in a globalized world: a room for

fundamental rights at work.................................................................................................... 6

3. New employment relationship features and the international regulation .............................. 7

4. The ILO Recommendation No. 198 ...................................................................................... 9

4.1. The employment relationship: a debated issue ......................................................... 14
4.2. National Policy Protecting Workers in an Employment Relationship ...................... 15
4.3. Determination of the Existence of an Employment Relationship ............................. 16
4.4. Case Law .................................................................................................................. 19
4.5. Statutory Regulation ................................................................................................. 21
4.6. Definitions ................................................................................................................ 22
4.7. Determination by Law .............................................................................................. 22
4.8. Burden of Proof ........................................................................................................ 23
4.9. Monitoring and Implementation ............................................................................... 24
4.10. Follow-up Resolution ............................................................................................... 25

5. Integrated reports addressing the growing concern over the employment relationship ...... 25

6. Assessment of the employment relationship by Labour Inspectorates: selected

case studies.......................................................................................................................... 31
Argentina............................................................................................................................. 31
Brazil ................................................................................................................................... 34
Chile .................................................................................................................................... 36
France .................................................................................................................................. 37
Ireland ................................................................................................................................. 41
Italy ..................................................................................................................................... 45
Spain ................................................................................................................................... 51
United States ....................................................................................................................... 56

7. Assessing the employment relationship at the workplace: a task for inspectors................. 60

8. Hierarchical power as the mainframe for labour inspectorates’ assessment ....................... 63

9. The employment relationship, undeclared work and labour inspection.............................. 67

Conclusions ................................................................................................................................... 73

Bibliography .................................................................................................................................. 74

iii
Preface
The protection of the employment relationship, placed within the contract of
employment, has been at the heart of the International Labour Organization’s agenda since
the middle of the 1990’s. The employment relationship is the natural evolution of what
previously represented the master-and-servant model. The employment relationship within
the contract model operates as a framework for both the protection of workers and the
guaranteeing of the exercise of fundamental rights at work.

The Industrial Revolution laid the ground for the progress of the labour law doctrine
in the sense that new inventions increased productivity, and modified the equilibrium of
power within the workplace. This scenario provided many opportunities for new law
regulations, aimed to protect workers from the asymmetry of power relations. In this
context, labour inspectorates were created to guarantee the enforcement of labour
legislation, rules and regulations.

Today, the globalization phenomenon has changed the world of work establishing
innovative organizational systems of doing business. As a result, new forms of
employment relationship have emerged. The concern among scholars and practitioners on
the determination of criteria for the employment relationship is a key element of this new
scenario. The strengthening of labour administrations and inspections in many countries
goes hand in hand with the enforcement of the rights established within the employment
relationship framework.

This paper aims at analyzing the connections between the employment relationship
and the role of labour inspection as a governance tool to protect workers’ rights.

I would like to thank Renato Bignami, Senior Labour Inspector of the Brazilian
Labour Inspectorate, and Mario Fasani, Labour Administration and Inspection Officer at
the ILO.

Many thanks go to Ms Caroline Augé and Ms Susan Bvumbe for their editing and
support in finalizing this publication.

G. Casale
Director
LAB/ADMIN

v
1. Introduction
The employment relationship has been on the main International Labour Organization
(ILO) considerations since at least 1997,1 when a general discussion about the work
contract took place on the agenda of the 85th International Labour Conference (ILC).
Following that examination, a proposed Convention and a draft Recommendation
concerning contract labour were prepared and released2 by the International Labour Office
to the governments of Member States within the frame of a report containing general
aspects on the subject.3

During the 86th ILC, in 1998, the labour contract committee had several meetings in
order to agree on aspects related to subordinate or dependant work. These meetings led to a
resolution that basically recommended the Governing Body “to place these issues on the
agenda of a future session of the ILC with a view to the possible adoption of a Convention
supplemented by a Recommendation if such adoption is, according to the normal
procedures, considered necessary by that Conference.”4 In addition to that, the resolution
pointed out that a meeting of experts should take place in order to examine which workers
were in need of protection, appropriate ways in which they could be protected, and how
they could be defined, bearing in mind the different legal systems and languages that exist
between countries.

By the year 2000, the tripartite meeting of experts in contract labour had occurred and
despite many difficulties represented by linguistic, conceptual and definitional
complexities of the subject, some premises were set up for the starting discussion.5 These
premises were mainly connected to the facts that concealed or disguised employment
relationships, excluded workers from protection and were increasingly verified at the
workplace.

The challenge of redirecting the meaning of legislation and refocusing employment

relationships is a fundamental mission of the ILO in these changing times. The concern
over the growing unprotected labour market represented by many forms of work insecurity
took place in many other debates. In the 90th ILC Session, in 2002, a further discussion
about the extent of decent work provisions was set. As a result, a resolution concerning the
informal market was published following broader discussions related to promoting decent

1
Since the 1950s, the ILO has been demanded, especially by workers, to take appropriate action in
order to correctly protect the employment relationship. See the Meeting of Experts on Workers in
Situations Needing Protection (The employment relationship: Scope). Basic technical document,
ILO, Geneva, 2000 (MEWNP/2000).
2
ILO: Contract Labour, Report V(1), International Labour Conference, 86th Session, Geneva, 1998.
See http://www.ilo.org/public/english/standards/relm/ilc/ilc86/rep-v.htm.
3
ILO: Contract Labour, Report V(2A), International Labour Conference, 86th Session (Geneva,
1998). See http://www.ilo.org/public/english/standards/relm/ilc/ilc86/rep-v2a.htm.
4
ILO: Resolution concerning the possible adoption of international instruments for the protection of
workers in the situations identified by the Committee on Contract Labour, 86th Session, Geneva,
1998.
5
Meeting of Experts on Workers in Situations Needing Protection (The employment relationship:
Scope). Basic technical document. ILO, Geneva, 2000 (MEWNP/2000).

1
 work for all workers, regardless of their status. The resolution6 concluded that “the term
informal economy refers to all economic activities by workers and economic units that are
–in law or in practice– not covered or insufficiently covered by formal arrangements” and
indicated that further action should take place in the Constituents, in order to properly
address the decent work deficit represented by these forms of work insecurity. There are
some similar terms used to express similar situations such as “work in the black market”,
‘informal market’, ‘undeclared work’, ‘non-declared work’, ‘illegal work’, ‘irregular
work’, ‘underground work’, ‘clandestine work’ and other forms of terminology always
related to unprotected work, but an important conclusion arises from this terminology
variety: the labour administration approach varies according to the cultural role played by
different nomenclatures.7

Following the meeting of experts in 2000, there were a series of debates and
researches aimed at addressing the scope of the employment relationship. These happened
during the 91st ILC Session, in 2003. One of the main conclusions achieved is related to the
universal notion of employment relationship as “a legal link between a person, called the
‘employee’ (frequently referred to as ‘the worker’) with another person, called the
‘employer’, to whom she or he provides labour or services under certain conditions in
return for remuneration.”8 Likewise, the notion of dependent work, as opposed to
autonomous, independent, own-account or self-employed, should be the mainframe for any
discussion regarding the employment relationship. Accordingly, dependent workers were
facing an increasing lack of protection by reasons of one or a combination of these
factors:9

- The scope of the law is too narrow or it is too narrowly interpreted;

- The law is poorly or ambiguously formulated so that its scope is unclear;

- The employment relationship is disguised;

- The relationship is objectively ambiguous, giving rise to doubt as to whether or not

an employment relationship really exists;

- The employment relationship clearly exists but it is not clear who the employer is,
what rights the worker has and who is responsible for them; and

- Lack of compliance and enforcement.

During the 91st ILC Session a general discussion took place within the tripartite
Committee on the Employment Relationship, resulting in remarkable conclusions and
outcomes. There was more consideration about the general causes and consequences of the
lack of protection, the specific reasons why this protection is lacking, and how there should
be appropriate action in order to develop and foster qualified labour administration and

6
Resolution concerning decent work and the informal economy.
See: http://www.ilo.org/public/english/standards/relm/ilc/ilc90/pdf/pr-25res.pdf.
7
J.L. Daza: “Informal economy, undeclared work and labour administration”, Paper No. 9
(Geneva, ILO, Social Dialogue, Labour Law and Labour Administration Branch, 2005), pp. 1-15.
8
ILO: The scope of the employment relationship, Fifth item of the agenda, Report V, International
Labour Conference, 91st Session, Geneva, 2003, p. 2.
9
Ibid, p. 2.

2
labour inspection systems.10 For that specific matter, the Committee on the Employment
Relationship pointed out that enforcement and compliance should take core relevance in
the protection framework of the employment relationship and that “labour administrations
and their services have a crucial role to play in monitoring the application of the law,
collecting reliable data on labour market trends and changing work and employment
patterns and combating disguised employment relationships.”11 In addition to that, it was
stated that ILO has a significant role to play in this matter and that “the Office should
strengthen its assistance to national labour administrations, and in particular to labour
inspectorates,” considering that compliance and enforcement are critical aspects of this
question.12 As a final result, the Conference noted that a Recommendation should be a
correct international response in order to address these issues related to the employment
relationship.

In the course of the 95th Session in 2006, the discussions about the employment
relationship took place again with a proposed recommendation. At that time the
employment relationship was definitively outlined by the constituents as the “legal notion
widely used in countries around the world to refer to the relationship between a person
called an employee (frequently referred to as a worker) and an employer for whom the
employee performs work under certain conditions in return for remuneration.”13 Further, it
was also clearly undertaken that ambiguous, disguised or triangular relationships14 should
be appropriately tackled by the ILO,15 and that the principle of primacy of facts should
play a definitive role on the determination of the employment relationship.16 Moreover, it
was well-defined that enforcement should be one of the key points with which to provide
protection in the workplace.17

The adoption of Recommendation No. 198, in 2006, together with the resolution that
followed it, represented the first internationally based approach devoted to the employment
relationship to be addressed to the constituents. It is notably the result of a great social
dialogue effort and contributes to maintain the debate on the employment relationship, as

10
ILO: Provision record N. 21, Fifth item on the agenda, The scope of the employment relationship
(general discussion), International Labour Conference 91st Session, Geneva, International Labour
Office, 2003, pp. 9-14.
11
Ibid, p. 54.
12
Ibid, p. 56.
13
ILO: The employment relationship, Fifth item on the agenda, Report V(1), International Labour
Office, 2005, p. 3.
14
There was some disagreement on what exactly should be addressed by the recommendation, in
regard to triangular relationships. Some considerations were taken in the sense of the complete
exclusion of the topic from the scope of discussions. There was a concern over the real threat of
great potential to commercial agreements represented by the establishment of a general assumption
of the existence of an employment relationship in triangular schemes. See International Labour
Office, Provision record, No. 21, Fifth item on the agenda, The scope of the employment
relationship (general discussion), International Labour Conference, 91st Session, Geneva, 2003, p.
72.
15
ILO: The employment relationship, Fifth item on the agenda, Report V(1), International Labour
Office, 2005, pp. 11-14.
16
Ibid, pp. 7-8.
17
Ibid, pp. 16-17.

3
 its core issue, the role of labour administration and labour inspection within a brand new
globalized world, and the future pathways for labour law.

In addition to this fundamental process and also as a general outcome of it, labour
inspectorates and labour administrations are once again being increasingly recognized as
key instruments in achieving decent work conditions through a broader protection for all
workers. Indeed, labour inspectorates were at the edge of creation of modern labour
administration systems18 and from the very beginning were focused on translating the
workplace’s reality of facts into technical and comprehensive documents capable of
describing the details of the real employment relationship and prescribing remedies as well
as commands to improve the working conditions.19

Historically labour inspectorates were specially created to guarantee that the

provisions of the then-recently developed labour law were obeyed.20 Labour law
enforcement has truly been one of the main labour inspectorates’ duties21 since the very
outset and labour inspectors have been the most adequate and sensitive officials to bridge
an abstract labour regulation and the reality of facts shown by the workplace. Indeed, the
urge for a labour oriented public controlling institution is at the essence of labour
inspectorates and labour administration, as the reality at the workplace has been so many
times a dramatic counterpoint to the provisions stated by the law.

Yet, as new forms of work arise and competition among enterprises is established at
an unprecedented rate, many challenges and opportunities emerge. Labour inspectorates
are the first line of discipline since the creation of the ILO22 and have been reintroduced
from time to time as the main tool for good governance in any changing society. The claim
for sound labour administration and inspection systems specifically regarding the
protection of the employment relationship in the context of globalization is currently one
of the main ILO concerns. It is duly stated by the ILO Declaration on Social Justice for a
Fair Globalization, adopted by the ILC at its 97th session, in 2008, as a main contribution
for the debate over the globalization and its impacts on the labour market. Moreover, the

18
The 1833 Factory Act, in England, also known as Lord Althorp’s Act, and named after its main
supporter, was the first regulation to intervene in the private labour relationship between an
employer and an employee by creating a system of public labour inspection with powers to enter the
workplace and impose fines.
19
Reports on working conditions provided by the first labour inspectors, during the XIX Century,
illustrated the reality of the workplace and helped to redirect national policies towards the correct
intervention and governance. See: Horner, Leonard; Howell, T. Jones; Kincaid, Captain; Saunders,
R. J. Reports of the inspectors of factories to her majesty’s principal secretary of state for the home
department, for the half-year ending 30 April 1851. Presented to both houses of parliament by
command of her majesty. London: W. Clowes & Sons, 1851.
20
G. O. Price: Administrations of labor laws and factory inspection in certain European countries.
Bulletin of the United States bureau of labor statistics. Whole number 142. Foreign Labour laws
series: n. 1. Washington: Government Printing Office, 1914, p. 36.
21
The main missions destined to Labour Inspectorates are: 1) To secure the enforcement of the legal
provisions in relation to the working conditions and the protection of the worker while engaged in
work; 2) To supply technical information and advice to employers and workers concerning the most
effective means of complying with the legal provisions; and, 3) To bring to the attention of the
competent authority defects or abuses not specifically covered by existing legal provisions. See
Convention 81, Art. 3.1, and Convention 129, Art. 6.1.
22
Treaty of Versailles. Art. 427. Ninth. Each State should make provision for a system of inspection
in which women should take part, in order to ensure the enforcement of the laws and regulations for
the protection of the employed.

4
international context represented by the threat of massive job losses starting in 2008, points
out that labour inspectorates and labour administrations are more than ever necessary for
the governance of labour markets. In such context, the ILO has a major role to play on
strengthening these services, as provided by the ILO Global Jobs Pact, an initiative aimed
at supporting the constituents towards a productive economic recovery based on
investments, employment and social protection.

In April 2009, the creation of the Labour Administration and Inspection Programme
(LAB/ADMIN) reassured the ILO commitment to address a renewed prospect for
strengthening national labour administration and inspection systems. Ever since,
LAB/ADMIN has been pursuing technical assistance and cooperation programmes to
support ILO constituents with the best resources, based on several projects, events,
meetings, best practices exchanges, publications and instructional material.23

In the course of the 100th ILC, held in 2011, an item on labour administration and
labour inspection was on the agenda, suggested by the Governing Body, during its 308th
Session, in June 2010. The resolution concerning labour administration and labour
inspection recognizes that these institutions are essential to achieve the decent work
objectives through good governance at the service of ILO constituents. In addition to that,
the resolution establishes a series of conclusions to the Office in order to properly
strengthen the labour administration and labour inspectorates.24 From those conclusions the
following recommendation is one of the most relevant, regarding the labour inspectorate’s
activities in the frame of the employment relationship:

- Carry out researches and provide advisory services, linked to the wider knowledge
management strategy of the ILO, in those selected areas of interest to labour
administration and inspection and social partners as identified in the report of the
Committee on Labour Administration of the 100th Session of the International
Labour Conference, including:

• Research on the use of government procurement in advancing compliance

with labour standards;

• Research around the challenges for effective labour inspection posed by

increased outsourcing, subcontracting, disguised and triangular employment
relationships and the means or methods to extend and enforce legislation to all
workers in an employment relationship;

• Research and evaluation of training methodology as well as training content

to ensure that it addresses the labour administration and inspectorates’ needs
and objectives; and

• Research on the risks and practices of the interface between labour

administration and migration regulatory frameworks.

In this context researches on the impact of globalization on labour administration and

labour inspection are definitive and must be undertaken in order to correctly address these

23
For a complete assessment of the LAB/ALMIN assets, see: http://www.ilo.org/labadmin/lang--
en/index.htm
24
ILO, November 2011, Resolution and Conclusions on labour administration and labour
inspection, International Labour Conference, 100th Session, Geneva, 2011.
See: http://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---
lab_admin/documents/meetingdocument/wcms_167749.pdf

5
 matters. Additionally the potential resulting benefits from a good practices exchange
approach points out to further studies on how labour inspectorates are dealing with the
rising phenomenon of new forms of employment and the informal market. Fundamental
rights at work are the main concept shaped to direct labour administration and labour
inspection’s activities within a globalized world.

2. Labour administration and labour

inspection in a globalized world: a room
for fundamental rights at work
Globalization, characterized by “the diffusion of new technologies, the flow of ideas,
the exchange of goods and services, the increase in capital and financial flows, the
internationalization of business and business processes and dialogue as well as the
movement of persons, especially working women and men,”25 is changing the way people
and nations interact with each other, and is revolutionizing labour law in an unprecedented
way.26 If in the early nineteenth century there was a fertile ground for the birth of labour
law, due to abuses committed under the laissez-faire doctrine, especially with excessive
working hours, the employment of children and abused women to harmful safety and
health conditions, in the beginning of this century much has changed. Economic
globalization and the creation of new technologies, replacing labour with more productive
machines, are demobilizing the unions as well as moving governments in order to avoid
rising unemployment by enabling deep changes in labour law.27 Such changes occur in
many aspects of individual employment contracts, thrusting the traditional bilateral
agreements into more flexible arrangements. That leads to a state of proliferation of more
precarious contractual forms, with fixed, short-term, part-time, triangular and temporary
being used more commonly and frequently than ever,28 increasing the precariousness of
work and shifting the risks and responsibilities from the employers to the workers.29 The
political changes that have occurred globally in the last 20 years are self-explanatory in
their search for the State capacity of answering to new challenges in labour matters.
Paradoxically, the well-studied decline of the Welfare State points to a nation oriented
solution.30

In addition, the boundaries between autonomous and subordinate work are less clear
and more complex. Teleworking, telecommuting, home office, and an increasing mobility
of labour, especially among those more specialized and technical professions, are at large
influencing this transformation. For instance, there are classic examples of software
factories developed at a distance, in India, to clients in Silicon Valley (USA). Other

25
(2008) ILO Declaration on Social Justice for a Fair Globalization.
See: http://www.ilo.org/global/meetings-and-events/campaigns/voices-on-social-
justice/WCMS_099766/lang--en/index.htm
26
U. Romagnoli: Il diritto del lavoro nell’età della globalizzazione, in Lavoro e diritto, Anno XVII,
N. 4, Bologna, Società Editrice Il Molino, 2003, p. 573.
27
T. Treu, Compiti e strumenti delle relazioni industriali nel mercato globale, in: Lavoro e diritto,
Anno XIII, N. 2, Bologna, Il mulino, 1999, pp. 191-208.
28
N. Mannrich, A modernização do contrato de trabalho, São Paulo, LTr, 1998, p. 220.
29
ILO: From precarious work to decent work, Policies and regulations to combat precarious
employment. Geneva, International Labour organization, 2011. p 5.
30
J. Habermas: Tiempo de transiciones, Madrid: Editorial Trotta, 2004, p. 101.

6
 examples could be added and they all signify a change in the way national legislation and
States should tackle the issue. Consequently, labour law adapts, modifying and reshaping
its principles, and the fundamental rights at work become a ground onto which to fix the
rules for a brand new globalized world, for all types of work, whether subordinate or not.31

At the international level, there is an increasing consciousness that market economies

only work correctly if there are labour rights, albeit at minimum, to ensure human progress
and social justice.32 The principles and rights contained in the 1998 ILO Declaration on
Fundamental Principles and Rights at Work should be respected regardless of the
ratification of these conventions33 by Member States of the ILO. Because of its
fundamental nature, and as a result of a freely jointed membership to the ILO, Member
States adhere to principles and rights contained in the Declaration. These principles are
coincident with the ILO Constitution and the Declaration of Philadelphia.

Therefore labour administrations and labour inspectorates have the opportunity to

tackle the laborious question of atypical work, with special aim at enhancing the protection
of all vulnerable workers. Labour inspectorates can adequately reach the essence of their
mission in view of the fundamental rights at work and aiming at the broader protection
provided by the employment relationship legal framework. Moreover, regardless of the
multiple aspects of globalization,34 labour administration is engaged in providing the
society with the best standards of good labour market governance through the enforcement
of labour regulation.

3. New employment relationship features

and the international regulation
Globalization and the subsequent rise in competition between companies, new
technologies and the increase of productivity, the decline of the Welfare State, these are all
factors that have changed in the basic premises of the labour law foundation. The current
crisis seems to reach a never before attained level. Additionally, the economic constraint
has roots in the historical and political discourse, armed with the neo-liberal critique.35

One of the first consequences of the changes in these premises is the production
model splitting in many pieces connected to each other in an eternal and sometimes
endless chain of a civil contract nature. The production decentralization helped in giving

31
R. Blanpain, M. Colucci: The globalization of labour standards. The soft law track, The Hague,
Kluwer Law International, 2004, p. 6.
32
K. Tapiola: Empresas multinacionais e os desafios sociais do século XXI, Geneva, Organização
Internacional do Trabalho, 1999, p. 21.
33
The ILO considers C. 87, and C. 98 (freedom of association and the effective recognition of the
right to collective bargaining); C. 29, and C. 105 (elimination of all forms of forced or compulsory
labour); C. 138, and C. 182 (effective abolition of child labour); C. 100, and C. 111 (elimination of
discrimination in respect of employment and occupation), as the fundamental conventions in regard
to the Declaration.
34
ILO: A fair globalization: Creating opportunities for all, Report of the World Commission on the
Social Dimension of Globalization, Geneva, 2004, p. 24.
See: http://www.ilo.org/public/english/wcsdg/docs/report.pdf.
35
R. Del Punta: Il diritto del lavoro tra valori e storicità, in Lavoro e diritto, N. 3/2002, Bologna,
Società Editrice il Mulino, 2002, p. 350.

7
 life to this new paradigm of the so-called business-networking enterprise.36 This
fractioning of the employment contract is enabling an entire rethinking of the traditional
contractual typology and is largely responsible for major changes in the premises of the
labour law foundation.

The tension between unity and fragmentation in the labour regulation has always been
present since the creation of the labour law, but the crisis of the social democratic project
gives rise to a crisis of its foundational values.37 Neoliberalism as a result of the
bankruptcy of the social democratic model, pleading for more laissez-faire within the
employment relationship, eventually produced the greatest paradoxes of modernity. While
proponents speak in modern times, demanding more autonomy within the work contract
frameset, there is also a longing for a distant past in which the civil law regulated and
determined the privacy of all citizens, without nuances or alternatives, in a bizarre
bifurcation between reform and restoration.38

Under a human resources and production management point of view, outsourced

production is the main characteristic of modernity.39 The implications for labour law are
various. The business-networking company seems to change working class lives, causing a
breakdown in the unitarian, subordinate, and dependant labour statute.40

The detypification of the employment relationship, now split into several civil
contracts and in many different non-standard types of employment arrangements, disrupts
the uniformity of non-derogable normative protective values adjusted to work, and brings
enormous challenges to jurists who attempt to assemble the puzzle formed by the current
labour relations.41 Regulation at the ILO level works as an alternative to the laissez-faire
and paves the road for a better protection of workers.

If, on the one hand, outsourcing seems to be one of the most attractive novelties under
a business standpoint, on the other hand, this whole division of the production chain
represents a risk of insecurity for the worker. Globalization increases the competitiveness
among enterprises, forcing them to constantly search for specialized services. Both the
increase of competition and the search for specialized services are the two major issues
that surround the debate on outsourcing.

36
F. Valdés Dal-Ré: La descentralización productiva y la formación de un nuevo paradigma de
empresa, in Relaciones laborales. Revista crítica de teoría y práctica, N. 18, Septiembre 2001, Las
Rozas (Madrid), La Ley-Actualidad, S.A., 2001, p. 6.
37
R. Del Punta, Op. Cit. p. 351.
38
Ibid, pp. 349-350.
39
U. Romagnoli: Il patto per il lavoro: quale lavoro? in Lavoro e diritto, Ancora sul lavoro
autonomo, Anno XI, N. 3, Bologna, Il mulino, 1997, pp. 459-464.
40
F. Valdés Dal-Ré, E. Casas Baamonde: Diversidad y precariedad de la contratación laboral en
España, in Relaciones laborales. Revista crítica de teoría y práctica, N. I. 1989, Las Rozas (Madrid),
La Ley-Actualidad, S.A., 1989, p. 240.
41
R. Castel: Les métamorphoses de la question sociale. Une chronique du salariat, Paris, Editions
Fayard, 1995, pp. 472-473.

8
 The considerable business paradigm shift in the last two decades addresses the path to
be taken. Traditionally, the ordinary organizational model could be explained by these
three business management pillars:42

1) Control of the entire goods and services production cycle (vertical integration);

2) Autonomy of each company in its relations with others;

3) Hierarchically oriented management.

In 15 years, this model has been replaced by another with structural features of
opposite signs:43

a) Productive cycle fragmentation (horizontal integration);

b) Dependency, coordination and articulation within the business-relationships;

c) ‘Functional autonomy’ oriented management.

As a result of this huge change an extreme individualization of the labour dispute is

observed resulting in demands for more freedom to the employment relationship. As
another major outcome, the return to the discussion embodied in Roman law about the
differences between the locatio condutio operis and the locatio condutio operarum is
visibly threatening the workforce to be reduced once more to a mere commodity, to be
bought and sold according only to the rules of the market.44

The employment contract, as the maximum expression of the employment

relationship, undergoes some changes in order to adapt to modern times.45 Subordination
and dependency features are overriding parameters that can still be clearly relied on to
trace the framework of an employment relationship. The primacy of facts as a major
principle and the labour inspectorates as leading organizations to enforce the labour
regulation are the most significant facets of notable discussions about the employment
relationship carried by the ILO Recommendation No. 198.

4. The ILO Recommendation No. 198

New forms of atypical work46 are undoubtedly one of the greatest challenges of
today’s labour markets.47 In addition to that, the enormous social costs of the informal

42
F. Valdés Dal-Ré, Op. Cit. p. 5.
43
Ibid, p. 5.
44
J. M. Galiana Moreno: Crisis del contrato de trabajo, in Revista de derecho social, N. 2, Abril-
Junio 1998, Albacete, Ediciones Bomarzo, S.L., 1998, p. 48.
45
A. Supiot: Les notions de contrat de travail et de relation de travail en Europe, Rapport pour la
Commission des Communautés Européennes, Luxembourg, Office des publications officielles des
Communautés Européennes, 1992, pp. 71-88.
46
Here understood as any kind of contract of work which is not the traditional bilateral employment
agreement, under permanent, full time and for a non-fixed term.
47
S. Bertoldi: Tipico-atipico: tendenze del mercato dei lavori, in Aggiornamenti sociali, Anno 54,
N. 4, Aprile 2003, Milano, San Fedele Edizioni, 2003, p. 297.

9
 sector and undeclared work should be taken into account, particularly in the developing
world but also increasingly in developed countries. Both atypical and informal
arrangements are part of a vast scenario of job insecurity that ultimately differentiates
those front-line workers with permanent employment contracts, salaries,
vacations/holidays, bonuses, health and safety, social security and other benefits
guaranteed by law and collective bargaining, from those second-class workers, with none
or few rights. At the end, social cohesion is under risk and should be improved.48

Non-standard contracts are related to unusual arrangements that could even affect the
worker’s personal life,49 and there are indicators that many occupations are currently
contracted under this kind of settlement.50 The three basic elements of these non-standard
agreements –flexible, precarious, and atypical work51– indicate that a modernization of the
notion of juridical subordination should be considered.52 Within this typical and atypical
employment relationship’s concept, the formation of labour law doctrine was developed in
the most innovative tradition: the independence from the civil law and the subsequent
adoption by the State to protect not only the workers but their own labour energy.53 The
concept developed the notion that any work performed under the worker’s subordination to
someone economically stronger should be regarded as an employment contract protected
by some minimum statutory rights, regardless of the way in which this contract is
externalized.

The greatest asset provided by this legal construction resides precisely in the fact that
labour law “does not protect the agreements as such, but the energy of human labour,”54
enabling a great advance in social relations and prioritizing the reality of the facts rather
than the merely contractual arrangements. Ever since, the reality of facts is attributed to be
at the very essence of the employment relationship because reality cannot be denied simply
by a declaration.55 It is in the interest of any legal system to protect the real facts in the way
in which these are expressed. It could be argued that a 1938 text no longer reflects current
reality and needs, but this would be a misconception of the idea grounded on that notion.
The 21st century represents a big challenge for governments and social agents who have to
confront growing internationalized markets and outsourced production as a main pattern.
Some wealthy and powerful corporation’s budgets sometimes surpass the limits imposed
by various countries, and their capillarity throughout the world normally operate without
major obstacles, while labour law is entirely related to one nation’s sovereignty and

48
E. Casas Baamonde: Las transformaciones del derecho del trabajo y el futuro del derecho del
trabajo, in F. Valdés Dal-Ré, A. Valdés Alonso (coord.): El trabajo autónomo dependiente, Madrid,
Comunidad Autónoma de Madrid, Consejería de Trabajo, 2003, p. 98.
49
U. Romagnoli: Lettera aperta ai giuristi del lavoro, in Lavoro e diritto, N. 3/2002, Bologna,
Società Editrice il Mulino, 2002, p. 373.
50
G. Altieri, C. Oteri: Il lavoro atípico: tendenze e ruolo nell occupazione italiana, in Rassegna
sindacale, Anno XLVI, N. 35, Roma, Stabilimento Grafico Editoriale, 2000, p. 15.
51
S. Bertoldi, Op. Cit. p. 297.
52
P. G. Alleva: I lavori atipici: pericolo od opportunità? in Revista giuridica del lavoro e della
previdenza sociale, Anno LI, N. 3, Roma, EDIESSE s.r.l., 2000, p. 515.
53
J. M. Galiano Moreno, Op. Cit. p. 49.
54
M. De La Cueva: El nuevo derecho mexicano del trabajo, 4ª edición, México, D.F., Editorial
Porrúa, S.A., 1977, pp. 194-195
55
Ibid. p. 195.

10
restricted to its boundaries. One approach to this reality is to foster soft regulation based on
international standards and reflected in the international organizations recommendations,
guidelines, codes of conduct, notices, reports, statements, instructions, programmes, and
projects.56 Some of these current expressions of law are not legally binding, however they
represent an undeniable moral and ethical character,57 as they are shaped by the social
actors in a dynamic and broader democratic participation. Still concomitantly to this
ideally democratic, modern and self-regulated world, there are extremely archaic and
grotesque forms of servitude, as well as a huge grey area in which workers are trying to
escape from being used as a mere commodity in a market oriented system.

The ILO Recommendation No. 198 of 2006, regarding the employment relationship,
follows the current trend on setting international standards for global questions. It is
inserted in a larger context with respect to decent work, and is a true manifestation of soft
law indicating the paths that different Member States must gently follow to ensure the
enforcement of labour protection. Its main objectives are:58

a) To solve uncertainties about the relationship;

b) To ensure compliance and effective implementation of the employment

relationship regulation;

c) To combat disguised employment relationships that conceal their true legal status
through contractual false forms named as autonomous; and,

d) To provide guidance on the most effective ways to determine the existence of an

employment relationship.

As reported before, this international labour law instrument is, in reality, the most
recent and finished version and is related to a discussion started in the early 1990’s, in the
context of the ILO, which has already passed through debates about outsourced
production, cooperative work, migration, telecommuting, child labour, undeclared work
and triangular relationships.59 Its great merit is to elevate the principle of the primacy of
facts to the level of international labour standards, in its purest and most traditional
version.60 Here, a special role in protecting the workers and the enforcement of labour law
is guaranteed by the labour inspectorates.61 This is the current international trend: the
extension of fundamental rights and decent work for all workers, and the dedication of the
labour inspection as a major governance institution.

The subject of employment relationship has been debated at the international level for
a number of years. The issue of who is or is not in an employment relationship, and what

56
F. Valdés Dal-Ré: Soft law, derecho del trabajo y orden económico globalizado, in Relaciones
laborales. Revista crítica de teoría y práctica, N. 4, Febrero 2005, Las Rozas, Madrid, La Ley-
Actualidad, S.A., 2005, p. 2.
57
R. Blanpain, M. Colucci, Op. cit. p. 122.
58
M. Rodríguez-Piñero: La determinación de la relación de trabajo, in Relaciones laborales.
Revista crítica de teoría y práctica, N. 20, Octubre 2006, Las Rozas, Madrid, La Ley-Actualidad,
S.A., 2006, p. 9.
59
OIT: El ámbito de la relación de trabajo, Oficina Internacional del Trabajo, Ginebra, 2003, p. 5.
60
ILO Recommendation No. 198, para. 9.
61
ILO Recommendation No. 198, para. 15-16.

11
 rights and protections flow from that status, has become problematic in recent decades as a
result of major changes in work organization and the adequacy of legal regulation in
adapting to those changes. Such changes have accelerated due to the process of
globalization, characterized by rapid economic integration among countries driven by the
liberalization of trade, investment and capital flows, as well as rapid technological
change.62

The impacts of globalization are quite uneven in terms of the degree to which they
benefit countries, enterprises and their workers. Globalization has frequently been
preceded or accompanied by legislative and institutional reforms. The nature and pace of
changes occurring in the world of work, and particularly in the labour markets, have given
rise to new forms of the employment relationship which do not always fit within the
traditional parameters. Patterns of employment are becoming more and more complex as
the range and variety of work arrangements expand, leading to opportunities as well as
risks. As a result, traditional concepts and certainties are being challenged. While these
changes have increased labour market flexibility, they have also led to a growing number
of workers whose employment status is unclear and who are consequently outside the
scope of the protection normally associated with the employment relationship. Job security
and the protection which has been built around the employment relationship are being
affected. This can also adversely impact the competitiveness and viability of enterprises.
These developments are on the increase worldwide and challenge the relevance of labour
laws which for many countries have been an instrument for the orderly organization of the
relationships between major labour market players, i.e. employers and workers.

A major feature of the employment relationship, one that can be found in different
countries and legal traditions, is the hierarchical power of employers over employees. The
hierarchical power consists mainly of three related elements: (i) the power to assign tasks
and to give orders and directives to employees (directional power); (ii) the power to
monitor both the performance of such tasks and the compliance with same orders and
directives (control power); (iii) the power to sanction both the improper or negligent
performance of the assigned tasks and disobedience to given orders and directives
(disciplinary power).

Significant problems of classification therefore emerged with reference to the

growing number of working activities in which directional power and hierarchical
organization were loosened, or in which at least they displayed new features. The risk was
either an exclusion of working relationships deserving the legal protection afforded to
employees by the legislator from the scope of the employment, or an inclusion in the same
scope of workers that did not deserve such protection. Neither exclusion nor inclusion
could be determined taking into account the mere written or oral declaration of the parties,
since courts –in the majority of jurisdictions– must rely principally on the factual
circumstances and characteristics of the relevant relationship. As we will see in the
following chapters, in order to avoid a borderless expansion of the scope of employment,
labour courts initially adopted a rigorous and narrow approach whereby directional –and
accordingly, hierarchical– power was deemed present only where the worker was subject
to directional, organizational and disciplinary control of the relevant employer, this being
shown by the issue of specific orders and by the exertion of an assiduous monitoring and
control of the working activity. Yet this approach carried the risk of excluding from the
scope of the employment relationship and from the relevant legal protection a wide range

62
See ILO, Country studies on the social impact of globalization: Final report, Working Party on the
Social Dimensions of the Liberalization of International Trade, doc. GB.276/WP/SDL/1, 276th
Session, Geneva, November 1999, para. 2. This document contains the results of a survey carried
out in seven countries to collect information on the effects of globalization and trade liberalization
on the attainment of the ILO social objectives.

12
of working activities that –due to the abovementioned changes in the production system–
did not display such stringent characteristics yet nonetheless deserved such a legal
protection on the basis of a systematic construction of labour regulations. Over the years
and in order to address such problems, the judicial approach in a good number of countries
became more flexible when dealing with working activities displaying forms of
hierarchical power differing from traditional ones. According to the ensuing rulings,
hierarchical power, and therefore employment, is also present when a person performs her
working activities –on a continuous, loyal and diligent basis– following the general
directives issued by such a subject according to programmes and purposes of the relevant
firm. Nonetheless, new working activities are still challenging legal categories: in most of
the European jurisdictions a growing number of workers are in a grey area between
employment and self-employment, their working relationships only partially fulfilling the
requirements of employment under the relevant laws. The problem is becoming a serious
one not only in Europe, but also in Latin America, Asia and Africa, as is testified by the
following contributions to this volume. In a good number of countries there is no
protection –or at least no significant protection– for self-employees, who operate in an
empirical grey area that is not covered by any legal structure, with no ‘median’ legal
category covering the area between employment and self-employment.

At the same time, it should be noted that under the post-Fordist system, a material
amount of production stages are now contracted out which are more and more significant
in the production cycle. Activities as important as accounting, marketing and client care
are entrusted to third parties. This has been defined as ‘horizontal’ outsourcing. The
reasons for this business practice are multifaceted. On the one hand, firms may have
recourse to third parties in search of specialized suppliers of delicate and high-skilled
activities. In this respect they may turn to a supplier that performs a business activity better
than they could do, both with regard to the quality of the relevant output and on the
relevant cost, related for instance to the experience curve effect: this may also be in order
to acquire a competitive advantage vis-à-vis their competitors.

In this context, contracting out is also driven by business strategies aimed at reducing
workforce costs. By way of example, firms might use suppliers whose overall labour cost
is lower than their own, because the relevant workers are non-unionized or in any event
receive lower wages. Workers’ protection has traditionally been centred on the universal
notion of the employment relationship, based on a distinction between dependent and
independent work. The employment relationship has historically proven to be a key point
through which labour law rights and benefits are rendered to both employers and workers.

The presence of hierarchical power in a working relationship has been traditionally

established –either statutorily or by case law– as the distinctive element of employment in
contrast to self-employment, and accordingly as an access key to the wide range of
regulations set out to protect employees in the different jurisdictions. The abovementioned
reduction of hierarchy and parcelization of work has materially changed the way in which
the working activity is performed. Together with the spread of new activities in the service
sector and the growing use of information technology in business, these developments
have challenged traditional legal categories of working relationships based on such models
as the blue-collar employee working in an assembly line of a big, bureaucratic and
vertically integrated firm. New working practices came to lawyers’ attention that did not
easily fit into either employment or self-employment. In particular, they embodied new
forms of integration of work in business enterprises whereby the coordination exerted.

The employment relationship is a legal notion widely used in countries around the
world to refer to the relationship between an employee (frequently referred to as a
‘worker’) and an employer for whom the employee performs work under certain
conditions, in return for remuneration. It is through the employment relationship, however

13
 defined, that reciprocal rights and obligations are created between the employer and the
worker.63

Despite the changes currently taking place in the global labour market, there is strong
evidence that the employment relationship continues to be the predominant pattern of work
arrangement in many countries around the world. The legal framework governing the
employment relationship is an important component for managing these changes. The
failure to adapt labour laws, however, can result in the perpetuation of regulations that are
ill-suited to the new realities of the contemporary global labour market.64 The debates over
the future of the employment relationship and its legal framework are gaining momentum
at both national and international levels, and the ILO was at the forefront of these debates.

4.1. The employment relationship: a debated issue

As mentioned above, the issue of who is or is not in an employment relationship has

become more and more problematic in recent decades. From a comparative point of view,
there is increasing difficulty in establishing whether or not an employment relationship
exists in situations where: a) the respective rights and obligations of the parties concerned
are not clear; or b) where there has been an attempt to disguise the employment
relationship; or c) where inadequacies or gaps exist in the legal framework, or in its
interpretation or application. Contractual arrangements can have the effect of depriving
employees of the protections they are due. Moreover, vulnerable workers appear to suffer
more from such arrangements. More and more, ILO member States and their social
partners have emphasized that the globalized economy has increased workers’ need for
protection, at least against circumvention of national laws by contractual and/or other legal
arrangements.

In the framework of the transitional provision of services, it is also important to

establish who is considered a worker in an employment relationship, what rights the
worker has, and who is the employer. This is the background against which the ILO and its
constituents worked, reaching an outcome which was the adoption of the Employment
Relationship Recommendation No. 198 (2006).

The analysis below will focus on major elements of the discussions and studies
leading to the adoption of Recommendation No. 198, which consists of three major
components: national policy of protection for workers in an employment relationship;
determination of the existence of an employment relationship; monitoring and
implementation.

63
ILO: The employment relationship, Report VI(1), International Labour Conference, 95th Session,
Geneva, 2006.
64
‘In my view labour law has to show a greater capacity of adaptation if it wants to continue to play
a significant role in the new social and economic environment. The changed environment is
challenging the very essence of the classic model: namely the idea that national law –and similarly
collective bargaining– can regulate with “imperative” effects and through unitary rules all the major
contents of labour relations. Flexibility is the key word, which goes against imperative and rigid
labour law’: T. Treu, “Labour law and social change”, public lecture, Geneva, International Labour
Office, November 2002.

14
4.2. National Policy Protecting Workers in an
Employment Relationship

The employment relationship is a universal concept with common elements which

can be found in countries with different legal systems and cultures as well as different
economic and social environments. Nevertheless, its evolution and the laws and practices
governing it vary from country to country, as do the problems associated with it. The
national authorities, in cooperation with the social partners, should lead the search for
appropriate and viable solutions.

Already in the technical document submitted by the ILO for discussion at the Meeting
of Experts 2000, attention was drawn to the importance of establishing a principle which
would commit Member States to tackling the problem of legal uncertainty affecting the
scope of the employment relationship by means of a systematic policy based on common
but flexible premises. That principle would lead to the formulation and application of a
national policy aimed at the continuing clarification and adjustment of the scope of labour
legislation, based on observation of the evolution of employment relationships. This
process would require a dynamic policy on the part of the competent authorities to monitor
the form in which employment relationships are evolving and the timely introduction of
necessary changes in standards.65 The Meeting agreed that the elements of a national
policy might include but not be limited to:

- providing workers and employers with clear guidance concerning employment

relationships, in particular the distinction between dependent workers and self-
employed persons;

- combating disguised employment which has the effect of depriving dependent

workers of proper legal protection;

- not interfering with genuine commercial or genuine independent contracting;

- providing access to appropriate resolution mechanisms to determine the status of

workers.66

As stated in the conclusions concerning the employment relationship adopted during

the International Labour Conference 2003 (ILC) general discussion,67 the collection of
statistical data and the undertaking of research and periodic reviews of changes in the
structure and patterns of work at national and sectoral levels should be part of this national
policy framework. The methodology for the collection of data and for undertaking the
research and review should be determined after a process of social dialogue. All data
collected should be disaggregated according to sex, and the national and sectoral level
research and reviews should explicitly incorporate the gender dimension of this question
and should take into account other aspects of diversity. National labour administrations and

65
See ILO, Meeting of Experts on Workers in Situations Needing Protection (The employment
relationship: Scope). Basic technical document. MEWNP/2000, International Labour Office,
Geneva, para. 205, 206, 212.
66
See ILO, Report of the Meeting of Experts on Workers in Situations Needing Protection, doc
MEWNP/2000/4(Rev), appended to doc. GB.279/2, 279th Session, Geneva, November 2000, pp.
38-39.
67
See ILO, Provisional Record No. 21, International Labour Conference, 95th Session, Geneva,
2006, Fifth item on the agenda: The employment relationship (single discussion), Report of the
Committee on the Employment Relationship pp. 21, 55.

15
 their associated services should regularly monitor their enforcement programmes and
processes. This should include identifying those sectors and occupational groups with high
levels of disguised employment and adopting a strategic approach to enforcement. Special
attention should be paid to those occupations and sectors with a high proportion of women
workers. Innovative programmes of information and education and outreach strategies and
services should be developed. The social partners should be involved in developing and
implementing these initiatives.

4.3. Determination of the Existence of an Employment

Relationship

The existence of an employment relationship depends on the existence of objective

conditions, i.e. on the form in which the worker and the employer have established their
respective positions, rights and obligations. This is to say that for the purposes of the
national policy of protection for workers in an employment relationship, the determination
of the existence of such a relationship should be guided primarily by the facts relating to
the performance of work and the remuneration of the worker, notwithstanding how the
relationship is characterized in an contrary arrangement that may have been agreed
between the parties.

The issue of the determination of an employment relationship was central throughout

the employment relationship debate at the ILO, including the 1997-98 ILC discussions on
contract labour,68 and as can be seen from the contributions to this volume, the general
rules applicable to the determination of an employment relationship derives from case law
and statutory provisions. If we look at such a circumstance from an employment
relationship viewpoint, in order to speak of employment, there must be some hierarchical
power relationship –even if it is only negligible. As mentioned above, hierarchical power
allows the working activities of employees to be moulded and directed according to firms’
aims and requirements, without any need to obtain the relevant consent, whereas the
counterpart’s consent is normally required in order to amend the activities to be performed
in other types of contracts. This juridical feature of the contract of employment
corresponds to its socio-economic function of providing employers with flexible working
capacity. This applies also to working relationships whereby the employee is endowed
with a material degree of executive autonomy and broadened discretion. As we will see in
the following pages, the problems that Italian courts have had to face in dealing with
working activities in which hierarchical power has taken forms different from the
traditional ones. Even in such cases, we have seen, the courts have maintained that
hierarchical power is in any case essential to the employment relationship. That is to say
that no employment relationship can exist in the absence of hierarchical power, the latter
also being –taking into account the relevant factual circumstances– the power to issue
general directives, according to the programmes and purposes of the firm, to a person who
is bound to perform his/her working activities on a continuous, loyal and diligent basis.

With regard to the duty of loyalty, it is worth noting that some students have
construed it under a broad meaning, namely as a duty to be available to perform any
activity the employer may require on the basis of its different business need, if no
demotion occurs. Therefore it could be said that the aforementioned basic juridical feature
of the contract of employment, together with the relevant socio-economic function, recurs
also when the employment relationship is carried out in loose hierarchy conditions and/or
environments.

68
ILO: Contract Labour, Report VI (1), International Labour Conference, 85th Session, Geneva,
1997, pp. 26-33.

16
 Until now, whilst speaking generally of hierarchical power and highlighting its
flexibility content, we have principally seen just one of its three main elements: the power
to assign tasks and to give orders and directives to employees, namely directional power.
But the other two elements thereof are also of use in achieving flexibility and ultimately in
reducing what are defined to be ‘transaction costs’. The control power affords employers
with the possibility of monitoring how working activities are discharged, thus eventually
allowing them also to adjust such activities if needed, also by making recourse to
directional power. At the same time, there are types of contracts where the power to check
how the counterparts’ duties are discharged is usually exerted at the end and not during the
period of the performance. This results in a quicker and at the end of the day, more flexible
way to coordinate the activities of different subjects in the firm: this also because of the
third hierarchical element, namely the disciplinary power. On closer inspection, then,
disciplinary power is a mighty instrument of flexibility and transaction costs reduction. As
to the former, disciplinary power allows employers to sanction activities deviating from
their orders and directives. In this sense, it provides a powerful means for enforcing same
orders and directives. Moreover, since it is exerted on a private basis –as it is not necessary
to take legal proceedings in order to make use of it– it is a swift means of enforcement.
Accordingly, disciplinary power is a means of both deterrence and sanction against non-
compliance when firms must rapidly adjust their activities to contingent and unpredictable
needs through new orders and directives.

With regard to transaction costs reduction, as complying with employer’s orders and
directions is an employee’s contractual duty, sanctioning any non-compliance will result in
enforcing the contract of employment without a need to resort to the courts: this materially
cuts the contract’s enforcement costs and therefore reduces transaction costs as a whole.
Furthermore, disciplinary power also fosters the flexibility of firms because it allows them
to graduate sanctions to the relevant breaches. Most notably, and almost uniquely in the
field of contracts, it makes it possible to lawfully sanction a breach of contract without
terminating it. This allows enforcing internal rules without the need of entering into a new
relationship and bearing the relevant transaction costs.

Thus far, we have shown some of the features of the employment relationship that
render it an important device for business organization, as it provides employers with a
great deal of flexibility. Accordingly it should follow that the internalization of activities –
of which the employment contract is a central tool– allows businesses to be run in a more
flexible way and ultimately also enables them to take advantage of the hierarchy as a way
to reduce transaction costs. Nonetheless, we should notice that under the post-Fordism
system, firms look principally for flexibility and also that the number of outsourced
activities has increased, in comparison with Fordism. From the above, it seems that this
reasoning is inconsistent. It is therefore convenient to examine the second facet of the costs
trade-off mentioned above, namely ‘organization costs’. The latter are the costs any
organization faces in carrying out an activity on its own, such as dispersion of resources,
arrangement of methods and devices of coordination and hierarchy, as well as some costs
related to limitation of hierarchy within the organization. In this regard, the determination
of an employment relationship has traditionally gone together with a growing set of
regulations afforded by the law and by industrial relation devices in order to protect one of
the parties of the relationship, namely the employee. As we have seen above, the definition
of employment has traditionally had a legal-technical basis rather than a socio-economic
one, the key element of employment being hierarchical power and not economic
dependence on the employer, or at least at the very beginning. From a legal viewpoint, the
hierarchical/coordination power is at the centre of the employment relationship; that is, the
regulatory protection of employees has traditionally focused on hierarchical power in order
to reduce it. In this sense such protection has provided for measures such as reduction of
working hours, regulation of overtime, limitations on employers’ control power,
impediments to demotion and most notably the possibility for employees to organize and
bargain collectively.

17
 Collective organization not only allows for reducing competition among workers in
order to bargain for better working condition. It also entails a reduction of hierarchical
power of employers. Hierarchical power allows employers to organize their business.
However, such an organization activity is rarely carried out on an individual basis. Since
organization implies the coordination of different parts and outputs, it is commonly exerted
on a plural and collective basis. As for work organization, orders and directives are
normally issued with regard not to a single worker but rather towards teams, line stages or
establishments.

This gives rise to a shift between the level at which hierarchical power is exerted –
which is plural– and the individual worker who is subject to hierarchical power. It has been
underlined that collective organization allows employees to participate on a plural and
collective basis, and therefore to place themselves on the same level with their employers.
This results in a limitation of hierarchical power, which is confronted with another plural
power, that of the collective organization. When, for instance, employees collectively
bargain to regulate working time or output audits or working environment conditions at a
shop or plant level, they control and limit the firm’s hierarchical power.

This is true also for regulation governing the mere individual employment
relationship, such as statutory rules establishing disciplinary procedures, forbidding
demotion, regulating transfers of workers or providing redress against unfair dismissal. As
to the latter, it is usually perceived as a gross impediment of flexibility, as it –depending on
the remedies afforded to the relevant employee– could hinder the possibility of the firm to
adjust the size of its workforce to the contingent business situation.

In light of the above, employers see the set of employment protections as limiting
their hierarchical power and therefore ultimately causing a reduction of flexibility for the
whole business. Such a reduction is perceived as a cost for the firm, notably as an
organization cost. Said costs are the other side of the coin with respect to internalizing
working activities as a means of reducing transaction costs. Accordingly, in deciding
whether to carry out a production phase on an internal basis or to outsource it, firms will
also take into account the trade-off between organization costs and transaction costs.

Moreover, some other circumstances must be taken into account in trying to draw an
analysis about the reasons that cause firms to have recourse to either internal or contracted-
out production.

First, the employment contract is not the sole device through which firms can afford
themselves flexibility by means of a hierarchical relationship, whereby they can adjust
terms and condition of the counterpart’s performance to their business needs, avoiding or
limiting transaction costs. Second, the employment contract is not a monolithic type of
contract, as there are very different forms of employment. With regard to the first
consideration, it is worth mentioning a species of contractual relationship which in recent
decades has increasingly come to the attention of lawyers and economists, namely
‘relational contracts’. The main features of relational contracts are their incompleteness
and their extension in time. Actually, the latter feature could be deemed to be the cause of
the former. Given the impossibility for parties to take into account every circumstance that
will occur throughout the relevant relationship –this being due to unpredictability, bounded
rationality of the parties or prohibitive transaction costs– same parties decide to leave
unspecified many parts of the contract’s terms and conditions, so as to be able to determine
them during the same relationship. As a consequence, they draft what could be said to be a
framework agreement setting out just the basic rules governing their business relationship,
such as criteria of determining the relevant compensations, the minimum or maximum
entity of the supply, and reasons for or notice of termination. Other terms of the contract
(e.g. the actual entity of the supply, the number or frequency of orders) are therefore left to
the parties’ future determination. This allows for adapting the performance of the parties to

18
 non-hierarchical market relationships between them, thus cooperating on a parity and not
on a hierarchy basis.

Asymmetrical cluster firms have recently experienced increasing attention from

economists, sociologists and, obviously, lawyers and legislators.

In this context, certain acts of legislation aim at avoiding excesses in terms of

incompleteness of contract, as a way to counter abusive business practices. Accordingly,
they render null and void clauses whereby one party can unilaterally amend terms and
conditions of a contract or terminate a contract without reasonable notice. It follows that
parties must determine or set criteria for determining their activities under the contract.
Most notably, such an approach forbids the abuse of the other parties’ economic
dependence and sets out that economic dependence must be ascertained taking into
account as well the parties’ opportunities to find business alternatives. The rationale of
such rules is therefore aimed at reducing the possibilities of misusing a business position
by means of relational contracts. Such contracts are relevant in the employment
relationship, since the latter assumes a variety of forms, including the so-called ‘non-
standard forms of employment’ that are perceived by firms as more flexible than the
standard. One of the main causes of such flexibility is found in their temporality. Although
not all non-standard forms of employment are on a fixed-term basis (e.g. part-time
employment could be permanent), nevertheless this is usually a common feature.
Temporality affords flexibility to the same extent that it allows firms to plan the duration
of working relationships in order to adjust the size of their workforce to the contingent
business needs. On the other hand, temporary forms of work are also more rigid than the
standard employment relationship in some aspects. We will now look at developments in
the case law.

4.4. Case Law

The mutual rights and obligations of the parties became the focus for the definition of
the nature of work relationships. The fundamental term of a contract of employment was
the performance of work under the employer’s supervision and control in exchange for
wages. Non-compliance with the employer's reasonable demands was a fundamental
breach of the contract entitling the employer to terminate the contract. Therefore, the case
law indicator of ‘subordination and control’ became all-important in the characterization of
an employment relationship. Initially, this indicator was simply understood as direct
control exercised by an employer over the work performed by the worker. However, with
technological and organizational changes, many employers could no longer directly
supervise and control their more highly trained or specialized workers. As a result, the
indicator of actual exercise of subordination and control was supplemented by a number of
other indicators, including the ‘business’ indicator (whether the worker is in business on
his or her own account) and the ‘integration’ indicator (whether the worker performs the
duties as an integral part of the business of the user enterprise). Further developments in
work organization, increased specialization of production and the growing diversity of
contractual arrangements brought to the existence a number of other indicators including,
inter alia, the following:

• the extent to which the user enterprise determines when and how work should be
performed, including instructions on where and how to do the work, working time
and other conditions of work;

• the extent of supervisory authority and control of the user enterprise with respect
to the work performed, including disciplinary authority;

• whether the work is performed on a regular and continuous basis;

19
 • whether the worker does the same work as that normally performed by the regular
employees of the user enterprise;

• whether the work performed is contractually stipulated as an activity or as a result

(‘final product’);

• the extent to which the work performed is integrated into the normal activities of
the user enterprise;

• whether the user enterprise pays the amounts due to the worker periodically and
according to pre-established criteria;

• whether the worker performs work exclusively for a particular user enterprise;

• the extent to which the user enterprise makes investments and provides tools,
materials and machinery, among other things, to perform the work concerned;

• whether the worker undertakes any risk in the business sense or, alternatively, has
any expectations of profits associated with the delivery of his or her services as
distinct from a fixed commission;

• who pays fiscal and social security contributions –the user enterprise or the
worker; and

• whether the user enterprise trains the worker.

In practice, no single indicator is decisive per se, but it is a combination, usually, of

two or more of these indicators that determines whether or not there is a genuine
employment relationship. It is possible to discern that the ‘subordination and control’
indicator is frequently given a high priority, which in most legal regimes is considered to
be the hallmark of an employment relationship. However, some experts are sceptical of the
efficiency of this kind of multi-indicator review. They assert that under such a test the
relationship itself remains largely undefined as a legal concept, since the relevance of
different criteria may vary according to the circumstances. Therefore, it is believed that
various formulations of indicators are no more than a determination of the degree of
dependency (or independence), for which there is no exclusive measure. It has been
emphasized that various factors are not exclusive or inclusive but are merely extensions
along the same continuum of dependency, which certainly includes subordination and
control, and therefore the distinction between an independent contracting and an
employment relationship lies in facts, not in law.

20
 In the so-called ‘triangular’ relationship,69 the identification of an employer is of
crucial importance. In order to resolve the issue, the judiciary determines whether it is the
user enterprise that exercises the requisite control and economic domination over the
workers concerned or whether it is the enterprise that provides these workers. Decisions
are normally grounded in employment legislation. In jurisdictions that provide for
recognition of two or more employers as a common employer, the courts recognize both
enterprises as employers.

4.5. Statutory Regulation

Where legislative policy seeks to determine an employment relationship, various

statutory techniques are used for this purpose, including the following:

• providing for definitions of ‘contract of employment’ or ‘employment

relationship’ and spelling out certain indicators, many originally developed by the
judiciary, according to which a contract or a relationship is defined as a contract of
employment or an employment relationship;

• determination of specific types of contractual arrangements in which the workers

concerned are regarded either as employees or as self-employed;

• easing the burden of proof for the workers concerned; and

• removing incentives to disguise an employment relationship.

Many national labour laws contain provisions on the employment relationship,

particularly with regard to its scope. Some provisions deal with the regulation of the
employment contract as a specific contract (whereby a worker agrees to perform certain
work for and under the authority of an employer, who in turn undertakes to provide the
necessary conditions for this work and to pay remuneration), its definition, the parties and
their respective obligations. Other provisions are intended to facilitate recognition of the
existence of an employment relationship and to prescribe administrative and judicial
mechanisms for monitoring compliance and enforcing these laws.70

69
Normally, an employment relationship involves two parties: the employer and the employee.
There are, however, more complex situations whereby one or more third parties are involved, in
what is sometimes termed a ‘triangular’ employment relationship. Such a relationship occurs when
the employee of an enterprise is made available by his or her employer to another enterprise to
perform certain work or provide certain services. Such situations can be beneficial to all concerned.
A wide variety of civil (commercial) law contracts can be used to formalize an agreement for the
provision of work or services. Such contracts can have beneficial effects for the provider’s
employees in terms of employment opportunities, experience and professional challenges. From a
legal standpoint, however, such contracts may present a technical difficulty as the workers
concerned may find themselves interacting with two (or more) interlocutors, each of which assumes
certain functions of a traditional employer. Whereas a ‘triangular’ employment relationship
normally presupposes a civil or commercial contract between a provider and user enterprises, it is
possible that no such contract exists and that the provider is not a proper enterprise, but an
intermediary that does not undertake any employer responsibility vis-à-vis the workers concerned.
70
See ILO: The employment relationship, Report VI(1), International Labour Conference, 95th
Session, Geneva, 2006, pp. 19-38.

21
4.6. Definitions

In many countries, the legislation contains a substantive definition of a contract of

employment, worded in such a way as to establish what conditions constitute such a
contract and hence what distinguishes it from other contracts; in other countries, however,
the legislation is less detailed and the task of determining the existence of an employment
contract is largely left to case law. The description of the conditions for determining
whether work is being performed under an employment contract varies in wording and
level of detail from one country to another. Thus, the most commonly used terms are
‘dependency’, ‘subordination’, ‘supervision’, ‘direction’, ‘control’, ‘authority’ of the
employer, or the latter’s ‘orders’ or ‘instructions’ or for the ‘employer’s account’. Some
legal systems use the terms ‘subordination’ and ‘dependency’ as alternatives or together,
either with different meanings or as synonyms. Sometimes, the law assigns a different
meaning to each word, and each is accompanied by a different qualifier: ‘legal
subordination’ and ‘economic dependency’. ‘Legal subordination’ is understood to mean
that the employer or his or her representatives direct or are likely to direct the performance
of the work. There is deemed to be ‘economic dependency’ where the sums received by
the worker constitute his or her only or main source of income, where such sums are paid
by a person or enterprise as a result of the worker’s activity, and where the worker does not
enjoy economic autonomy and is economically linked to the sphere of activity in which the
person or enterprise that may be considered as the employer operates. It is interesting to
note that in case of doubt, ‘economic dependency’ may be used as a factor for determining
whether there is an employment relationship.

In this regard, it is possible to see that some labour laws define not only the
employment contract but also the employment relationship, understood to mean the fact of
performing a service, irrespective of the nature of the agreement under which it is
performed, placing the employment contract in the broader context of the employment
relationship.

In some other jurisdictions, the employment contract is simply described as a contract

between an employer and an employee, without referring to the abovementioned
conditions characterizing it as an employment contract. However, the legislation of these
countries may have provisions giving a clear idea of the conditions in which the parties are
bound by such an employment relationship. For example, provisions governing a worker’s
duties often include the obligation to respect the employer’s orders and instructions—
which is an important indicator for determining the existence of an employment contract.

4.7. Determination by Law

In some legal systems, labour laws describe certain potentially ambiguous or

controversial situations as employment relationships, either in general or under certain
conditions, or at least presume they are employment relationships (for example,
professional athletes and artists, models, professional journalists, sales representatives,
travelling salespersons, insurance salespersons, sales promoters and various public
transport workers (drivers, operators, conductors, etc.). In other cases, labour legislation
specifies whether a given type of work is excluded from its scope or whether or not it gives
rise to a contract of employment, depending on the conditions under which it is performed,
for example, when home work is deemed to be employment if it is neither discontinuous
nor sporadic. On the other hand, work done by persons performing work or services
directly for the public, or home work that is performed discontinuously or sporadically, is
not deemed to give rise to an employment contract, and neither is work done by a student
or graduate of higher education or secondary vocational and technical education for a
specified period to fulfil a practical work requirement, even if the enterprise where this
work is done provides food, transportation or an allowance in lieu of such benefits.

22
 Conversely, legislation may specify that certain work relationships are not
employment relationships, or exclude certain categories of workers from their scope, while
other laws authorize the government to make such exclusions. The most common is the
total or partial exclusion of public servants and similar workers and, less frequently, public
sector workers. In some other countries, labour legislation authorizes the government to
adapt the scope of employment legislation to include in it certain categories of workers as
parties to contracts of employment.

4.8. Burden of Proof

In cases of determination of an employment relationship, the application of the

general rule of contract law, whereby the burden of proof rests on the complainant, could
make it very difficult or sometimes impossible for the worker to show that he or she is in
an employment relationship with the plaintiff. In an employment relationship, it is the
employer who has the upper hand, particularly because he or she controls the sources of
information. That is why labour laws in many countries have provided certain measures to
ease for the workers concerned the burden of proof of the existence of an employment
relationship.

It is common for labour legislation to expressly provide that the employment

relationship may be proved by any of the usual means, or by any means permitted by law.
In some instances, the law may provide that contracts of employment are consensual,
i.e. concluded merely by the consent of the parties without further formalities. In other
instances, however, the law may require that the contract be in writing for various reasons
relating to compliance or to evidence; or it may proceed from the assumption that the
employment relationship exists based on the fact that services are provided. An important
element of certainty, which also makes it easier to prove the existence of an employment
contract, is the obligation on the part of the employer to inform employees of the
conditions applicable to the contract by providing a written contract, a letter of engagement
or other documents indicating the essential aspects of the employment contract or
relationship. Non-compliance with this obligation may cause the worker to question his or
her employee status. Conversely, having the written information in question makes it
easier for the worker to prove that status.

With the same aim of easing the burden of proof, some laws provide for a
presumption of the existence of an employment relationship. This presumption might be
considered either as ‘substantive’ or as ‘procedural’. The ‘substantive’ presumption
implies that under certain conditions spelled out in legislation, the relationship is deemed
to be an employment relationship. The ‘procedural’ presumption means that if certain
indicators are present, the relationship is deemed to be an employment relationship, unless
the alleged employer proves otherwise or unless it is evident that the parties entered into a
different kind of contract.

During the international debate at the ILO, together with the role of case law and
statutory regulation in the determination of the existence of an employment relationship,
other important issues were highlighted. These included:

- effective access to justice in accordance with national law and practice;

- the role of collective bargaining and social dialogue as a means of finding

solutions to questions related to the scope of the employment relationship;

- respect for and implementation of laws and regulations concerning the

employment relationship through labour administration services, including labour
inspection and their collaboration with the social security administration and the
tax authorities; and

23
 - removing incentives to disguise an employment relationship.

As a matter of curiosity, in the replies to the questionnaire contained in Report V(1),

the question concerning the indicators of the existence of an employment relationship
proved to be of considerable interest to governments. For example, 41 governments
mentioned indicators that could be included in the proposed Recommendation; several
endorsed those mentioned in the questionnaire. One government preferred the ‘common
law’ approach. Another considered that indicators were not relevant to determining the
existence of an employment relationship. One indicated that such indicators should be
derived from law and jurisprudence. Another stated that they should be defined by national
law and practice, that their inclusion in the instrument could be interpreted as implying an
exhaustive list, and that some indicators might not be universally recognized. Finally, one
government considered that, given the diversity of employment relationships, it was
virtually impossible to cite all valid indicators.

Whereas the trade union replies were supportive with regard to the question
concerning indicators of the existence of an employment relationship, the employers’
organizations stated that these factors should be defined not in the instrument but by the
national authorities, as they were based on different concepts in different countries.
According to the employers’ organizations, an instrument containing a list of such factors
would not be useful and, according to one organization, would be at variance with the
agreement that the Recommendation should not universally define the content of the
employment relationship. On the other hand, one employers’ organization recalled that
national legislation and practice may not provide for measures of protection in the case of
disguised employment relationships, and consequently the instrument should set out clear
provisions in this area. At the same time, employers’ organizations opposed the very idea
of an international definition of the employment relationship. They argued that the
definition and scope of that relationship depended on a wide range of national
characteristics and that any attempt to introduce the concept of common indicators would
only lead to disagreements and dissatisfaction among the social partners.

4.9. Monitoring and Implementation

Reviewing changes in the labour market and in the organization of work as well as
advising governments on the implementation of national policy concerning the
employment relationship are among the major issues addressed in the debates in the ILO
concerning the employment relationship. The monitoring of employment relationships is a
major political and technical challenge for governments. To address this, it is suggested
that a consensus-building tripartite mechanism be devised as a focal point for common
observation and analysis of the developments in the labour markets and organization of
work, with the specific task of identifying the functional and dysfunctional trends
emerging in employment relationships. The body responsible for monitoring employment
relationships could suggest corrective measures to fine-tune relevant legal provisions or
their application, as well as economic and social initiatives to correct the dysfunctional
trends, including initiatives to ensure that necessary statistics are collected on a regular and
systematic basis. Respectively, the following points were proposed to the experts for
discussion:

- Periodic review of law and practice;

- Creation of a tripartite mechanism to facilitate the formulation and application of

the national policy concerning the employment relationship;

- Practical guidelines for governments on specific ways of developing and

implementing the national policy.

24
 Such a policy should be reviewed at appropriate intervals and if necessary, clarify or
adapt the scope of the regulation of the employment relationship in the country’s
legislation in line with current employment realities. The review should be conducted in a
transparent manner with participation by the social partners.71

4.10. Follow-up Resolution

At the end of the ILC 2006 discussion, a number of government delegates proposed a
resolution to instruct the Director-General of the Office to help all ILO constituents to
better understand and address the difficulties encountered by workers in certain
employment relationships. Noting that Paragraphs 19-22 of the newly adopted instrument
recommend that the ILO Members establish and maintain monitoring and implementing
national policy mechanisms, the resolution’s objective was to ensure and reinforce
assistance for such mechanisms, the collection of up-to-date information and comparative
studies, and the promotion of good practice.

The adopted resolution invites the Office to:

- assist constituents in monitoring and implementing mechanisms for the national

policy as set out in Recommendation No. 198;

- maintain up-to-date information and undertake comparative studies on changes in

the patterns and structure of work globally, in order to:

• improve the quality of information on and understanding of employment

relationships and related issues;

• help better understand and assess these phenomena and adopt appropriate
measures for the protection of workers;

• promote good practices at the national and international levels concerning the
determination and use of employment relationships; and

• undertake surveys of legal systems to ascertain what criteria are used

nationally to determine the existence of an employment relationship and make
the results available to ILO Members to guide them, where this need exists, in
developing their own national approach to the issue.72

5. Integrated reports addressing the growing

concern over the employment relationship
Workers in need of protection have been the leading subject of researches and
concerns of the ILO for the last years. Under this topic many situations of precariousness

71
See ILO, Report of the Meeting of Experts on Workers in Situations Needing Protection, doc.
MEWNP/2000/4(Rev), appended to doc GB.279/2, 279th Session, Geneva, November 2000, pp. 38-
39.
72
For the text of the adopted resolution, see International Labour Conference (95th Session) ILO,
Provisional Record No. 21, Geneva, 2006, 21/80 at
www.ilo.org/public/english/standards/relm/ilc/ilc95/pdf/pr-21.pdf.
See also The Employment Relationship: An Annotated Guide to ILO Recommendation No. 198,
Paper No. 18, Geneva, ILO, 2008.

25
 and unfavourable circumstances are tackled: atypical contracts of work, disguised or
ambiguous relationships, undeclared work, and triangular relationships are examples of
how vulnerable workers can be. It seems some groups are more exposed to these unstable
and insecure forms of labour relationship than others. Migrants, women, children, ethnic
minorities, indigenous, unqualified workers and others are likely to experience precarious
work during their working lives.

Yet the employment relationship is normally related to better conditions, decent work,
more rights and protection. National social security systems are focused on regular and
formal employment relationships in order to keep their right budgetary balances. In
addition to that, it is important to note that national financial systems are normally based
on the notion of the employment relationship for the concession and assurance of other
rights and benefits like bank mortgages, loans, etc. Modern societies are based on the
notion of security given by the typical non-fixed-term employment relationship as one of
the main basis for the functioning of its institutions.

The employment relationship has been a synonym of a wider protection for the
worker over the last century. Other forms of work73 also have the potential to guarantee the
proper social dimension required by some types of activities, but only the employment
relationship is able to provide the employee with all the necessary means to achieve decent
work while supplying the enterprise with the best provision of preserved and productive
work in order to fulfil its corporate targets.

A number of studies aiming to counter the transformations suffered by the

employment contract over the years have been undertaken, in different contexts, as it
results to be a growing matter everywhere. Three of these studies’ reports have become
internationally known, as they have in common the same target: to tackle the future of
labour law by studying the transformations that have occurred due to globalization.
Although one of them, the Dunlop Commission Final Report, has been developed in an
American context, and the other two, the Supiot Report and the Green Paper on
Modernizing Labour Law, have been taken under a European framework, they all
represent high valuable reflections on the challenges presented to modern labour law and
the possible paths to be taken, specifically in relation to the employment relationship.

The Commission on the Future of Worker-Management Relations, which took the

name of its chairman, former US Secretary of Labour John T. Dunlop, was launched on 24
of March, 1993, in the United States, with a specific mandate to answer the following
questions:74

1. What (if any) new methods or institutions should be encouraged, or required, to

enhance work-place productivity through labour-management cooperation and
employee participation?

2. What (if any) changes should be made in the present legal framework and
practices of collective bargaining to enhance cooperative behaviour, improve
productivity, and reduce conflict and delay?

73
Here intended to refer to autonomous work or semi-autonomous work.

74
Commission on the Future of Worker-Management Relations, U.S. “The Dunlop Commission on
the Future of Worker-Management Relations - Final Report” (1994), Federal Publications, Paper 2,
p. 3. See:
http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1004&context=key_workplace

26
 3. What (if anything) should be done to increase the extent to which work-place
problems are directly resolved by the parties themselves, rather than through
recourse to state and federal courts and government regulatory bodies?

Regardless of its industrial relations conflict-prevention oriented approach, the

Dunlop Commission pointed out many aspects and recommendations related to the
employment relationship. It recognized that the 21st century American workplace needed
more flexibility for fast-changing market conditions75 and gave suggestions on how the
contingent work76 could be efficiently assessed. Admitting that “contingent arrangements
may be introduced simply to reduce the amount of compensation paid by the firm for the
same amount and value of work, which raises some serious social questions”,77 and that
“the federal government loses billions of dollars to underpayment of taxes by workers
misclassified as independent contractors,”78 the Commission adopted a double way
assessment –legal definition reform of both employers and employees– to the topic,
emphasizing that:79

1. The definition of employee in labour, employment, and tax law should be

modernized, simplified, and standardized. Instead of the control test borrowed
from the old common law of master and servant, the definition should be based on
the economic realities underlying the relationship between the worker and the
party benefiting from the worker's services;

2. The definition of employer should also be standardized and grounded in the

economic realities of the employment relationship. The Congress and the National
Labour Relations Board (NLRB) should remove the incentives that now exist for
firms to use variations in corporate form to avoid responsibility for the people who
do their work.

According to this two-way approach, employer and employee definitions are unclear
in the US due to many different concepts provided by either statutory or common law. The
Dunlop Commission thus proposed a regulation improvement in order to reduce to one
single federal statute the definition of an employer and an employee. Furthermore, it
recommended that the existence of an employment relationship should rely rather on the
economic dependence than on whether there is an immediate control over the employee.80
Regarding the administrative procedures applied to the enforcement of employment
standards, the Commission recommended the United States Department of Labour to
provide clearer guidance to both workers and employers, as a way to diffuse proper
information on how to comply with the law.81 As a major contribution to the debate around
the employment relationship the Dunlop Commission strongly demonstrated the link

75
Ibid, p. 13.
76
Dunlop Commission refers to contingent work as the use of independent contractors and part-
time, temporary, seasonal, and leased workers. See Commission on the Future of Worker-
Management Relations, U.S., “The Dunlop Commission on the Future of Worker-Management
Relations - Final Report” (1994), Federal Publications, Paper 2, p. 61.
77
Ibid, p. 61.
78
Ibid, p. 62.
79
Ibid, p. 63.
80
Ibid, p. 66.
81
Ibid, p. 81.

27
 between disguised labour agreements and tax evasion, advocating for a revenue authority
oriented control to correct eventual misclassifications along with law reforms.

The European Commission, for instance, organized in 1997 a group of lawyers,

sociologists and economists chaired by Alain Supiot to compile national approaches from
several European countries about the present and the future of labour law and the
employment relationship. The Supiot Report, issued in 1998, was one of the most complete
assessments toward a comprehensive reference of the employment relationship paths in
Europe under a globalized market. It was originally assigned “to conduct a prospective and
constructive survey on the future of work and labour law within a Community-wide,
intercultural and inter-disciplinary framework, culminating in a conference and subsequent
report on the subject,”82 while many other conclusions and recommendations are part of
the report.

The final report analyzed topics such as the relationship between work and private
power, work and employment status, work and time, labour and collective organization,
and labour and public authorities, all split in five different chapters. As one of the first
conclusions presented by the commission there was a slight trend to power dispersion
within the labour environment represented by the end of the fordist model. From a legal
perspective, this decay is basically represented by:83

• Fostering or development of self-employment as opposed to waged employment;

• Evolution of the principle of subordination which defines the nature of the

employment contract;

• Labour outsourcing or sub-contracting to economically dependent enterprises.

A major result related to this power deconcentration, also outlined by the report, lays
the ground for a third of labour relationship category recognition: a figure represented by
an economically dependent self-employed worker who is neither a classical employee nor
an entrepreneur.84 Some European legal systems have already perceived the existence of
this category by regulating its activity.85 It is the case of Italy (lavoratore

82
A. Supiot (general rapporteur): Transformation of labour and future of Labour law in Europe,
Final report, June 1998, p. 1.
83
Ibid, p. 9.
84
Ibid, p. 13.
85
A. Perulli: Subordinate, Autonomous and Economically Dependent Work: A Comparative
Analysis of Selected European Countries, in G. Casale (Ed.): The employment relationship. A
comparative overview, Geneva, International Labour Organization, 2011, pp. 137-188.

28
parasubordinato),86 Germany (arbeitsnehmeränhliche Personnen)87, or Spain (trabajador
autónomo economicamente dependiente).88

Moreover, power deconcentration in the workplace signifies a change in the notion of

subordination. While for one group of workers, namely the economically dependent self-
employed, there are advances in greater on-the-job independence, for another group,
represented by casual employment,89 a growing weight of subordination seems to prevail.90
In addition, a tendency to increase the strength of the employer’s directive power is
noticed, even for non-casual workers. This trend is caused by a shift in the creation of jobs
from big companies to small and medium sized businesses. The Supiot Report attributes
this inclination to a “rising incidence of the business networking model, whereby firms are
interrelated by means of sub-contracting or outsourcing arrangements.”91

The tendency in case law studies seems to express an increasing broadening of the
legal subordination concept in order to characterize an employment relationship. The
Commission emphasized that the legal notion of subordination “is no longer defined only
in terms of submission to orders in the performance of work itself, but also of workers’
integration in a collective organizational scheme designed by and for others,”92 and
retained a particular attention to the “indication clustering” method (méthode du faisceau
d’indices) as a general labour law tool to establish the existence of an employment
relationship in contrast with other legal figures. Under this technique, a logical inference
from several indicators takes place in order to converge to a sustainable conclusion over an
argument. The method is particularly useful for disguised and ambivalent relationships as
it does not rely only on evidence and proof, but on a set of indicators which may clarify the
true nature of the established connection.

It is interesting to note that, according to the Supiot Report, by “replacing the concept
of legal subordination with that of integration in someone else’s company”93 it became
possible to convert a great number of jobs into wage-earning positions. Moreover, by
revisiting the traditional notion of subordination and dependency, now covered with new
features and a broadening concept related to the notion of the so-called network-enterprise,
Labour law could keep serving as it was intended to be from the outset: a tool for social
cohesion. For that matter, labour law has to be as much adaptable as to cover new

86
A. Perulli: Economically dependent/quasi-subordinate (parasubordinate) employment: legal,
social and economic aspects, Study prepared for the European Commission, Directorate-General for
Employment and Social Affairs, 2003, pp. 76-82.
87
Ibid, pp. 82-85.
88
D. M. C. Barreto: Acerca de la denominada crisis del contrato de trabajo tradicional y la
aportación española: el estatuto del trabajo autónomo, Gaceta Laboral, ago. 2008, vol.14, no.2,
pp. 193-219.
89
Here intended as any sort of atypical contract, as previously mentioned.
90
A. Supiot (general rapporteur), Op. Cit. p. 16.
91
Ibid, p. 16.
92
Ibid, pp. 17-18.
93
Ibid, p. 18.

29
 developments in the way labour is organized and refrain from only protecting traditional
subordinate employees, according to the report’s conclusions.94

Another important document was provided by the European Union, more recently, in
2006, the Green Paper - Modernizing labour law to meet the challenges of the 21st century,
and was aimed at launching “a public debate in the European Union (EU) on how labour
law can evolve to support the Lisbon Strategy’s objective of achieving sustainable growth
with more and better jobs.”95 The EU’s common objectives of full employment, labour
productivity and social cohesion are at the background of the paper as it stands for
everlasting general European principles to be achieved. The paper recognized that the drive
for flexibility in the labour market “has given rise to increasingly diverse contractual forms
of employment, which can differ significantly from the standard contractual model in
terms of the degree of employment and income security,”96 giving an opportunity for the
EU to foster flexicurity policies throughout the Union. Flexicurity is a neologism for more
flexibility together with more security for the labour market. For instance, it happens to be
the key element of the Green Paper, and for that it seeks:97

• To identify key challenges which have not yet yielded an adequate response and
which reflect a clear deficit between the existing legal and contractual framework,
on one hand and the realities of the world of work on the other;

• To engage Member States’ governments, the social partners and other relevant
stakeholders in an open debate about how labour law can assist in promoting
flexibility combined with employment security, independently of the form of
contract;

• To stimulate discussion on how different types of contractual relations, together

with employment rights applicable to all workers, could facilitate job creation and
assist both workers and enterprises by easing labour market transitions, assisting
life-long learning and fostering the creativity of the whole workforce; and,

• To contribute to the better regulation agenda by promoting the modernization of

labour law.

Once again, globalization and technological changes are at the backdrop of the urge
for labour market reforms. As flexible arrangements are an asset sought after like never
before within the European labour market, new forms of employment agreements emerge
deconstructing labour law premises and requiring new approaches from governments and
social partners.98 From another point of view, security needs to be improved in order to
guarantee social cohesion and the ambition for full employment.

94
Ibid, p. 25.
95
Comission of the European Communities. Green Paper. Modernizing Labour law to meet the
challenges of the 21st century, Brussels, 22.11.2006, COM (2006) 708 final, p. 3.
96
Ibid, p. 3.
97
Idem. Ibidem, p. 4.
98
Ibid, p. 7.

30
 The proliferation of non-standard work arrangements is behind the need for new
regulation and action to be taken against disguised relationships or undeclared work.99 In
addition, triangular relationship protection and quasi-employees regulation are also
mentioned in the paper, as related to the provision of broader protections at the same time
as flexibility.100 In any case, national experiences could be fostered to add value to this
debate by adapting the legal provision to the current reality of the workplace. The Green
Paper, rather than showing any novelty regarding the matter, brought the debate of the
Nordic success of flexicurity to the European Union. It does not rely on any traditional
community law formula but on the open method of coordination, based on the trinomial
“benchmarking –policy making– best practices,”101 to serve as a main orientation for the
search of new approaches toward innovative forms of employment.

6. Assessment of the employment relationship by

Labour Inspectorates: selected case studies
In addition to the studies and suggestions brought by experts’ commissions, national
experiences in confronting the assessment of the employment relationship by the labour
inspectorate and labour administration are paramount when establishing a basic common
action line for intervention. National approaches to the assessment of the employment
relationship may vary from one country to another, as much as their labour laws and labour
inspection systems do. In some instances there are national systems that are more tax
evading oriented, while in other places the systems rely rather on labour administration as
a governance tool. Nevertheless, in most systems, the reality of the facts, economic
dependence and subordination are common principles and indicators of an employment
relationship.

In some countries the economic burden caused by tax evasion has effectively revealed
methods and indicators of an employment relationship. In this case, the main objective is
to minimize misclassification and consequently tax avoidance. In these cases, a
multidisciplinary approach has been implemented in different contexts and inspections are
carried out not only for labour purposes, but also as a tool to reduce tax evasion and other
frauds.

Most of the developed countries have adopted a multifaceted approach to tackle the
growing phenomenon of undeclared work, disguised relationships and atypical work. An
integrated enforcement action with the participation of different agencies, improvement in
legislation, announcement campaigns and tripartite meetings are among the most used
tools used to solve the problem. Highlighting criteria in order to establish the existence of a
true employment relationship, based on the reality of facts assessed in the workplace, is
also a common tool for inspectors found in most developed countries. Developing nations
have also established strategies to address the growing problem of unprotected work.

Argentina

Argentina launched in 2003 the National Plan for the Regularization of Work (Plan
Nacional de Regularización del Trabajo – PNRT), aimed at tackling unregistered work,

99
Ibid, p. 10/11.
100
Ibid, p. 12.
101
C. La Porte: Is the open method of coordination appropriate for organizing activities at
European level in sensitive policy areas? In European Law Journal, Vol. 8, Aix-en-Provence, C.
Joerges and F. Snyder, 2002, pp. 46-58.

31
 verifying the conditions and fundamental rights at work, providing social protection in
order to encourage voluntary regularization, and promoting awareness of unregistered
work related problems.102 PNRT is an integrated effort supported by the Nation’s Ministry
of Labour, Employment, and Social Security (Ministerio de Trabajo, Empleo y Seguridad
Social), Federal Administration of Public Revenue (Administración Federal de Ingresos
Públicos - AFIP), and provincial labour authorities, under the Federal Labour Council
(Consejo Federal del Trabajo), and is part of the Argentinean strategies to tackle the “21st
century labour inspection challenges.”103 As a matter of fact, undeclared work is certainly
part of the problem of precariousness at work, targeted by Recommendation No. 198,
whenever a risk of unprotected relationship occurs.

In fact, undeclared work is a major problem in developing countries and much of the
flexibility at work is provided by denying basic fundamental rights through social costs
cuts in the informal market.104 The Argentinean labour force is deeply affected by
undeclared work which currently makes its assessment a great priority.105 Decent work is
the main target to be reached through public policies by diversifying strategies on how to
tackle the problem, including non-labour measures, considering the diversity of factors
related to the causes of informality.106 In that context, labour inspection develops an
important role by representing a State policy and by being responsible for the
implementation of the PNRT.107

PNRT is based in an integrated effort of different agencies, both federal and

provincial. Once a complaint is registered, a competence rule is placed and the inspection
must be ordered within 24 hours.108 Planned inspections also occur, based on previous

102
Subsecretaría de Fiscalización del Trabajo y Seguridad Social. Instructivo de procedimiento.
Plan Nacional de Regularización del Trabajo. Versión 1.0. Buenos Aires: Ministerio de Trabajo,
Empleo y Seguridad Social, Enero 2011. p. 3, and also Secretaria de trabajo, La Inspección del
Trabajo en la Argentina 2003-2012, Acciones y resultados, Ministerio de Trabajo, Empleo y
Seguridad Social, Buenos Aires, 2013.
103
P. A. Topet: La inspección del trabajo en la República Argentina: un informe general y algúnas
reflexiones particulares, in Revista Latino-Americana de Derecho Social, Núm. 6, Enero-Junio
2008, México, Instituto de Investigaciones Jurídicas, 2008, p. 181.
104
L. Ronconi: Informalidad laboral e inspección del trabajo en Argentina. Un enfoque
institucional, Documento 46, Marzo de 2001, pp. 1-27.
See http://faculty.udesa.edu.ar/tommasi/cedi/dts/dt46.PDF
105
C. Tomada: Prólogo. Aportes a una visión de la informalidad laboral en la Argentina, 1ª. ed.
Buenos Aires, Banco Mundial, Ministerio de Trabajo, Empleo y Seguridad Social, 2008, p. 7.
106
M. Novick, X. Mazorra, D. Schleser: Un nuevo esquema de políticas públicas para la reducción
de la informalidad laboral, in Aportes a una visión de la informalidad laboral en la Argentina. 1a.
ed. Buenos Aires, Banco Mundial, Ministerio de Trabajo, Empleo y Seguridad Social, 2008, p. 26.
107
Ibid, p. 32.
108
Subsecretaría de Fiscalización del Trabajo y Seguridad Social, Instructivo de procedimiento.
Plan Nacional de Regularización del Trabajo, Versión 1.0, Buenos Aires, Ministerio de Trabajo,
Empleo y Seguridad Social, Enero 2011, p. 5.

32
database analysis.109 In order to proceed to the inspection of the employment relationship
itself, inspectors are advised to follow some steps, once in the workplace.110

1. Identify themselves, with the proper credentials, asking to talk to the responsible
agent;

2. Count the workers in an initial visual overview, in order to roughly acknowledge

the average quantity of workers who are available to receive orders; if possible,
collect the individual timesheets, in order to check the amount of workers actually
existing in the workplace; inspectors need to explain the reason of the visit,
pointing out that its main objective is to inspect the regularity of the Social
Security registers and thus all workers need to be interviewed; this initial
explanation should be brief, in order to keep all workers around and prevent them
from spreading or missing in the workplace; in addition, it is very important to talk
about the PNRT, explaining its targets, scope, and actions for both, managers and
workers;

3. Then inspectors need to interview all workers, and start to collect data about them,
to be opposed with the information provided by AFIP – inspectors carry a netbook
connected to the AFIP database in order to verify the proper register information
of every worker,111 the first question to the worker should be if he/she works for
the inspected employer, in order to clarify whether the worker is the inspected
firm’s employee or a contractor’s one; as a suggestion, inspectors could ask who
pays the worker’s wages as in many cases the answer reveals who the real
employer is;

4. If the worker self declares him/herself as independent, his/her data still needs to be
collected and an observation will be noted;

5. The worker needs to identify him/herself with a valid ID;

6. In case the worker declares to be the owner, a partner, one of the owner’s parents
or children, or even the spouse, there is no need to formalize his/her declaration, if
there is an identification proving such a situation; otherwise the formalization will
take place and the person can later provide evidence of his/her situation directly to
the public administration;

7. Once all the clearly visible workers are checked with the AFIP database,
inspectors must proceed to look for more possible employees in hidden areas, such
as changing/locker rooms, kitchens, toilettes/bathrooms, resting areas, patios,
machinery rooms, stock rooms, etc., always followed by the firm’s representative;
if access is denied, inspectors must mention the coverage of Art. 8, Annex II, Law
No. 25.212, giving a deadline to the employer to permit access; if the employer
denies access once again, an obstruction note form must be filled and given to
him/her;

109
Ibid, pp. 9-11.
110
Ibid, pp. 16-18.
111
This proceeding, namely “digital inspector” (inspector digital), was recently introduced in order
to streamline the whole inspection procedure, eliminate the forms and save some administrative
steps.

33
 8. Once the inspection is complete with all names and data, inspectors must penalize
those employers whose workers were not properly registered, issuing a notice of
infringement (acta de infracción) against the company.

These guidelines are meant to provide labour inspectors with the most accurate tools
in order to correctly address the matter of the informal sector in Argentina. As an asset to
facilitate the control over the workplace and governance of the labour market, a certificate
of registered work (certificado de trabajo registrado) can also be required, if the company
depends on public financing or if it is going to contract with the Public Administration,
either federal, provincial, or municipal. Resolution No. 774/2008, from the Labour
Secretariat, provides that any employer can apply for a certificate of registered work to the
local labour authority that will proceed to inspect all the applicant’s establishments, under
the PNRT, in order to verify if all workers are properly registered. The certificate is only
issued if the employer keeps all workers duly registered, or liquidates the eventual fines
and debts with the Social Security, whenever undeclared work is found. In any case, the
certificate expires after 60 days of release and needs to be renewed, if the employer is
required, for some reason, to provide another one.

Brazil

Brazil has a well established labour inspection planning structure and originality has
been applied to tackle subjects like employment in the informal sector (setor informal),112
fraudulent subcontracting (terceirização irregular), and many others related to the correct
balance between persuasion and punishment, in order to achieve compliance with decent
work provisions.113 Regardless, legislation is still deficient to deal with many of the current
controversial labour relations topics, like the establishment of the employment relationship
within triangular schemes and subcontracting. While the Legislature still debates many of
the aspects related to the protection of workers in such schemes, case law and
administrative ordinances fill the void in an effort to ensure social rights through the
establishment of the employment relationship.

The Consolidation of Labour Laws (Consolidação das Leis do Trabalho - CLT) is the
legal framework that protects the employment relationship and contains some statements
concerning its characterization,114 as well as the nullity of any actions aimed at
misinterpreting or perverting its application.115 Despite this protective criterion, the law
does not describe what these fraudulent actions are. Another important provision refers to
subcontracted work, especially in the construction field.116 Notwithstanding, a proper
regulation to organize outsourcing schemes and subcontracting has been requested by both

112
C. H. L. Corseuil, R. Almeida, P. Carneiro: Inspeção do trabalho e evolução do emprego formal
no Brasil, 1688 texto para discussão, Brasília, Instituto de Pesquisa Econômica Aplicada - IPEA,
2012, pp. 7-27.
113
R. Pires: Promoting sustainable compliance: Styles of labour inspection and compliance
outcomes in Brazil, in International Labour Review, Volume 147, Issue 2-3, June/September 2008,
Geneva, International Labour Organization, 2008, pp. 199-229.
114
Consolidation of Labour Laws, Arts. 2 and 3 establishes that any person with a permanent work,
earning a salary, and working under the subordination of an employer, is an employee.
115
Consolidation of Labour Laws, Art. 9, states that any fraud against the employment relationship
should be considered as ipso juri null.
116
Consolidation of Labour Laws, Art. 455, determines the application of the subsidiarity principle
when dealing with subcontracting within the construction field.

34
employers and workers’ organizations and some proposals are currently being analyzed by
the Congress.

While regulation is not published, jurisprudence has been playing a major role on the
definition of some aspects related to triangular relationships, subcontracting and the
employment relationship. The Superior Labour Court (Tribunal Superior do Trabalho)
published, in 1997, the well known Precedent 331 (Súmula 331), recently reformed, as an
evolution of the previous Precedent 256, published in 1986. In short, Precedent 331
determines that:

- Subcontracting is illegal in any situation, except:

• For temporary jobs (Law No. 6.019/74);

• For cleaning and private security jobs (Law No. 7.102/83);

• For any other specialized job related to the means to pursue a certain activity,
and never connected to its core business, provided that subordination and a
personal basis (intuitu personae) liaison are inexistent between the
subcontractor’s employees and the contractor.

- When an irregular subcontract exists, the employment relationship should be

established directly between the employee and the contractor, ignoring the
subcontractor figure;

- Whenever subcontracting, there is a subsidiary responsibility between contractor

and subcontractor, provided that both are part of the same judicial procedure;

- Public administration can only recruit by public tenure and, therefore, irregular
subcontracting does not ensure the establishment of an employment relationship
between the Administration and the employee.

Based on Precedent 331, the Department of Labour Inspection (Secretaria de

Inspeção do Trabalho) published, as well, normative Ordinance No. 3 (Instrução
Normativa n. 03), 1 September 1997, in order to guide the labour inspectors’ activities, in
case a triangular relationship is established. The ordinance’s main aspects are:

- Commercial relationships between two or more companies should be based on the

civil law;

- Labour relationship between employees and employers should be based on the

Labour law;

- Depending on their nature, activities could be performed either at the contractor’s

premises or elsewhere;

- The subcontractor’s employees are not subordinated to the contractor’s directive,

technical, and disciplinary power;

- The contractor and subcontractor should develop different activities and pursue
distinct targets;

- The contractor cannot keep a worker in a different activity other than the one
he/she was recruited for;

- Irregular subcontracting does not result in the establishment of an employment

relationship in the case of a contract involving the public administration;

35
 - The employee’s files and timesheets should be kept in the workplace, regardless
who the employer is, for inspection control;

- The subcontractor’s employees’ activities cannot coincide with those performed by

the contractor, otherwise the inspector should verify such anomaly in order to
prevent irregular subcontracting;

- The contractor’s and subcontractor’s core businesses cannot coincide and the
inspector should verify such abnormality in order to prevent irregular
subcontracting;

- The inspector should verify the nature of the agreement between contractor and
subcontractor, in order to prevent deviation from what has been established in the
agreement and what is being required of the workers and performed by them;

- If the inspector recognizes the employment relationship characteristics between the

subcontractor’s employees and the contractor, he/she should elaborate and issue a
notice of infringement unfavourable to the latter, based on the violation of the
Consolidation of Labour Laws, Art. 41;

- The contractor should monitor the value chain regarding undeclared work, correct
payment of wages, regularity of collective bargaining benefits, and deviation of the
subcontractor's employees’ activities;

- The contractor should also retain and deposit the social security share of the entire
value chain.

Chile

Chile experienced a recent law reform which included an outsourced work regulation
(régimen de subcontratación) into the Labour Code (Código del Trabajo).117 The same law
has given the Labour Department (Dirección del Trabajo) and labour inspection a
fundamental role in controlling compliance with the law. Ever since, the labour
inspectorate has been pursuing an intervention model, based on the respect to decent work
and the reality of facts as the main principles underpinning its activities. More regulation
of outsourcing practices, though, resulted in an increase in judicial conflicts involving
employers and the labour administration. In Chile there are several judicial decisions
denying the labour inspectorates’ competence in determining the existence or not of an
employment relationship.

Law reform stimulated the labour administration on the regulation of the intervention
promoted by the labour inspectorate. Ordinance No. 141/05, 10 January 2007 (Dictamen n.
141/05) establishes the meaning and the extent of Arts. 183-A, 183-B, 183-C, and 183-D,
from the Labour Code, about outsourcing and triangular relationships. According to this
ordinance, outsourced work legally exists if:

1) The employee works for an employer, contractor or subcontractor, under an

employment contract;

2) The contracting company owns the work, the company, or the task to be performed
under the outsourced contract;

117
Law No. 20.123, 16 October 2006, introduced a new chapter in the Labour Code, regulating
triangular outsourced relationships and temporary jobs agencies.

36
 3) There is a contract between the contracting company and the
contractor/subcontractor, stating that the latter is obliged to perform for the
previous some tasks or works, under its own risk and account;

4) Works or tasks are performed by the contractor/subcontractor with their own

dependent employees.

These prerequisites are part of the legislator’s attention to protection whenever

considering an existing triangular linkage. One of the first conclusions deriving from these
precepts, concerns the centrality of the employment relationship as the mainframe for the
exercise of private autonomy. According to the ordinance, legitimate outsourcing may only
occur if all four prerequisites exist in the relationship. Moreover, the ordinance establishes
that a legitimate outsourcing agreement exists if subordination and dependency occur only
between contractor and employee. Whenever employees are directly submitted to a
hierarchical and directive power by the contracting company, instead of the contractor, or
even concurrently, an illegal work supply has happened, and is penalized by law.

From a preventive approach, Decree No. 319, 20 January 2007, approves the
regulation of article 183-C, of Labour Code, about the certification of the labour and social
security obligations. Under that provision, the contracting company has a right of
information regarding the fulfilment of labour and social security legislation by the
contractor and/or subcontractor. Labour inspectorates are responsible for elaborating and
publishing the certificates, concurrently with private evaluators, under the labour
administration supervision. In the same direction, Decree No. 76, 18 January 2007,
approves the regulation of Art. 66bis, of Law No. 16.744, 1 February 1968, with regard to
the establishment of health and safety management systems in triangular relationships.

Despite of the formal regulation detailing obligations on triangular relationships, and

giving the labour inspectorate a crucial role on controlling compliance with the law, some
tensions have occurred recently between the labour administrative authority and the
judicial system, undermining the administrative intervention. These strains are related to
prevailing jurisprudence in Chile, constantly declaring the labour inspectorate’s lack of
attributions, denying their authority to qualify or interpret the legal nature of a private
agreement that has not been formally drawn up to produce labour related effects.118
Ultimately, the Chilean courts’ decisions end up restraining the labour inspectorate’s
activity and reducing it to “as nothing” inspection119 that could only take place in relation
to determinate, precise, clear, and objective infringements. In other incidences, dealing
with conflicts between the parties, only jurisdiction is accredited to take action.

France

France has a very detailed legislation and well-established policies against fraudulent
contracts and illegal work.120 The Labour Code describes in a detailed and clear way a few

118
See Resolution 11914, 3rd Chamber, Supreme Court. Rol 887/2008, CODELCO vs. Dirección
del Trabajo.
119
J. L. U. Cataldo: Inspección del trabajo en Chile: vicisitudes y desafíos, in Revista latino-
americana de derecho social, Núm. 6, Enero-junio de 2008, México, Instituto de Investigaciones
Jurídicas, Universidad Nacional Autónoma de México, 2008, p. 199.
120
French legislation determines that illegal work is a collection of major frauds to the social and
economic public order provided by the Labour Code. The term was legally established in Law No.
2005-882, 2 August 2005.

37
 provisions about illegal work (travail illégal).121 National policies have been laid out in
order to counter the growing concerns over the reassurance of the employment
relationship.122 These concerns are related to illegal work which, according to French
legislation, is regarded as any infringement of the labour legislation related to different
forms of:

- Dissimulated work;

- Trafficking of workers;

- Illicit supply of work;

- Employment of foreigners without work permit;

- Illicit accumulation of employment relation;

- Fraud or false declaration to the provisions of Labour Code arts. L. 5124-1,

L. 5135-1, and L. 5429-1.

This well-established classification provided by the law facilitates the performance of

the labour inspectorate’s task of controlling the employment relationship. Indeed, a clearer
legislation about fraudulent forms of the employment relationship is paramount to establish
a satisfactory and effective labour inspectorate’s response. In order to better describe the
various forms of illegal work, the General Department of Labour (Direction Générale du
Travail - DGT) published brochures in which further considerations are laid out in order to
elucidate the extent of the provisions of law:123

1) Dissimulated work (travail dissimulé) would happen according to three basic

fraudulent situations:

a) Intentional dissimulation of self-employed work, causing social, tax, and

commercial violations - particularly represented either by unregistered trade
register acts or undeclared tax and social duties;

b) Partial or complete intentional dissimulation of employment relationship -

mostly represented by undeclared work or salary;

c) False independent work - mainly employed by employers who conceal a true

employment relationship behind an apparent commercial liaison.

2) Trafficking of workers (marchandage) comes about with the concurrence of three

main instances:

a) Own workers’ allocation at a different employer at the cost of reduction in

social rights - occurs in case the only purpose is to reduce social rights and,
therefore, general costs, by diverting part of the (or the entire) production to a

121
Labour Code, Art. L-8211-1.
122
The National Plan to Fight Against Illegal Work was firstly established in 2004, for the
following biennium. It has been renewed ever since, with the same duration. Before that, Decree n.
90-656, 25 July 1990, established some regulation regarding clandestine work, undeclared work,
and illegal subcontracting. In 1997, Decree No. 97-213, 11 March 1997, repealed the previous
decree in order to set up coordination among the ministries to tackle illegal work.
123
See http://www.travail-emploi-sante.gouv.fr/IMG/pdf/TRANSPARENCE1doc.pdf

38
 different employer/set of employers; it is different from legitimate
contracting-out, which implies a structured business with its own means and
technique;

b) Financial gain purpose - represented by a clear purpose of financial gain, at

the expense of the workers’ rights, based on the reduction in social costs;

c) Decrease of social rights - expressed by the unambiguous loss of rights

suffered by the trafficked worker, which is the main purpose of the operation
itself, for its costs cutback potential.

3) Illicit supply of workers (prêt illicite de main d’oeuvre) occurs in the two
following situations:

a) Own workers’ allocation at a different employer - similar to the first instance

of the trafficking of workers, nevertheless it rests properly characterized even
if the reduction of social rights is not cleared as present;

b) Financial gain purpose - represented by the purpose of financial gain at the

expense of the workers’ rights.

4) Employment of foreigners without work permit (Emploi d’étrangers sans titre de

travail) may encompass two situations:

a) Introduction of a foreign worker in France illegally - it implies that any

foreign worker not holding a European Union citizenship can only be
recruited and hired through the public employment system, if living abroad;

b) Hiring of a foreign worker without a valid work permit - it means that every
foreign worker not holding a European Union citizenship can only be hired if
possessing a valid work permit, and while living in France.

5) Illicit accumulation of employment relations (formes illicites de cumul d’emplois)

may occur in two situations:

a) Two or more employment relationships – mostly represented by the

accumulation of more than one employment or job, implying that the overall
working hours exceed 48 hours per week;

b) One employment relationship and another self-employed relationship – occurs

in “exclusive only” activities, according to the law, like temporary jobs and
some types of managerial jobs.

6) Fraud or false declaration to the provisions of Labour Code arts. L. 5124-1, L.

5135-1, and L. 5429-1 (Fraude ou fausse déclaration prévue aux articles L. 5124-
1, L. 5135-1 et L. 5429-1) includes three main forms of deceit:

a) Perception of undue social benefits – happens whenever a false Position

Reclassification Leave for Paraprofessionals takes place, and after a
termination for economic reason occurs;

b) Unfair reception of “back to work” bonus – takes place with a forged “return
to work” condition just to receive an additional benefit;

c) Unjust payment of unemployment benefit– occurs in various fraudulent forms

of deceiving the public administration in order to obtain payment for
unemployment.

39
 Labour inspectorate is a key element in the struggle against fraud and in favour of the
employment relationship.124 In order to bring administrative activity into life, DGT has
been publishing a series of acts mostly in the last decade. These acts are in response to a
broad government determination to institute a National Plan to Fight Against Illegal Work
(Plan National de Lutte Contre le Travail Illégal).125 The main objectives expressed in the
national plan are:126

a) To reinforce partnership;

b) To reinforce the fight against undeclared work;

c) To guarantee the regular transfer of workers by foreign companies;

d) To develop good practices in terms of contracting-out schemes;

e) To prevent the employment of undocumented foreign workers, and

f) To assure the right to legal conditions represented by genuine and proper statutes
(internship, fixed-term, autonomous, etc.).

A national commission (Comission Nationale de Lutte Contre le Travail Illégal) was

created to establish targets and deadlines. Labour inspectors, courts, police, gendarmerie,
Social Security and Family Allowance Contribution Collection Offices (Unions de
Recouvrement des Cotisations de Sécurité Sociale et d’Allocations Familiales - URSSAF),
and tax authorities act together in order to tackle fraudulent activities by setting up a
comprehensive package of sanctions, remedies, preventive measures, and information for
the entire population.

Another large contribution to the establishment of the employment relationship comes

from the French courts: the elaboration of the “indication clustering” technique (méthode
du faisceau d’indices). This method is used to verify the facts that characterize an
employment relationship according to a sequence of evidences (indicators) to be analyzed
and evaluated in order to ascertain the legal qualification of a specific relation. It was
developed and firstly used to resolve the nature –whether public or private– of the service
provided by an agent working for the public sector. It has since, been extended to other
fields, notably the labour law, especially to help define the legal framework, whether
labour or not, in which the relationship should be placed for examination.127

The technique is largely used by French labour inspectors and it consists of sustaining
an argument with the support of a set of coherent and converging factual evidences,
analyzed in order to establish the qualification of a legal relation, namely a contract of
work. The method is applied and verified based on concrete elements, by inspectors
qualified to impose sanctions against deceit. The inspectors examine factual working
conditions, especially regarding subordination, and forge conviction according to the
concurrent presence of several concordant evidences.

124
Ministère du Travail, de l’Emploi et de la Santé: L’inspection du travail en France en 2010,
Bilans et rapports, Paris, Ministère du Travail, de l’Emploi et de la Santé, 2011, p. 174.
125
See http://www.travail-emploi-sante.gouv.fr/IMG/pdf/20040618_dossier-presentation.pdf.
126
See http://www.solidarite.gouv.fr/IMG/pdf/DP_CNILTI_mars_07.pdf.
127
Ecole des Roches v. M. Barrat, 1983, Plenary Assembly (Arrêt Barrat).

40
 Proven subordination128 applied to the “indication clustering” method, therefore, is
regarded as the technique to verify the existence of an employment relationship by the
combination of sorted evidence:

- Submission to a work schedule and at a certain workplace;

- Worker’s own personal absence;

- Working tools provided by the employer;

- Employer’s exclusive own profit;

- Remuneration.

Case law has been clearly defining the borders between autonomous and dependent
work.129 Fraudulent subcontracting, false autonomous work, dissimulated managers,
disguised interns, and other deceitful schemes to conceal an employment relation are
amongst the main considerations of the labour inspectorate in France.

Ireland

In a similar approach Ireland launched in 2000 the “Programme for prosperity and
fairness”, as a social dialogue’s main outgrowth.130 Ever since the Employment Status
Group formed under the programme mandate,131 it has been working in setting criteria to
establish an employment relationship. The criteria were organized taking into account
statutory and case law, and gathered under a preliminary Code of Practice which was later
updated.

In 2006, the Programme was rebranded under the “Towards 2016 - Ten-Year
Framework Social Partners agreement 2006-2015,” with a main target to develop “a
dynamic, internationalized and participatory society and economy, founded on
commitment to social justice and economic development that is both environmentally
sustainable and internationally competitive.”132 The agreement recognized a key role for
the labour inspectorate to tackle non-compliance with employment rights and suggests the
creation of Joint Investigation Units (JIU) composed of some different public agencies to

128
J. Mouly: Droit du travail, 4e Édition actualisée, Paris, Editions Bréal, 2008, pp. 34-35.
129
See: http://www.courdecassation.fr/publications_cour_26/bulletin_droit_travail_2230/
bulletin_droit_travail_2008_2779/travail_3_2963/
130

http://www.taoiseach.gov.ie/attached_files/Pdf%20files/ProgrammeForProsperityAndFairness.pdf
131
The group consists of representatives from the following organizations: Irish Congress of Trade
Unions, Irish Business and Employers Confederation, Revenue Commissioners, Department of
Social, Community and Family Affairs, Department of Enterprise, Trade and Employment, and
Department of Finance. See www.revenue.ie/en/practitioner/tech-guide/ppfrep.pdf
132
Department of Taoiseach. Towards 2016, Ten-Year Framework Social Partners Agreement
2006-2015, Dublin, Stationary Office, 2006, p. 5. See
http://www.taoiseach.gov.ie/attached_files/Pdf%20files/Towards2016PartnershipAgreement.pdf

41
 work together on the theme.133 Furthermore the Agreement settled the basis for executive
action taken by the Hidden Economy Monitoring Group.134

In 2007, the Hidden Economy Monitoring Group published the updated “Code of
Practice for Determining Employment or Self-Employment Status of Individuals.” Aimed
“to eliminate misconceptions and provide clarity,” within an employment relationship,135
the Code establishes a series of criteria to distinguish a true employee from a self-
employed worker. These criteria were collected based on case law and gathered according
to the group’s provisions:

Criteria on whether an Criteria on whether an

individual is an employee individual is self-employed

While all of the following factors may not apply, an individual would While all of the following factors may not apply to the job, an
normally be an employee if he or she: individual would normally be self-employed if he or she:
- is under the control of another person who directs as to how, - owns his or her own business;
when and where the work is to be carried out; - is exposed to financial risk, by having to bear the cost of
- supplies labour only; making good faulty or substandard work carried out under the
- receives a fixed hourly/weekly/monthly wage; contract;
- cannot sub-contract the work. If the work can be subcontracted - assumes responsibility for investment and management in the
and paid on by the person subcontracting the work, the enterprise;
employer/employee relationship may simply be transferred on; - has the opportunity to profit from sound management in the
- does not supply materials for the job; scheduling and performance of engagements and tasks;
- does not provide equipment other than the small tools of the - has control over what is done, how it is done, when and where
trade. The provision of tools or equipment might not have a it is done and whether he or she does it personally;
significant bearing on coming to a conclusion that employment - is free to hire other people, on his or her terms, to do the work
status may be appropriate having regard to all the which has been agreed to be undertaken;
circumstances of a particular case; - can provide the same services to more than one person or
- is not exposed to personal financial risk in carrying out the business at the same time;
work; - provides the materials for the job;
- does not assume any responsibility for investment and - provides equipment and machinery necessary for the job, other
management in the business; than the small tools of the trade or equipment which in an
- does not have the opportunity to profit from sound management overall context would not be an indicator of a person in
in the scheduling of engagements or in the performance of business on their own account;
tasks arising from the engagements; - has a fixed place of business where materials equipment etc.
- works set hours or a given number of hours per week or month; can be stored;
- works for one person or for one business; - costs and agrees a price for the job;
- receives expense payments to cover subsistence and/or travel - provides his or her own insurance cover e.g. public liability
expenses; cover, etc.;
- is entitled to extra pay or time off for overtime. - controls the hours of work in fulfilling the job obligations.
Additional factors to be considered: Additional factors to be considered:
- an individual could have considerable freedom and - generally an individual should satisfy the self-employed
independence in carrying out work and still remain an guidelines above, otherwise he or she will normally be an
employee; employee;
- an employee with specialist knowledge may not be directed as - the fact that an individual has registered for self-assessment or
to how the work is carried out; VAT under the principles of self-assessment does not
automatically mean that he or she is self-employed;

133
Idem. Ibidem. pp. 93-94.
134
The Hidden economy monitoring group is made up of representatives of Ireland’s tax authorities,
the Office of the Revenue Commissioners, the Department of Social and Family Affairs, the Irish
Congress of Trade Unions (ICTU), the Irish Business and Employers’ Confederation (IBEC), the
Small Firms’ Association (SFA) and the Construction Industry Federation (CIF).
See http://www.eurofound.europa.eu/areas/labourmarket/tackling/cases/ie001.htm
135
See http://www.welfare.ie/EN/Publications/Documents/code-of-practice-on-employment-
status%5B1%5D.pdf

42
- an individual who is paid by commission, by share, or by - an office holder, such as a company director, will be taxed
piecework, or in some other atypical fashion may still be under the PAYE system. However, the terms and conditions
regarded as an employee; may have to be examined by the Scope Section of Department
- some employees work for more than one employer at the same of Social and Family Affairs to decide on the appropriate PRSI
time; Class;
- some employees do not work on the employer’s premises; - it should be noted that a person who is a self-employed
contractor in one job is not necessarily self-employed in the
- there are special PRSI rules for the employment of family next job. It is also possible to be employed and self-employed
members; at the same time in different jobs;
- statements in contracts considered by the Supreme Court in the - in the construction sector, for health and safety reasons, all
‘Denny’ case, such as “You are deemed to be an independent individuals are under the direction of the site foreman/overseer.
contractor”, “It shall be your duty to pay and discharge such The self-employed individual controls the method to be
taxes and charges as may be payable out of such fees to the employed in carrying out the work.
Revenue Commissioners or otherwise”, “It is agreed that the
provisions of the Unfair Dismissals Act 1977 shall not apply
etc.”, “You will not be an employee of this company”, “You will
be responsible for your own tax affairs” are not contractual
terms and have little or no contractual validity. While they may
express an opinion of the contacting parties, they are of
minimal value in coming to a conclusion as to the work status of
the person engaged.

The National Employment Rights Authority (NERA) is the responsible unit for
enforcing Labour law in Ireland. It was established under the “Towards 2016” Social
Agreement and has as one of its mandate “to secure compliance with employment rights
legislation and to foster a culture of compliance in Ireland.”136 In 2008, the Employment
Law Compliance Bill was published in order to secure better compliance with the
employment regulation by reforming the legal provisions with the purpose of strengthening
inspection and enforcement powers.137

The labour inspection system in Ireland has undergone significant changes in recent
years and at the time of writing is continuing to evolve. The existing labour inspection
agency is NERA which was established in 2007. This development emerged from the
changing circumstances in the early to mid-2000s when Ireland experienced an
unprecedented economic boom and almost full employment. One consequence was a
significant increase in economic immigration (immigration resulted in a 16.8 per cent
increase in the population of Ireland between 1996 and 2006). Traditionally Ireland was
more used to emigration. The trade union movement in particular became concerned that
some employers might use the situation to take advantage of vulnerable workers
(particularly immigrant workers) who might not be aware of their employment rights and
entitlements in Ireland.

Over time ICTU and individual Trade Unions lobbied through the Social Partnership
process for more effective policy responses. This ultimately resulted in an agreement in
2006 between, inter alia, Government, Trade Union and Employer Representatives as part
of the 10-year Framework Social Partnership Agreement 2006-2015 “Towards 2016”, to
establish NERA. It was subsequently established on an interim basis, pending enactment of
appropriate legislation in February 2007 and is currently in the process of being subsumed
into a new Workplace Relations Commission. The objective in establishing NERA was to
enhance and expand the existing Labour Inspectorate of the then Department of Enterprise
Trade and Employment in order to develop “a comprehensive and responsive system of
compliance and enforcement.”

136
See http://www.employmentrights.ie/en/aboutnera/.
137
See http://www.oireachtas.ie/documents/bills28/bills/2008/1808/b1808d.pdf.

43
 The draft legislation to establish NERA on a statutory basis was the Employment Law
Compliance Bill which was initiated in the Irish Parliament (Dáil Éireann) in 2008. The
purpose of the Bill was to secure better compliance with employment legislation in
accordance with provisions of Part 2, Sections 11 to 16 of the “Towards 2016” Social
Partnership agreement .

The main provisions of this Bill were:

- to establish a new statutory office dedicated to employment rights compliance, and

with a tripartite Advisory Board;

- to strengthen inspection and enforcement powers and make other necessary

provisions to secure compliance with employment legislation;

- to specify the statutory employment records to be kept by employers for all

employees and the high penalties for failure to do so or for other breaches of
employment legislation;

- to foster increased co-operation at workplace level to safeguard employment

rights;

- to support and enhance monitoring and inspection activity in relation to

compliance with the REA in the electrical contracting industry;

- to provide for exchanges of information between statutory enforcement authorities

so as to facilitate joint investigations of employers suspected of contravening the
law;

- to strengthen the powers of the Minister for Enterprise, Trade and Employment to
initiate investigations and publish the outcomes in cases of public interest;

- to provide for involvement of labour inspectors, for the first time, in the
enforcement of provisions of the Employment Permits Acts 2003 and 2006 and to
strengthen those Acts as regards records and other obligations of employers.

Although the Employment Law Compliance Bill was never progressed into law,
legislative work continued until the dissolution of the Dáil in 2011. The new Government
decided to undertake a fundamental review of the existing employment law and industrial
relations infrastructure by initiating a Workplace Relations Reform Programme designed
to deliver a world-class workplace relations service and employment rights framework by
merging the activities of NERA, the Labour Relations Commission, the Equality Tribunal
and the first instance functions of the Labour Court and the Employment Appeals Tribunal
into a new body of first instance - the Workplace Relations Commission (WRC). The
existing appellate functions of the Employment Appeals Tribunal were to be incorporated
into an expanded Labour Court. The intention from the labour inspection perspective was
that NERA would be responsible for promoting maximum compliance with employment
law.

At the time of writing the legislative programme was still on-going. The Minister for
Jobs, Enterprise and Innovation had indicated his commitment to the early enactment of
the legislation with a view to having the proposed new Workplace Relations structures in
place during 2013.

The functions undertaken to date by NERA in promoting a culture of compliance with

employment legislation will be continued by a proposed Compliance Service of the new
WRC. Officers previously referred to as Labour Inspectors or NERA Inspectors will be re-
named as Compliance Officers. Compliance Officers will deal with underpayment of

44
 national minimum wage; rates of pay due under REAs; rates of pay due under EROs;
failure to provide a pay slip contrary to the Payment of Wages Act; failure to detail all
deductions from gross pay on a pay slip; unlawful deductions from pay contrary to the
Payment of Wages Act; illegal methods of payment; failure to keep records mandated by
the Payment of Wages Act; failure to issue a statement of terms and conditions of
employment/accurate statement or to amend a statement as required by the Terms of
Employment (Information) Acts; various breaches of the Protection of Young Persons
(Employment) Act; working without a valid employment permit or employing somebody
without a permit where one is required under the Employment Permits Acts 2003 and
2006. Where the enactment in question is EU derived and provides for the potential award
of compensation over and above mere restitution of an underpayment (as for example the
Organization of Working Time Act in respect of annual leave), the Compliance Officer
should be able to award restitution but a complainant should in the alternative be able seek
compensation at a hearing before an Adjudication Officer. Compliance Officers may also
be able to use Compliance Notices as a form of statutory notice or direction to an employer
to rectify suspected non-compliance with employment legislation. Compliance Officers
should also be empowered to issue Fixed Charge Notices in respect of the following
examples of non-compliance with employment legislation should the employer in question
fail to rectify his or her non-compliance within 14 days of having been advised in writing
to do so by a Compliance Officer:

• Failing or refusing to provide an employee with written terms and conditions of

employment;

• Failing or refusing to provide an employee with a payslip;

• Failing or refusing to record deductions on a payslip;

• Failing to maintain or produce employment records for a Compliance Officer.

In addition, Compliance Officers will continue to engage with employers and their
representative organizations and will continue to inspect individual employers’
employment records with a focus of achieving voluntary compliance in the first instance
where non-compliance is detected. It is proposed that existing statutory powers of
Labour/NERA inspectors will be enhanced by introducing new mechanisms designed to be
effective instruments in fostering a culture of compliance. It is expected that the changes,
particularly in the area of compliance, will enhance the powers of Compliance Officers.

Italy

Italy is one of the countries to have recently experienced a deep reform in the labour
market.138 The Legislative-Decree No. 276, 10 September 2003, under the mandate
established by Law No. 30, 2 February 2003, aims basically at providing the Italian labour
market with more contractual types than previously existed, and, consequently, more
flexibility.139 The reform has also opened the gates to a wider restructuring within the

138
Referred here as Biagi Reform, named after its main mastermind, Prof. Marco Biagi, from
University of Modena and Reggio-Emilia, consultant, advisor and Labour law expert for the Italian
Ministry of Labour.
139
Ministero del Lavoro e delle Politiche Sociali: La riforma Biagi: Il lavoro atipico e flessibile,
Roma, Istituto per lo sviluppo della formazione professionale dei lavoratori, 2004, p. 6.
See http://www.lavoro.gov.it/nr/rdonlyres/d61c6e85-928b-41a7-97c4-
37b4e6feadb6/0/10_riforma_biagi_lavoro_atipico.pdf

45
 labour inspection services, redirecting them to current concerns over the employment
relationship.

The administrative reform that followed the Biagi Law represented a substantial gain
for the labour inspectorate by recognizing it as the most appropriate institution capable of
promoting good working practices, while preventing fraud and fighting against irregular
forms of work.140 Although there is no single legal definition of what constitutes “irregular
work” according to the Italian labour system, there are some indicators established by
sparse legislation141 delegating the task of controlling fraud and work misclassification to
the country’s General Department of Work (Direzione Generale del Lavoro - DGL).

Based on that definition, legislation has been created and implemented in order to
revise labour inspection targets. Legislative Decree No. 124, 23 April 2004, aims at
rationalizing social security and labour inspectorates’ functions and establishes142 a central
commission to coordinate inspection activity, especially when dealing with underground
and irregular work. In the same direction, DGL has been issuing some administrative acts
in order to regulate the labour inspectorate’s activity in regard to the recognition of an
employment relationship, especially in the case of underground work (lavoro sommerso)
and contract work (contratto di appalto).

For instance, a Directive of 9 September 2008, from the Ministry of Labour, Health
and Social Policies, has established patterns and standards to follow in order to carry out
inspections, according to the new regulation. The planning strategy, the right balance
between prevention and repression, dealing with the management of complaints and
conciliation, flexible jobs, working hours, contract, undeclared and fraudulent contracts are
among the topics included in the orientation. Another referential administrative instrument
is the Ministry of Labour and Social Policies’ Circular No. 38, 12 November 2010. This
administrative act regulates the establishment of the so-called “maxi-sanction”
(maxisanzione), which was implanted by the law143 in order to improve the tools to counter
undeclared work. “Maxi-sanction” assures that all the applicable penalties will be issued,
cumulatively, including a punishment for every undeclared working day for every worker,
and that a very high sanction will be applied to the employer. Under these directions,
“maxi-sanction” is triggered when the evidence of undeclared work arises due to an
employer’s failure to inform about new employees to the local employment centre.

One of the most characteristic and intriguing feature of current labour law challenges
are the triangular relationships. In Italy, contracting-out (contratto di appalto) is regulated
by law,144 and further ordinance has been established to coordinate the inspection

140
M. Fasani: Labour inspection in Italy, LAB/ADMIN, Working document No. 11, March 2011,
Geneva, International Labour Organization, 2011, pp. 10-13.
141
In the Italian legal system one of the first attempts in conceptualizing these atypical figures
appeared in Law No. 73, 23 April 2002, establishing that the employment of dependent workers
unregistered in the company’s accounting books should be penalized; Law No. 248, 28 July 2006,
reformed the previous legislation to extend the concept to all workers, not only dependent ones.
142
Legislative Decree No. 124, 23 April 2004, Art. 3.
143
Law No. 163/2010, Art. 4, reformed previous legislation, art. 36-bis, c. 7, “a”, Law No. 248, 8
August, 2006, which established the maxi-sanction for the first time.
144
Art. 1665, and subsequent, Civil Code; art. 29, Legislative Decree No. 276/2003; Art. 118,
Legislative Decree No. 163/2006; Art. 35, c. 28, Decree Law No. 223/2006.

46
activity.145 Administrative regulation acts to clarify the difference between legitimate
contracting and illegal subcontracting. For that, some revealing evidence (indici revelatori)
and criteria were established to assist inspectors in their activity. Legitimate contracting
would be in course if a contractor displays:

- Own organizational consistency;

- Specialized know-how;

- Assumption of entrepreneurial risk, related to:

• Habitual activity;

• Own productive activity performed in a proven way;

• Possession of a mix of different customers, either simultaneously or in the

course of an elapsed time.

If an inspector reaches the conclusion that an illicit contract took effect, a sanction
must be placed and a mandatory injunction must be released (prescrizione obbligatoria), in
order to provide the immediate stoppage of the fraudulent activity as well as the employees
absorption by the contracting party. Further orientation is also given to provide guidance
for health and safety standards, social security contributions retrieval (in case of fraud),
solidarity clause, and certification procedure, which is further described ahead.

Another consequence of the Biagi Reform was the surge of new forms of preventive
control over the contract of employment, especially established to avoid and prevent
potential conflicts within triangular relationships and new contractual types surged thereby.
One of these new forms of preventive control is the use of certification, an administrative
process that testifies, under the employment relationship parties’ request, that the intended
contract respects the provisions of the law. It is a voluntary procedure aimed at granting
consultative assistance to the employment relationship parties and implies in the selection
of a certifier institution. According to legislation,146 certifier institutions are:

- Bilateral entities;

- Provincial Labour Departments and Provinces;

- Universities;

- Ministry of Labour and Social Policies (whenever the employer has its
headquarters in two or more provinces).

The procedure starts with the proper manifestation of the parties and concludes within
30 days. The request must express the exact effects the certification is intended for,
whether for administrative, civil, social security or tax purposes. Based on the documents
presented, the certifier institution must verify the adequacy of the chosen contract and
propose modifications, if necessary. A hearing with the parties to clarify the purposes of
the certification may be a part of the procedures. The institution can certify many types of
relationship:

145
Ministry of Labour and Social Policies’ Circular No 5, February 2nd 2011.
146
Legislative Decree No. 251, 6 October 2004.

47
 - Employment contract (Art. 75, Legislative Decree No. 276/2003), aiming at
securing the qualification of the employment relationship;

- Contracting-out (Art. 84, Legislative Decree No. 276/2003), aiming at

distinguishing between a true contract-out from an illegal subcontracting;

- Internal rules of a cooperative, aiming at analysing the nature of work to be done

by the associates in a future job to be performed (Art. 83, Legislative Decree No.
276/2003);

- Transaction and renunciation in regard to a project cooperation (Art. 68,

Legislative Decree No. 276/2003), aiming at rendering these acts non opposable,
ex vi Art. 2113 Civil Code;

- Transaction and renunciation in reference to the rights upraised from an

employment relationship aiming at rendering these acts non opposable, ex art.
2113 Civil Code (art. 82, Legislative Decree No. 276/2003);

- Assisting and consulting the parties, particularly in reference to the exact contract
qualification and the alienable rights (Art. 81, Legislative Decree No. 276/2003);

- Voluntary conciliation attempting, (art. 410, Civil Procedure Code, Art. 31 Law
No. 183/2010);

- Mandatory certification of the arbitration clause (Art. 808, 412 and 412 quarter,
Civil Procedure Code, as Art. 31, c. 10, Law 183/2010);

- Assisting and consulting the parties on just cause matters in regard to the
individual employment contracts;

- Arbitration chamber institution (Art. 31, c. 12, Law No. 183/2010);

- Conciliation attempting in case of judicial action against the employment contract

certification (c. 4, Art. 80 Legislative Decree No. 276/2003);

- Organizational model and enterprise management, including occupational health

and safety in the workplace.

Flexible arrangements147 need to be inspected according to administrative rules

published by the Ministry of Labour and Social Policies, which established standards for
the labour inspectorate, as well.148 These rules are based on the notion that certificates
generate the assumption of a contract regularity that can only be challenged in the case of a
proven breach.149

A current experience based on social dialogue, in Italy, regards the search of an index
that determines accurately the existing labour intensity, in certain activities. Congruence
indexes (Indici di congruità) are scales of measurement of the workforce intensity, with

147
Here understood as fixed term, part-time, on-call and occasional jobs, as referred to in the
Ministry of Labour, Health, and Social Policies´ Directive of 2008, 18 September which establishes
that labour inspectorate should only focus on uncertified relationships. Same procedure should be
applied to contract-out jobs, and triangular relationships.
148
Ministry of Labour and Social Policies Circular No. 48, 15 December 2004.
149
See sentence no. 2647, 22 June 2009, Labour Section, Court of Milan.

48
regard to a certain activity, and were introduced by law,150 in the Italian regulation. The
intention was to avoid social dumping and unrealistic values, based on the denial of the
workers’ rights. These indexes apply to every contract-out scheme and whenever a
presented value is so low that it displays incongruence, triggering an assumption of
incongruity and halting the issuance of a social security certification, thus paving the way
for further investigations. Congruence indexes were elaborated as a result of the social
dialogue, between the most representative organizations of both employers and employees,
under the organization and supervision of the Ministry of Labour and Social Policies. It is
still under probation, according to the agreement reached among the social agents and it
will be fully applicable from 2013.

In June 2012, Parliament enacted a law, (known as “Legge Fornero” after Mrs Elsa
Fornero, the former government Minister of Labour), which has completely reformed the
labour market in Italy.

The Reform has amended Art. 18 of the “Statuto dei Lavoratori” (Law 300/1970),
providing different sanctions arising from unlawful dismissals in workplaces with more
than 15 employees. Whilst the previous legislation provided reinstatement and complete
back pay in all cases for the months between termination and reinstatement, the Reform
lists the following sanctions:

i. Termination based on discrimination or similar cases: due to the employee getting

married, violating the maternity/paternity protection, due to a reason against public
policy - or a void termination (i.e. oral termination notice). In these cases, the
sanctions remain the same as prior to July 2012: reinstatement and total back pay,
although the employee now has a right to opt for a 15-month allowance by the
employer instead of reinstatement;

ii. Termination based on breach of contract, followed by a lawsuit in which the

employee proves that he/she did not breach the contract or the Court assesses that
the conduct that caused the termination is among the list of cases prescribed in
collective bargain as a reason for a conservative sanction only. These cases receive
the same sanction as cases of termination where the employee is dismissed for a
reorganization or collective lay off and can demonstrate that the real motivation of
termination was instead an alleged misconduct; in all the hypothesis mentioned in
this point, the employee is reinstated with back pay, but with a maximum of
twelve months, in the event the trial lasts longer;

iii. In all other cases of termination for cause or for economic reasons that Courts
deems wrongful, for any reason other than the ones stated in the paragraph above.
In these cases, there is no reinstatement and the employee is awarded an allowance
equal to 12-24 monthly compensation payments, depending on a vast array of
criteria including seniority, size of the firm, behaviour of the parties etc.;

iv. Terminations that are challenged for reasons relating to the procedure (i.e. absence
of motivation of the just cause, insufficient time for the employee to respond to the
employer notice of misconduct etc.). In these cases reinstatement is not admitted
and back pay is limited to between six and 12 monthly salary payments, according
to the above mentioned criteria.

As for the Independent Contractor Agreements, the Reform aims to discourage

relationships that differ from employment contracts (i.e. project labour, labour

150
Law No. 296, 27 December 2006, Art. 1, cc. 1173 and 1174.

49
 partnerships, independent contractor agreements). Various constraints and sanctions have
therefore been enacted, as follows:

a) Independent project contractor agreements have to refer to a specific project

dedicated to a clearly defined final result. They can no longer relate to a part of a
wider project; neither to the corporate activity of the principal; nor to merely
executive or iterative works (unless they are agreed by collective bargaining
agreements). Failing the foregoing, an independent contractor agreement providing
for collaboration on a regular basis is regarded as a permanent employment
contract by operation of law, since the date of its coming into force. This new
provision has resolved some discrepancies in the case law under the previous rule.
Hence, today, the determination of the specific project is a precondition of an
independent project contractor agreement; no other evidence can be submitted to
Court by the principal of the independence of the contractor. Furthermore, if the
independent project contractor performs its contractual activity in a way similar to
that of the employees of the principal, then the independent project contractor
agreement is regarded as a permanent employment contract. However, in this case,
the principal is admitted to give evidence regarding the independence of the
contractor. The foregoing assumption does not apply in the case of highly
professional activities, to the extent that such activities are agreed by collective
bargaining agreements.

b) The Reform also regulates the activities performed by independent contractors

holding a VAT position. The relevant relationship is regarded as a contract
providing for collaboration on a regular basis whenever at least two of the
following conditions occur:

i. The duration of the relationship is in excess of eight months for two

consecutive years;

ii. The consideration is in excess of 80 per cent of the overall annual earnings of
the contractor for two consecutive years;

iii. The contractor has a dedicated working desk at the principal’s facilities.

This assumption is skipped in three cases only:

1. The contractor renders a professional activity the performance of which requires

admission to registers or rolls;

2. The contractor gains an annual income as an independent contractor (regardless

whether from one or more principals) below 1.25 times the minimum national
insurance contribution base;

3. The contractor renders a highly-specialized activity with skills acquired through

substantial education or practice.

The burden of proof of the independence of the contractor lies upon the principal.
Failing any evidence, the relationship is regarded as a contract providing for collaboration
on a regular basis and the latter is in turn regarded as a permanent employment contract by
operation of law if no specific related project can be evidenced.

As for the labour partnership, according to the Reform no more than three partners
can be dedicated to the same activity (except for relatives or kindreds). Failing this, the
relationship with all further partners is regarded as a permanent employment contract. In
any case, the relationship with a partner is regarded as a permanent employment contract
when:

50
 a) The partner has not benefited from the earnings of the partnership or of a
concerned business;

b) No accounting reports have been submitted to the partner;

c) The partner performs a scarcely specialized activity.

The Reform intervenes also on temporary work as follows:

a) In future, no specific reason (i.e. organization, production, technical, substitution)

is required to enter into a temporary employment contract for the first time
provided that the duration of the contract is not in excess of 12 months. The same
rule applies when agreed by means of collective bargaining agreements, or when
the employee is hired within peculiar production activities (i.e. new activities,
launch of a new product or service) or within the first appointment of a temporary
administering contract;

b) The legislator has extended the maximum time limit upon expiration of which a
temporary employment contract is regarded as a permanent employment contract;
such limit applies also in case a temporary employment contract undergoes one or
more extensions. However, where the duration of a temporary contract is extended,
the employer is obliged to inform the local labour authority, by communicating the
length of the extension. The term after which a new temporary employment
contract is regarded as a permanent employment contract has been prolonged from
10 to 60 days (if the duration of original temporary employment contract was not
in excess of six months) and from 20 to 90 days (if the duration of original
temporary employment contract was in excess of six months);

c) Thirty six months is the maximum duration of a temporary employment contract

after which the contract is regarded as a permanent employment contract and must
be calculated including the appointments within a temporary administering
contract, whether temporary or permanent, between the same parties and for the
same activities.

Spain

The labour inspectorate in Spain has long been dealing with undeclared work and
disguised relationships. In 2005, the Tax Authority (Agencia Tributaria) launched the Plan
to Prevent Tax Fraud (Plan de Prevención del Fraude Fiscal). It was updated in 2008 to
adapt to the new economic circumstances, with the creation of the Fraud Observatory
(Observatorio del Fraude). The Observatory is formed by the General Treasury of the
Social Security (Tesorería General de la Seguridad Social) and by the Labour Inspectorate
(Inspección de Trabajo y de la Seguridad Social) and it has, as main objectives:151

• To permanently update the fraud conduct directory and the sector risk profile as
well as to elaborate a risk assessment;

• To establish action protocols, aimed at orienting the investigations of deceptive

conduct;

151
Plan Integral de Prevención y Correción del Fraude Fiscal, Laboral y a la Seguridad Social.
p. 13. See http://www.aeat.es/static_files/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Sala
_de_Prensa/Plan_int_prev_corr_fraude.pdf.

51
 • To extensively and intensively prospect the database of the General Treasury of
the Social Security using IT tools; and,

• To propose the improvement of management and the updating of normative in

order to increase the efficiency and effectiveness of the struggle against fraud.

Undeclared work and the irregular economy have been main targets for the Spanish
labour inspectorate since 2005, following an immigrant’s regularization plan launched in
the same year. Moreover, labour inspection performance in Spain is totally based on a
crossing-data cooperative basis. Different tools and approaches are relevant to accomplish
better results and aside from the field inspections, it is important to mention that
campaigns, lectures, discussions and tripartite meetings are paramount.

Alongside with undeclared work and irregular economy, triangular and disguised
relationships are also targets of a major strategy to tackle the multifaceted problem of
precarious work that deteriorated as a result of the 2008 global crisis.152 Specifically with
regard to the approach adopted by Spain, focus has been given to certain sectors and
activities. Legislation itself has been updated to regulate new forms of autonomous work153
and other forms of control have been assigned to the labour inspectorate in order to
regulate contracting-out within the construction sector.154

The employment relationship has a “statutory assumption” status in Spain as the

Statute of Labourers (Estatuto de los Trabajadores) establishes that there is an
employment relationship every time work is performed under someone else’s direction,
organization and account, for remuneration.155 Jurisprudence, for instance, has been setting
the framework for the exercise of this organizational employer’s power. Thus, working for
someone else’s, under dependency, for remuneration, and the insertion on the directive and
organizational entrepreneurs’ circle, are some of the employment relationship
characteristics shaped by jurisprudence in Spain.156 Since the Spanish labour inspectorate
is also responsible for inspecting and retrieving the social security quotas,157 one of its
duties is to correctly assess the relationship occurring under a contract of work, and
establish whether it is an employment relationship or an autonomous work.

152
M.-L. Vega Ruíz: The global economic and social crisis and its impact on labour inspection
systems Social Dialogue Sector, Geneva, International Labour Organization, 2009, pp. 8-13. See
http://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/--
lab_admin/documents/publication/wcms_123770.pdf.
153
See Law 20, 11 July 2007, called Autonomous Work Statute, and Royal Decree 197, February
23th, 2009, which develops the concept of economically dependent autonomous worker (trabajador
autónomo economicamente dependiente - TRADE).
154
See Law 32, 18 October 2006, which regulates contracting-out within the construction sector,
and Royal Decree 1109, 24 August 2007, which develops the law. Both instruments create the
Certified Firms Register (Registro de Empresas Acreditadas), related to the Regional Labour
Authority. Whenever a fraud is detected the certificate is cancelled and the subcontractor is
penalised by the labour inspectorate.
155
Estatuto de los Trabajadores, Art. 8.1.
156
See, among others, Supreme Tribunal decisions TS ATS 3940/2008, TS ATS 11374/2007, and
TS STS 8532/1999.
157
Law 42, 14 November 1997, Art. 3. 1.3.1.

52
 Likewise, in order to correctly determine the undergoing relationship, labour
inspectorate issued some ordinances to guide the labour inspector’s work. Instruction
8/2009, 29 July, is intended to tackle the false autonomous work phenomenon and defines
some indicators that establish if there is a fraudulent operation leading to further
investigation of the worker:158

- Time proximity: to preferably select cases in which a small time-lapse between

disconnection from the general social security system and enrolment in the
autonomous work social security system occurs;

- Economic sectors: to preferably select industry and transportation, in which annual

targets are far from accomplishment;

- Ambulant vending: ambulant vendors will not be selected as they are part of the
reform imposed by Law 2/2008;

- Sectorial coincidence: to preferably select cases where there is a coincidence

between the workers’ and the companies’ National Code of Economic Activities
national code (Código Nacional de Actividad Económica - CNAE).

Furthermore, the ordinance also establishes some criteria to determine whether there
is an employment relationship. Thus, regardless of the legally formal aspect of the
relationship, if a considerable amount of the following characteristics occur, there is a true
employee, rather than an autonomous worker.159

Dependency or subordination signs exist:

a) If the worker develops his/her work under the company’s (or any of its officers)
direction, vigilance, and orders;

b) If the worker is submitted to technical or organizational orientation, and under the

company’s command power;

c) If the worker obeys the contractual orders about his/her tasks;

d) If the worker performs similar tasks compared to the other regular plant’s
employees;

e) If the worker has similar hours of work compared to the other regular plant’s
employees;

f) If the worker has previously operated with the same company as an employee it is
especially interesting to determine whether the current activity is different from
that performed under an employment contract;

g) “Working for someone else” signs exist;

158
See instruction no. 8/2009, about crackdown NS0033 tackling false autonomous workers,
General Department of Labour Inspection (Instrucción n. 8/2009 sobre campaña NS0033 de
trabajadores falsamente autónomos, de la Dirección General de la Inspección de Trabajo y
Seguridad Social).
159
Ibid.

53
 h) If the entrepreneur appropriates the fruits of labour directly and from the
beginning, as they were produced, instead of waiting for the final outcome;

i) If the worker commits to an activity oriented obligation, leaving the result

obligation to a second level;

j) No risk to the worker. The remuneration earned by the worker is not affected by
the risk of deterioration, destruction, or failed operation which cannot be attributed
to him/her. The entrepreneur must take all the risks, not the worker;

k) If the worker earns a retribution based on time (per hour, per diem, per week or per
month), or on partial units of the entire work instead of a total amount, paid after
the conclusion of the work;

l) If the worker does not use his/her own tools, materials, and machinery, aside from
the most simple and useful ones specifically related to some professions. The
worker just uses his/her own physical and intellectual capacity;

m) “Own organization” signs exist;

n) If the worker does not perform his/her own and individualized activity, regardless
the fact that he/she is enrolled as an autonomous worker in the social security
system;

o) If the worker does not possess the factors attributed to denote organized and “own
activity,” like working in his/her own establishment (building, office, workshop,
etc.) separated from his/her private residence, sufficient machinery to perform the
tasks, or the means of transportation to realize the activity.

On another direction, towards a sectorial approach, technical criterion 79/2009

(Criterio Técnico 79/2009), relates to the social security regimen applicable to the private
health sector workers. It has some guidelines directing labour inspectors on how to
recognize a true employment relationship in the private health system. Under this
ordinance, there are six main factors based on jurisprudence to be addressed in order to
determine whether there is an employment relationship:160

1. The qualification of the contract does not depend on how it was determined by the
parties but by the effective configuration expressed in the obligations accepted
under the agreement and its performance - “primacy of facts” principle (STS 11
December 1989, STS 29 December 1999, among many);

2. The provisions of the Civil Code (contract of service) are not discrepant in regard
to the employment relationship, as the latter is a type of the first, improved by a
legislative evolution (STS 7 June 1986): under the Civil Code (contract of service)
regime, there is a generic “obligation-and-work” exchange scheme compensated
by an amount of remuneration for the services, whereas under an employment
contract this scheme consists of an obligation to perform dependent work for
retribution;

3. Characterization of the “note of dependency” within the health sector, according to

jurisprudence:

160
See technical criterion no. 79/2009, about the social security regime applicable to health
professionals in the private sector (Criterio Técnico Número 79/2009 sobre régimen de seguridad
social aplicable a los profesionales sanitarios de los establecimientos sanitarios privados).

54
 a) Task organization: If the health professional is integrated to the
establishment’s professional board which is provided by all the organizational
elements to provide the services;

b) Clientele: Whether the establishment’s or the health professional/worker’s

own;

c) Personal provision of services: Health professionals are obliged to provide

personal services;

d) Workplace, premises, and working teams: A health professional working

for a society of doctors is usually considered to be in an employment
relationship;

e) Working methods: Dependency is explicit whenever determined by the

health company, but it is important to notice that a certain level of technical
independence is expected as a characteristic of medical and other liberal
professions;

f) Working hours: A strict working hour regime is not necessary as the doctor
is submitted to work during the clinic opening hours under the organizational
and directional power of the health establishment;

g) Replacements: Even when occasional substitutions are directly decided by

the health professional that is going to be substituted, an employment
relationship exists if the existing contractual provisions about the substitution
are the exception and not the rule under the main agreement signed by the
parties.

4. Characterization of the note of “working for someone else” note characterization

within the health sector, according to jurisprudence:

a) Fruits of labour: Should be transferred to the establishment from the

beginning, and not to the medical and nursery personnel;

b) Marketing and public relationship: Pricing policy, clientele selection,

persons to be seen, are powers that characterize the entrepreneur’s activities.
If these powers are denied to any entrepreneur, it is likely that an employment
relationship exists;

c) Retribution: Both a fixed or periodic retribution, and a correlation between

the tasks and the amount of money earned, are evidence of an employment
relationship.

5. Evaluation of the characterization of the notes of “employment relationship”:

Relationships set in a health sector establishment are varied but the common
characterization of the notes of “employment relationship” applied to any other
employment relationship is also valid to determine the existence of an employment
contract. Peculiarities related to the health sector may arise, though. In any case, as
indicated by the Supreme Tribunal, there must be examined whether:

a) There is voluntarily agreed intuitu personae work;

b) There is “work developed for someone else”, as the fruits of labour are
appropriated from the beginning by an entrepreneur in exchange for
retribution;

55
 c) There is work performed under the directional and organizational power of
someone else;

d) There is the perception of habitual retribution.

The Supreme Tribunal sentence of 7 November 2007, established a method to

select criteria in regard to the employment relationship. According to this sentence
the first step to be taken is to analyze the most usual common evidence of
dependency. Thereafter it is necessary to apply the evidence system to the
controversial relationship being examined, based in the real facts, with an eye on
the characterization of the medical activity, highlighting the usual technical
independence enjoyed by health professionals.

6. Consequences of the existence of the notes of characterization of the employment

relationship:

Labour inspectors should automatically enrol the health professional within the
general social security regimen and provide the correct amount of payment owed,
from the beginning of the relationship.

According to Spanish legislation,161 whenever the labour inspectorate declares the

existence of an employment relationship in contrast to an originally alleged
autonomous work, the interested part is able to contest the administrative remedies
(actas de infracción and actas de liquidación) judicially. Once the judicial
procedure is settled, the administrative procedure is suspended until a final judicial
decision is published.

United States

The rise of non-standard arrangements in North America has followed the economic
opening represented by the North American Free Trade Agreement (NAFTA), in 1994.162
Ever since, the United States Internal Revenue Service (USIRS) has been implementing
methods and guidelines for both workers and entrepreneurs aimed at helping both parties
to recognize a truly employment relationship and to avoid misclassification. One of the
first initiatives was to establish guidelines addressing the employment relationship’s
indicators, in order to orient the taxpayer on how to adequately identify the real condition
of the service realized. The “20 factors” test, also known as “right-to-control” test, served
as a simplified indicators script, shaped to delimit the differences between an employee
and a contractor, under a common law perspective.

161
Law 36/2011, 10 October Art. 148.
162
J. Sack, E. Phillips, H. Leal-Neri: Protecting workers in a changing workworld: the growth of
precarious employment in Canada, the United States and Mexico, in G. Casale (editor): The
employment relationship. A comparative overview, Geneva, International Labour Office, 2011,
pp. 233-285.

56
The “20 factors” indicating whether an individual is an employee or an independent contractor are:163
Instructions
An employee must comply with instructions about when, where and how to work. Even if no instructions are given, the
control factor is present if the employer has the right to control how the work results are achieved.
Training
An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own
methods and receive no training from the purchasers of their services.
Integration
An employee’s services are usually integrated into the business operations because the services are important to the
success or continuation of the business. This shows that the employee is subject to direction and control.
Services rendered personally
An employee renders services personally. This shows that the employer is interested in the methods as well as the
results.
Hiring assistants
An employee works for an employer who hires, supervises and pays workers. An independent contractor can hire,
supervise and pay assistants under a contract that requires him or her to provide materials and labour and to be
responsible only for the result.
Continuing relationship
An employee has a continuing relationship with an employer. A continuing relationship may exist even if work is
performed at recurring although irregular intervals.
Set hours of work
An employee usually has set hours of work established by an employer. An independent contractor generally can set his
or her own work hours.
Full-time required
An employee may be required to work or be available full-time. This indicates control by the employer. An independent
contractor can work when and for whom he chooses.
Work done on premises
An employee usually works on the premises of an employer, or works on a route or at a location designated by an
employer.
Order or sequence set
An employee may be required to perform services in the order or sequence set by an employer. This shows that the
employee is subject to direction and control.
Reports
An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of
control.
Payments
An employee is paid by the hour, week or month. An independent contractor is usually paid by the job or on a straight
commission.
Expenses
An employee’s business and travel expenses are generally paid by an employer. This shows that the employee is subject
to regulation and control.
Tools and materials
An employee is normally furnished significant tools, materials and other equipment by an employer.
Investment
An independent contractor has a significant investment in the facilities he or she uses in performing services for someone
else.
Profit or loss
An independent contractor can make a profit or suffer a loss.
Works for more than one person or firm
An independent contractor is generally free to provide his or her services to two or more unrelated persons or firms at the
same time.

163
Department of Treasury. Internal Revenue Service. Employment taxes. Publication 937. (Rev.
Nov. 94). Cat. No. 93126N. pp. 4/5. See http://www.unclefed.com/IRS-Forms/1996/P937.PDF

57
 Offers services to the general public
An independent contractor makes his or her services available to the general public.
Right to fire
An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces a
result that meets the specifications of the contract.
Right to quit
An employee can quit his or her job at any time without incurring liability. An independent contractor usually agrees to
complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to
complete it.

Despite the possibilities and applicability of the test, some concerns emerged as it
became a very popular try-out during the 1990’s. If from one perspective it was helpful for
common citizens to achieve a better understanding about the employment relationship
elements, from another point of view it was too simplistic and apart from other factors
which should be applied, like if the worker is protected by a statute or only by common
law rules, for instance.164

Another analysis notes that under common law rulings the factors must be measured
differently, because not all factors apply in each case or have the same weight.165 From
another point of view, some could say that these guidelines would rather help bad
taxpayers to be sharper at the moment of defining the type of relationship to declare to
American authorities. In any case, USIRS has recently developed a form to be filled by
anyone willing to have an official position about the legal framework applicable to the
reality.166

From a more labour oriented perspective the United States Department of Labour
(USDOL) has recently started a joint project with the U.S. Treasury in order to address the
“worker misclassification” problem. Worker misclassification means “the practice of
treating a worker who is an employee under the law as something other than an employee,
thus depriving the employee of rights and benefits to which they are entitled.”167 While
USIRS has long issued guidelines to differentiate real employees from independent
contractors, USDOL has been pursuing an integrated model in order to enforce the statutes
under its responsibility.

Enforcement realized by USDOL is related to some specific federal labour

regulation168 and agencies within the USDOL own administrative structure. Wage and

164
M. P. Burchett: Employees vs. Independent Contractors (1990), William & Mary Annual Tax
Conference, Paper 217, pp. 6-12. See http://scholarship.law.wm.edu/tax/217.
165
A. R. Sumutka: Employee or independent contractor: are the IRS’s 20 factors useful or even
needed? in The CPA Journal, April 1992, New York, The New York State Society of Certified
Public Accountants, 1992, pp. 48-55.
166
The form SS-8 is a voluntary way to have an official referral from IRS about the employment
relationship contrasting with the independent contract. See http://www.irs.gov/pub/irs-pdf/fss8.pdf.
167
S. D. Harris (DOL Deputy Secretary), Statement before the Committee on Health, Education,
Labor, and Pensions, U.S. Senate, 17 June 2010.
See http://www.dol.gov/_sec/media/congress/20100617_Harris.htm.
168
Notably federal labour regulation such as the Fair Labour Standards Act, the Family and Medical
Leave Act, the Migrant and Seasonal Agricultural Worker Protection Act, worker protections
provided in several temporary visa programs, the prevailing wage requirements of the Davis-Bacon
and Related Acts, the Service Contract Act, the Employee Retirement Income Security Act, the
Occupational Safety and Health Act, and numerous whistleblower provisions of federal statutes.

58
Hour Division (WHD) is one of the agencies responsible for enforcing labour law and
stands among the main USDOL agencies involved in the task force oriented of tackling the
worker misclassification issue.

As an initial contribution of USDOL’s efforts to create a joint Labour-Treasury

misclassification initiative focused on detecting, investigating, and prosecuting employers
with misclassified workers, USDOL published some guidelines other than the common
law indicators summed at the USIRS “20 factors” test. In fact, these additional guidelines
take into consideration the economic reality established within the relationship as a major
jurisprudence input for the determination of the employment relationship.169 In the same
direction, the Supreme Court consolidated some criteria resembling the economic reality
test, which should drive the contextual analysis carried out by the judges. These are:170

- The extent to which the services rendered are an integral part of the employer’s
business (examples: Does the worker play an integral role in the business by
performing the primary type of work that the employer performs for his customers
or clients? Does the worker perform a discrete job that is one part of the business'
overall process of production? Does the worker supervise any of the company's
employees?);

- The permanency of the relationship (example: How long has the worker worked
for the same company?);

- The amount of the worker’s investment in facilities and equipment (examples: Is

the worker reimbursed for any purchases of materials, supplies, etc.? Does the
worker use his or her own tools or equipment?);

- The nature and degree of control by the employer (examples: Who decides on how
many hours are to be worked? Who is responsible for quality control? Does the
worker work for any other company(s)? Who sets the pay rate?);

- The worker’s opportunities for profit and loss (examples: Does the worker make
any investments such as insurance or bonding? Can the worker earn a profit by
performing the job more efficiently or exercising managerial skill or suffer a loss
of capital investment?);

- The amount of initiative, judgment, or foresight in open market competition with

others required for success of the claimed independent enterprise (example: Does
the worker perform routine tasks requiring little training? Does the worker
advertise independently via yellow pages, business cards, etc.? Does the worker
have a separate business site, etc.?).

The Field Operations Handbooks – FOH,171 published by USDOL, explain in further

details how do the “right-to-control” and the “economic reality” tests should be applied by

169
The US Supreme Court has been analyzing the applicability of some statutes depending on the
status of the worker. One of the first cases that attributed to economic reality a major role on
determining the employment relationship is Rutherford Food Corp. v. McComb, 331 U.S. 722, 728,
67 S.Ct. 1473 (1947).
170
See http://www.dol.gov/elaws/esa/flsa/docs/contractors.asp.
171
Operations manual provides Wage and Hour Division (WHD) investigators and staff with
interpretations of statutory provisions, procedures for conducting investigations and general
administrative guidance. See http://www.dol.gov/whd/FOH/index.htm.

59
 WHD investigators, in order to establish whether a worker is an independent contractor or
an employee.172

Improving legislation173 and increasing control over the workplace174 are also some of
the ways to tackle the matter.

7. Assessing the employment relationship at

the workplace: a task for inspectors
The respect for the fundamental rights at work is the most important feature of
modern challenges faced by labour administrations throughout the world, and it sets up the
framework for the intervention exercised by labour inspectorates. Those rights, as stated by
the Declaration, need to be guaranteed, regardless or not the ratification of certain basic
and fundamental standards. Labour inspectors are the public agents who are in charge of
the enforcement of fundamental rights at work. That is why the Declaration is a central
document to guide national labour policies in respect to those rights under any system.
Additionally it is important to note that the establishment of the employment relationship is
crucial, in most systems, to guarantee the exercise and fulfilment of most of these rights.

The reassurance of labour inspection playing a key role in the assessment of the
employment relationship is part of a global strategy to strengthen labour administrations in
order to guarantee good governance and compliance with the law.175 Changing roles in
labour institutions are related to the increasing economic competition throughout the
world. Globalization has put companies under unprecedented levels of competition and
threatened the certainty conquered by labour institutions during the 20th century.176

Labour inspection systems have a mandate provided by both Conventions Nos. 81

and 129. These conventions, together with Recommendations Nos. 81 and 133 are
fundamental documents supporting States on the implementation of good governance
schemes. Unprotected work is the main fertile ground for Labour Inspectorate’s action
because it undermines a desirable social cohesion in the constituent States. However,
unprotected work is too wide a concept that includes different precarious situations such as
undeclared work, triangular relationships, quasi-employees, and disguised relationships,
therefore it is absolutely necessary to understand the various different approaches
presented by different labour inspectorates.

172
See http://www.dol.gov/whd/FOH/FOH_Ch10.pdf.
173
See the bill text for the Employee Misclassification Prevention Act at http://thomas.loc.gov/cgi-
bin/query/z?c112:H.R.3178.
174
See http://www.dol.gov/whd/workers/misclassification/.
175
G. Casale, A. Sivananthiran: Fundamentals of labour administration, Geneva, International
Labour Office, 2010, pp. 43-53.
176
G. Arrigo, G. Casale, M. Fasani: A guide to selected labour inspection systems (with special
reference to OSH), LAB/ADMIN, Working document No. 10, Geneva, International Labour
Organization, 2011, pp. 3-6.

60
 Triangular, disguised, subcontracted, undeclared and other atypical labour-related
relationships represent an enormous challenge to many different countries.177 Agricultural
work is subject to subcontracting practices in most countries, as the agricultural sector was
one of the last to be regulated in terms of labour, and thus is still related to ancient legal
practices. The evolution of agribusinesses has produced many more complex, professional,
and specialized practices, requiring new approaches to be implemented, as the outsourcing
phenomenon appears as a great protagonist within the sector. Working conditions, on the
other hand, could still be very hazardous, and good governance is essential to guarantee a
safe workplace.

In urban areas, industries and services are increasingly demanding higher productivity
at lower costs. Competition is driving companies to search for outsourced forms of work,
and alternative ways of having the product of work without having to pay for it. Industries
are tempted to spread their production between several different plants, while services are
similarly split between many multiple offices, not to mention the return of the domestic
system of work, very much related to the service sector, and to some extent, also the
manufacturing sector.

Labour inspectors do not regularly determine whether there is or not an employment

relationship because this is normally a task reserved to national judicial systems. Rather
than declaring the existence of a pact, what labour inspectors do, in most systems, is
recognize, assess and gather evidence on how the reality of the facts is expressed within
the workplace. For that, labour inspectorates should rely on enough statutory prerogatives
and remedies in order to apply them to real situations. In most systems, labour
inspectorates deliver notices, reports and other administrative remedies to foster more
adequate, private conducts. Labour inspectors’ administrative acts correspond to the
official analysis about a determined relationship, in order to properly verify if there is a
real and concrete independent work or a disguised relationship in need of protection.

The labour inspection represents a government’s official statement about a certain and
determined workplace. It is also the bridge between the reality of the facts that happen
within the workplace and the letter of the law. Labour inspection observations and reports
are very useful when describing what the inspector witnessed and perceived in the
workplace, therefore a detailed description of the circumstances and facts the inspector has
seen is essential for the correct assessment and framing of the employment relationship.178

As established in Recommendation No. 198, the reality of the facts should drive the
analysis to be done and the inspection itself. Although documents like a written contract or
job agreements are necessary for a good inspection and may be required as proof of the
existence of an employment agreement for most of the labour relationship systems, the
facts observed in the workplace play a definitive role in determining the employment
relationship, rather than what is written on a piece of paper.

The doctrine of the reality of facts, currently enshrined in Recommendation No. 198,
is largely known and used in most systems. It slowly made its way into the jurisprudence at
the end of the 19th and beginning of the 20th centuries, and definitively shaped to its current
format in 1930, by Mexican jurist Mario de la Cueva. The doctrine was developed with the
anti-contractualist overtones and represents the essence of this particular law branch.

177
M.-L. Vega Ruíz: La inspección de trabajo en Europa: retos y logros en algunos países
seleccionados aún en tiempos de crisis, LAB/ADMIN, Documento de trabajo n. 3, Ginebra,
Organización Internacional del Trabajo, 2009, pp. 32-35.
178
ILO: Guide for labour inspectors, Studies and reports, New series, no. 41, Geneva, International
Labour Office, 1955, pp. 16-17.

61
 Moreover, the reality of facts is at the core of the existence of any possible agreement
between the worker and the entrepreneur, and simply cannot be denied, insofar as reality
itself cannot be denied by any formal declaration,179 as previously asserted.

Since labour inspection deals with the reality of facts that happen within the
workplace on a daily basis, it is the best placed stakeholder to assess the employment
relationship. In fact, the origin of the word “inspector” itself seems to be related to a true
and complete scrutiny of a subject.180 That is the major essence of labour inspectorates,
specifically with regard to the employment relationship assessment: to collect evidence and
publish an official statement over the reality of the facts revealed by the labour inspection.
It is an important contribution to the realization of decent work practices and the protection
of fundamental rights at work, for the benefit of the social development in any country.181
As a matter of fact, it is not uncommon to find a disguised labour relationship underneath
formalized civil agreements made between enterprises and service providers/contractors.

Regardless the established position asserted by the ILO,182 constant judicial decisions
in some places are placing administrative activities, represented by labour inspectorates,
under risk, and most of the time these decisions reflect a complete lack of understanding of
both the ILO and the nature of its activities. Other decisions, in contrast, even when they
show a reasonable knowledge of labour inspectorate premises and prerogatives established
by Convention Nos. 81 and 129, represent a historical paradox comparable to the exegesis
debate established in the 18th century, on whether judicial activity interprets the legislation
or only applies the legislator’s will.183 According to this current jurisprudence approach,
labour inspectorates are considered mere executors of the law, with no power to interpret
legislation and private deals of a different nature than labour, even if they are only destined
to disguise the provisions of the law. This position could threaten the overall capacity of
the labour administration to promote decent work through the control of the working
conditions. Furthermore, in the long-term it could result in a steep rise of conflicting
situations, as the preventive role of labour inspectorates in promoting the adequacy of the
employment relationship would be considerably diminished.

179
M. De La Cueva, Op. Cit, p. 195.
180
Inspectĭo, ōnis, f. inspicio, I. a looking into, inspection (post-Aug.). I. Lit. In gen.: “ager prima
inspectione neque vitia, neque virtutes abditas ostendit,” Col. 1, 4, 1: “speculi non tam possessio
culpatur quam inspectio,” App. Mag. 13, p. 282, 4.— In partic., a looking through, examination:
“tabularum,” Quint. 5, 5, 2; Dig. 29, 3, 2, para. 5: rationum, Trajan. ap. Plin. Ep. 10, 57, 1.— II.
Trop., consideration, investigation, contemplation; hence theory, in opposition to practice, Quint. 2,
18, 3; 2, 17, 42; Dig. 41, 1, 63, para. 3; 45, 1, 91, para. 4. See:
http://www.perseus.tufts.edu/hopper/text?doc=Perseus%3Atext%3A1999.04.0059%3Aentry%3Din
spectio
181
R. Pires: Labour inspection and development: some reflections, LAB/ADMIN, Working
document number 9, Geneva, International Labour Organization, 2011, pp. 2-7.
182
See several decisions of the Committee of Experts on the Application of Conventions and
Recommendations.
183
“But as we have already observed, the national judges are no more than the mouth that
pronounces the words of the law, mere passive beings, incapable of moderating either its force or
rigour” (mais les juges de la nation ne sont, comme nous avont dit, que la bouche qui prononce les
paroles de la loi; des êtres inanimés qui n’en peuvent modérer ni la force ni la rigueur), as
Montesquieu declared in his famous work “The spirit of the laws”, reaffirming the debate over the
nature of a judge’s decision in contrast with the legislative authority and will. See C. de
Montesquieu: De l’esprit des lois, Tome premier, Paris, P. Pourrat Fres, Éditeurs, 1834, pp. 305-
306.

62
8. Hierarchical power as the mainframe for
labour inspectorates’ assessment
The recognition of the existence of an employment relationship should be guided by
the facts of what was actually agreed and performed by the parties, and not by the
denomination given to the contract.184 That is why the existence of an employment
relationship depends on the existence of certain objective conditions (the manner in which
the worker and the employer have established their respective positions, rights and
obligations, and the actual services to be provided), and not on how, either individually or
both of the parties, formally describe the relationship. This is known in law as the principle
of the “primacy of fact”, which is explicitly enshrined in some national legal systems. This
principle might also be applied by judges in the absence of an expressed rule.185

Non-compliance with the law is the biggest concern among ILO constituents. The
problem is particularly widespread in developing countries, but it also occurs in
industrialized nations.186 Commonly, labour inspectorates are poorly provided with
sufficient statutory powers, tools or mechanisms to identify disguised labour
relationships.187 Regardless the importance of the employment relationship to provide
decent work, the mechanisms and procedures for determining the existence of an
employment agreement and establishing exactly the parties involved, are generally
insufficient to prevent infringements of labour law or safeguard the workers’ rights188. The
development and use of technical guidelines, administrative ordinances, tools, checklists,
training modules, and other instruments, is essential for labour inspectorates to properly
tackle the growing problem of precarious and vulnerable work, mostly represented by the
avoidance of the employment relationship framework.

Traditionally, the employment relationship is defined by the hierarchical power of

employers over employees.189 In fact, the workers’ subordination to the employer is the
common core characteristic of all European legal systems.190 This power encompasses
three main elements, which are part of the whole hierarchical power applied on the
employee:

- Direction;

- Control;

- Discipline.

184
See ILO Employment Relationship Recommendation n. 198, 2006, Art. 9.
185
ILO: The scope of the employment relationship, Fifth item of the agenda, Report V, International
Labour Conference, 91st Session, Geneva, International Labour Office, 2003, p. 23.
186
Ibid, p. 34.
187
Ibid, pp. 34-35.
188
Ibid, p. 34.
189
A. Montoya Melgar: La nueva configuración del poder de dirección del empresario, in L. E. De
La Villa Gil (coord.): Reforma de la legislación laboral. Estudios dedicados al Prof. Manuel Alonso
Garcia, Madrid, Asociación Española de Derecho del Trabajo y de la Seguridad Social, Marcial
Pons, Ediciones Jurídicas, S.A., 1995, p. 190.
190
A. Supiot: Critique du droit du travail, Paris, Presses Universitaires de France, 1994, p. 113.

63
 Directive power is evidenced by the faculty an employer has to assign tasks and to
give orders to employees; controlling power is related to the ability an employer shows in
order to monitor both the performance of tasks and compliance with given orders and
directions; finally, disciplinary power is expressed by the capacity an employer
demonstrates to penalize both the improper or negligent performance of assigned tasks,
and disobedience to given orders and directions.191 With the evolution of the new
enterprise feature, expressed by the paradigm of the network enterprise, directive power is
also adapted to encompass its new multifaceted character.192

The indication clustering technique (méthode du faisceau d’indices), applied to labour

Inspectorate’s performances, could be helpful to establish the existence of a true
employment relationship in the frame of a contractual agreement, whatever its formal
nature is. Under this technique, legal operators research through different indicators that
could be applied to the specific agreement to be analyzed, seeking to clarify the nature of
the presented relationship. As expressed before, it is an investigation method mostly used
in French courts by judges, to determine whether there is an employment relationship or an
autonomous work. The method works in order to help legal operators define certain typical
signs of specific legal arrangements, especially in the absence of precision in the law.193
The technique requires the evidence to be shared and divided into different major generic
groups, related to the signs (indicators/evidences) that reveal the existence of an
employment relationship. Then legal operators match the indicators extracted from the
investigation to the different generic signs. National legislations, jurisprudences or
practices normally determine major signs to be used as clusters on which legal operators
should match the evidences of the employment relationship. At the end of the process a
conclusion arises indicating whether there is or not a true employment relationship.

In order to launch the process and to understand the flowing of orders and directions
within the established contractual relationship, inspectors should interview both the
workers and managers, as well as middlemen, contractors, suppliers, buyers, companies’
representatives and other relevant stakeholders. The analysis of documented evidence,
such as internal orders, guidelines, codes of conduct, which are indicative of directive
power, or penalties, punishment measures, constraints, which are indicative of disciplinary
power, is also of particular importance. Increasingly, orders given to employees are hidden
in between other commandments, notably those of a commercial nature that could be
arguably represented by the interposition of many multiples subcontracting layers. It is part
of the inspection process to adequately address the proper characterization of the
employment relationship, shaping the general frame of a certain liaison.

Evidence of hierarchical power should be collected by labour inspectors, during the

inspection visit, according to the range of facts that characterize an employment
relationship. The technique also classifies criteria in two different categories, represented
by either essential or subsidiary indicators. Essential indicators are associated with the
exercise of hierarchical power and subsidiary evidences are connected to additional
information that could support a further and more complete analysis. The following table
aims to assist labour inspectors in their employment relationship recognition task,
according to the indication clustering technique:

191
See G. Casale: The employment relationship. A comparative overview, Oxford, Hart Publishing,
ILO, Geneva, 2011.
192
F. Valdés Dal-Ré: Poder directivo, contrato de trabajo y ordenamiento laboral, in Relaciones
laborales. Revista crítica de teoría y práctica, N. I. 1993, Las Rozas, Madrid, La Ley-Actualidad,
S.A., 1993, p. 29.
193
J. Mouly, Op. Cit, p. 34.

64
Employment relationship assessment – subordinate work establishment criteria

Essential Criteria – hierarchical power – intensity generic signs

Direction Control Discipline
1 Direct orders; Direct organization; Direct punishment;
2 Specific verbal and/or written Determination of working hours; verbal and/or written warnings and
determinations; reprimands;
3 Assignment of detailed and/or Position occupied within the company Determination of disciplinary suspension of
fragmented orders; structure and/or in contrast with other work;
employees;
4 Comprehensive instructions given; Place where the work is to be performed; Just cause termination;
5 Instruction of tasks and/or duties; Orientation of the scope and/or object of Benefit loss and/or wage discount caused
the work; by disciplinary reasons;
Subsidiary Criteria – additional power – intensity specific signs
6 Work is executed continuously within the client premises and/or with the client own tools;
7 Retribution is paid based on the amount of time worked, not on the result achieved, and/or according to a specific periodicity of
time;
8 Schedule control limited by the client and there is an obligation to notify the client in any absence necessity;
9 The contract object is always for work to be provided and never a specific result to be obtained;
10 There is no risk to be absorbed by the worker, risk is totally managed by the client;
Autonomy Criteria – Self-employment indication – distinction factors
11 Contract normally conditioned by a fixed term agreed by both parties;
12 Self-employed worker performs the tasks and his/her own activity with a consistent amount of autonomy limited only by the
contractual arrangements;
13 No schedule control at all;
14 Retribution is freely settled by both parties and it follows no previous rules.

If a line is traced between the authentic and pure self-employed worker and the
typical subordinate employee, utilizing the table above, the closer to essential criteria the
relationship is the nearer to the usual subordinate work it gets, establishing an authentic
employment relationship. In order to properly address the indication clustering technique, a
questionnaire should be elaborated and utilized by labour inspectors. The most common
questions to direct the intervention are:

- Is the contractor’s employee directed in any matter by the client (example,

directions, organization, discipline, etc.)?

- Does the contractor provide proper training for his/her own employees?

- Is the scope of the services to be provided by a contractor different from that of the
clients’ core business?

- Does the contractor possess own material and intellectual means to provide the
arranged work?

- Is the retribution paid according to the whole service provided or remunerated by

worked hours?

- Who provides the tools, the client or the contractor?

Basically, the questions above intend to spot the existence of a true employment
relationship. Two main questions are inherent to this entire verification process and should
direct the inquiry: Who is the employee? Who is (are) the employer(s)?

Occasionally, the answer is not simple, and further examination should be

undertaken. Especially in subcontracting schemes, wherein atypical and triangular
relationships frequently occur, and with much more complex network structures, workers
are inserted within these polyhedric configurations accordingly. In such cases the
inspection, aside from assessing the real and/or immediate employer, should focus on
perceiving the existing complete network, formed by several potential or concrete

65
 employers. Some case law approaches are tackling this new feature by proposing an
innovative doctrine, based on the notion of the network enterprise194 and new forms of
legal subordination.195 Most European systems already deal with network connections
within the value chain, instituting in legislation the legal element of solidarity among the
firms. Other approaches suggest that economic dependency should drive any analysis,196
despite of the intense debate established since the foundation of labour law regarding this
topic.197 That could be an indication on how labour inspectorates could actually build the
bridge between the reality of facts and the letter of law, as previously exposed. The use of
injunction power to enforce the law is the main tool to put into effect the preventive role of
labour inspectorates.

The main purpose of this assessment is to provide indication on how labour

inspectorates can fulfil the ILO’s governance conventions mandate - to enforce labour law
provisions, to advise employers and workers, and to find and highlight loopholes in
regulation with a view of updating it. As an underlying purpose, there is a concrete
potential to cooperate with the judicial system in order to gather evidence of the true nature
of an employment relationship.

The mandate expressed on both Convention Nos. 81 and 129 is related to a complete
enforcement of labour provisions, by both compliance orders and information, and also to
contribute as a labour law modernizing factor, by reporting gaps, loopholes and
inadequacies of the law to the legislative branch. The current paper intends to foster and
promote the enforcement of the employment law, but labour inspectorates are strongly
encouraged to work closer to legislative branches, in order to support the innovation of
labour regulations, whenever and wherever required. That would be the case of Member
States where intermediary figures, between autonomous work and subordinate work, does
not exist, under valid legislation. That would also be the case of Member States where

194
This concept was forged by Castells, by analyzing the effects of the new feature of businesses
inserted within the global network society. See M. Castells: The rise of the network society. The
information age: economy, society, and culture, Volume I, Second edition, Malden (MA), Wiley-
Blackwell, 2010. pp. 163-215.
195
In Brazil, for instance, case law has been innovating jurisprudential doctrine in order to better
integrate the letter of law in contrast with this new feature. In this respect structural or reticular
subordination has been increasingly applied to labour controversies related to the determination of
an employment relationship existing under polyhedric liaisons in regard with the real and concrete
employer. According to the judicial precept, “the concept of subordination must be examined in
light of the worker’s insertion within the dynamic of the contractor of services, indicating the so-
called structural subordination, a theory that aims to solve the cases in which the classical concept
of subordination is innocuous” (o conceito de subordinação deve ser examinado à luz da inserção
do trabalhador na dinâmica do tomador de serviços, configurando a denominada subordinação
estrutural, teoria que se adianta como solução para os casos em que o conceito clássico de
subordinação se apresenta inócuo).
See: TST RR - 44100-13.2009.5.03.0003, of 23/06/2010, available at:
http://aplicacao5.tst.jus.br/consultaunificada2/inteiroTeor.do?action=printInteiroTeor&highlight=tru
e&numeroFormatado=RR - 44100-13.2009.5.03.0003&base=acordao&numProcInt=
91365&anoProcInt=2010&dataPublicacao=13/08/2010 07:00:00&query=.
196
N. Countouris: The employment relationship: a comparative analysis of national judicial
approaches, in G. Casale: The employment relationship. A comparative overview, Oxford, Hart
Publishing, ILO, Geneva, 2011, pp. 60-65.
197
M. E. Casas, J. de Munck, P. Hanau, A. L. Johansson, P. Meadows, E. Mingione, R. Salais,
A. Supiot, P. V. Der Heijden: Trabajo y empleo. Transformaciones del trabajo y futuro del derecho
del trabajo. Informe para la Comisión Europea, Valencia, Tirant lo Blanch, 1999, pp. 52-53.

66
 triangular schemes are not fully regulated and protected. Finally that is the case of Member
States where disguised relationships are not tackled and prevented properly.

9. The employment relationship, undeclared

work and labour inspection
One of the phenomenon within the determination of employment relationship is
undeclared work. The fight against undeclared work has become a key concern since the
1990s and is even more relevant today in view of the effects of the economic crisis.198
Apart from an increase in unemployment and labour turnover, there has also been a rapid
and progressive change in certain indicators that have a direct influence on the work of
labour inspectorates (both their work and the working conditions they are required to
inspect) and consequently, on their ability to guarantee social stability through the
protection of workers and proper application of the law.

Most undeclared work involves small enterprises, or at least those with fewer than 50
workers, and sectors such as the construction industry, small-scale retail, agriculture,
hospitality and transport. In the Green Paper on “Modernizing labour law to meet the
challenges of the 21st century,” the prevention and fight against undeclared work was one
of the key items for the future development of labour law in the EU. In fact, undeclared
work is seen as a particularly worrying and persistent feature of European labour markets
which affects the Member States’ economies and the financial sustainability of the
European social model by constraining economic growth and budgetary and social policies
and in particular for lowering work quality standards, creating risks for health and safety of
workers, putting at risk the financial sustainability of social protection systems,
undermining the competitive environment for businesses and feeding social segmentation
and poverty.

In 2013, Eurofound published some macroeconomic estimates pertaining to

undeclared work among Member States. According to this study, the average size of the
undeclared economy across the EU27 was equivalent to 18.4 per cent of GDP, although
with large regional differences. In some European countries such as Bulgaria (32,3 per
cent), Cyprus (25,8 per cent), Latvia (26,5 per cent), Lithuania (29 per cent), Poland (25
per cent) and Romania (29,5 per cent), the size of undeclared work is, in terms of the GDP,
higher than in other European Union countries, like Austria (7,9 per cent), Belgium (17 per
cent), France (13 per cent), Germany (13,5 per cent), Ireland (11 per cent), Italy (19,4 per
cent), the Netherlands (9,8 per cent) and Spain (17,6 per cent).199 Most of the Member
States with relatively large undeclared economies in 2012 are either east central European
or southern European Member States. Those with below-average undeclared economies,
meanwhile, are largely west European and Nordic Member States. This signals a clear
north–south and east–west divide within the EU concerning the relative size of the
undeclared economy.

Although this data remain valid overall, the strong impulse to create new jobs seen in
recent years has resulted in a decrease of this phenomenon in certain new Member States.

198
A recent OECD report (Jutting and Laiglesia, 2009) finds that out of a global working population
of some 3 billion, around two-thirds (1.8 billion) work in the undeclared economy. Such work,
therefore, is far from being a small residual realm. It is a prominent feature of the contemporary
global economy.
199
Eurofound (2013), Tackling undeclared work in 27 European Union Member States and Norway:
Approaches and measures since 2008, Eurofound, Dublin.

67
 These figures also apply to other European countries affected by similar economic and
social problems.200

The main reasons for undeclared work201 in Europe involve the following conditions:

- Enterprises and individuals operating in the labour market without being declared
to the authorities, especially social security, insurance and tax administration;

- Enterprises declaring only part of their activities. Some experiences report of

practices such as using undeclared workers during night shifts;

- Enterprises using undeclared workers for suppliers and subcontractors in their

premises or production in substitution of their direct workforce, as a way of
avoiding the payment of taxes, costs with occupational safety and health
requirements and obtaining contractual flexibility;

- Businesses having part of their workers registered and part undeclared or falsely
declared as part time workers, interns or self-employed workers;

- Serious forms of exploitation as a result of human trafficking, usually involving

irregular migrant workers;

- Workers employed in enterprises while receiving social benefits for sickness,

maternity, unemployment or other causes;

- Emergence of unregistered temporary work agencies or agencies using fraudulent

practices, which are difficult to detect and to act upon due to the volatility of the
entrepreneurship, use of complex contracting chains, and apparent financial profits
for all parties involved;

- Bogus self-employment, quite significant in some sectors. For instance, the Dutch
federation of Contractors stated, in 2012, that the total number of the self-
employed in the building industry was estimated at 73,000, representing around 70
per cent of all alleged self-employed people;

- Misuse of extraterritorial cost arrangements, where part of the payment of a

foreign employee can be used for tax-free allowances for costs of housing,
transport or other costs resulting from working abroad;

- Under-declaration of wages, most commonly not declaring overtime work,

declaring only the minimum wage and paying the rest under the counter or by not
declaring the value of payments in housing and food benefits, false part-time
where only a percentage of the real worked hours is declared, disguise of
remuneration under apparent fringe benefits (use of car, credit card), false per
diem, etc.;

200
There are a number of recent factors which seem to favour undeclared work and ultimately,
informal labour: the increased demand for domestic services and assistance owing to the socio-
demographic changes; the appearance of labour relations that have a less hierarchical structure and
more flexible remuneration systems; the boom in self-employment, subcontracting, flexible
contracts and ad hoc work; the simplification of the process for establishing cross-border
businesses.
201
This refers to labour that is illegal under the provisions of labour law, and not to criminal
activities per se.

68
 - Fraudulent or fictitious employment declared to obtain social benefits, where the
enterprise creates disguised employment relationships, declaring the worker to
social security, paying contributions for a short period and reporting afterwards
false leaves that entitle workers to social benefits, who in turn will pay a price to
the employer.

There is no doubt that these issues relate to the activities of the inspectorate and that
effective programmes to overcome this fundamental problem are being sought. Thus, in
certain countries, the existence of illegal work has resulted in administrative structures
designed to combat it. Austria, France and Germany, for instance, established a single
body to the fight against undeclared work while in Belgium, the Czech Republic, Italy,
Lithuania, Luxembourg, and Slovenia, a central coordinating committee is responsible for
ensuring coordinated action by the multifarious departments that have a stake in tackling
undeclared work.202

202
In Austria, in the field of undeclared or illegal work a special unit of the border administration, the KIAB
(Control of Illegal Employment of Workers), was given the task of checking work permits and, ultimately, the
employment of foreign workers. The results of these controls are sent to the relevant competent authorities,
who include administrative authorities responsible for imposing sanctions, the monitoring body for industry,
the employment services and the labour inspectorate, ensure that they are subject to the relevant procedure. In
Belgium, a number of initiatives have been taken to counter UDW. Because so many agencies, ministries and
inspections are involved in the fight against social and fiscal fraud, on 29 April 2008, a Central Committee for
the struggle against fiscal and social fraud was founded in which all ministers that are involved in the combat
against fraud are seated. At the same time, the Council (college) against fiscal and social fraud was formed. In
this Council, presided by the secretary of state responsible for the coordination of tackling fraud, the directors
of all agencies involved are seated (social, fiscal, juridical, police). Every year, the Committee and Council
should draw up an integrated action plan against fraud. France created in 1997 the Délégation interministérielle
à la lutte contre le travail illégal (DILTI) which is an inter-ministerial mechanism to fight illegal work and is
part of the Délégation nationale à la lutte contre la fraude (DNLF) with responsibility for tackling every aspect
of the undeclared economy. In July 2003, the German federal government decided to reorganize the
administrative competences for detecting and combating undeclared work with the institution of
Finanzkontrolle Schwarzarbeit (FKS) to target all types of UDW. In Italy, a National Committee for the
Formalization of Non-Registered Labour was created in 1998 with the aim to gaining knowledge on the
informal economy. The main objectives of the initiative include: creating an institutional network between the
central government and regional authorities, with the aim to gain knowledge about the qualitative and
quantitative characteristics of the informal economy and to propose formalization policies, encouraging
commitment among workers and employers to be tax compliant, and fighting undeclared work. The Committee
coordinates the bulk of policy initiatives in Italy and also stimulates research into UDW. In addition, various
structural and legislative measures were implemented under the Legislative Decree No. 124/2004, the Minister
of Labour’s Directive of 18 Sept 2008 and Law No. 183/2010. The measures focused on strengthening the
powers of the Ministry for Labour and Social Policy in the fight against clandestine labour and undeclared
work, and emphasized the key role played by the labour inspectors as part of the mechanisms set up for this
purpose. In Lithuania, a central Coordination Group was established in 2001. This group analyses and
highlights the prevalence of undeclared work in the country, to predict and approve measures for control
implementation and to decrease the volume of undeclared work. In Luxembourg, the Inter-administrative Unit
for Combating Illegal Work (CIALTI) was established in 2000. It is an informal unit intended to coordinate
unannounced inspections in various fields of economic activity. The main party involved is the Labour and
Mines Inspectorate (Inspection du Travail et des Mines - ITM), which is responsible for the unit's coordination.
Finland in 2011 replaced the VIRKE project by establishing the Grey Economy Information Unit (Harmaan
talouden selvitysyksikkö). The Grey Economy Investigation Unit is a specialized unit, which, at the request of
other enterprises, investigates specific enterprises and persons suspected of engaging in undeclared work. It
contributes to tackling the grey economy by producing and distributing information on the grey economy and
action against it. The unit also prepares reports concerning business entities to other authorities for purposes
laid down in the law. In Ireland, the National Employment Rights Authority (NERA) is the body responsible
for tackling all types of undeclared work. It aims to secure compliance with employment rights legislation and
to foster a culture of compliance in Ireland through five main functions: information, inspection, enforcement,
prosecution and protection of young persons. In the United Kingdom, the fight against undeclared work is
coordinated on a local level through Joint Shadow Economy Teams (JoSET’s). Officers from the department
for Work and Pensions, The Majesty’s Revenue and Customs and Employment Agency Jobcentre Plus work
together in these teams. The attention of the teams is focused on construction and building services, taxis and
couriers, catering and hotel and guest houses.

69
 Priorities of many labour inspectorates are focusing on industries using migrant
workers as the main or significant workforce. Special attention is being given to
employment and temporary agencies and all forms of recruitment with the use of
intermediaries, construction and seasonal work where illegal migrants are more probable to
be found. The main challenge, though, is to separate the function of labour inspection from
the application of laws regulating the entrance and stay of foreigners.

Many labour inspectorates are also focusing on high risk sectors, which are
commonly the construction industry, agriculture, cleaning, retail, temporary employment
agencies, hospitality and seasonal industries related with tourism and industries relying on
peak labour periods, low skilled workers and labour intensive. Priorities are defined
according to risks of non-compliance. The accuracy of the chosen strategies depends on
the access to reliable, complete and updated sources of information on enterprises, sectors,
workers, previous inspection visits, imposed sanctions and interventions from other
authorities. Political options, academic studies, official statistics and complaints received
from trade unions, workers or other interested parties are also considered as indicators on
which to base future action.

In many countries, labour inspectorates have increased and strengthened their

cooperation with social security institutions, public insurance agencies, tax authorities,
municipalities, immigration authorities, the police and public prosecution offices.

In order to address the challenges of undeclared work, public authorities have taken
various steps to facilitate the work of the labour inspectorate. In some cases, such measures
have focused on preparatory and preventive activities, such as those carried out by the
National Committee for the Formalization of Irregular Work in Italy or the Hidden
Economy Monitoring Group in Ireland.

Labour inspectorates are using a combined set of accommodative methods and

punitive approaches to prevent and fight against undeclared work. Among the preventive
action information campaigns, hotlines, and call centres are the most usual tools.
Repression is based on the imposition of sanctions of administrative or criminal nature and
increasingly on negative publicity given to enterprises using undeclared work. Information
and dissemination campaigns have also taken place. In Sweden, the ID06 project in the
construction sector took a similar approach and proved to be an effective monitoring tool
to address undeclared work, with a requirement for all building site workers to register and
carry identity cards. Similar measures have been introduced in Finland, Italy and Norway.

In a similar vein, section 52a was introduced in the Finnish Occupational Safety and
Health Act in February 2006 requiring those directing or overseeing a construction site to
ensure that every person working on the site possesses and displays photographic
identification. Other measures of this kind aimed at vulnerable groups (although focused
solely on safety and health) exist in New Zealand, which issues a “Passport to safety” to
workers in the 15-24 age bracket, who are deemed vulnerable. This covers both safety and
contractual protection. Australia has also introduced this programme, which is similar to
the Canadian Safe Communities model. In Switzerland, the Federal Act of 17 June 2005
on measures to combat undeclared work, in force since 1 January 2008, has increased the
workload of the labour inspectorates in every canton with regard to undeclared work
(9,000 checks had already been carried out by July 2010). The Act established a new
cantonal labour inspection body with new investigative powers. At the same time, a new
set of fines have been implemented, providing for both a higher financial penalty and the
exclusion of guilty enterprises from tendering for public contracts or receiving subsidies.
The names of non-compliant enterprises are also published on the Internet. This new body
operates in parallel with the traditional safety, health and working conditions inspectorate.
The new inspection agency plays a key role in coordinating with other public agencies (the

70
police, employment offices, social security, customs and tax authorities) to combat
undeclared work.

In the Netherlands, the labour inspectorate, the Social Intelligence and Investigation
Service and the Inspection Service for Work and Income were brought together in March
2010 under the supervision of an Inspector General within the Ministry of Social Affairs
and Employment. This measure is the result of changes in the monitoring of undeclared
work since 2003, which have been hastened by the current state of the economy. The
collation and use of statistical data is a common strategy in the fight against illegal work.
In Belgium, a set of merged databases have proven invaluable in detecting, preventing and
combating undeclared work. Since the total number of labour inspectors may often be
limited, new integrated methods have been formulated to detect undeclared work using
information gathered from other sources or by other administrative bodies not obviously
connected with labour issues. To this end, certain countries are developing indicators to
compare and verify information compiled from various databases, in addition to other
information resources. Spain, for example, has devised a creative technique to identify
undeclared seasonal work during the orange and grape harvests: labour inspectors compare
the area of agricultural land with the number of hours worked during the previous year’s
harvest and the number of workers registered each month in the database of the social
security institution. If a discrepancy is found between the figures, employers may be asked
to provide additional documentation, including labour contracts. If this does not resolve the
problem, an inspection may be carried out or the employer called to a meeting at the labour
inspectorate.

Plans and campaigns to regularize undeclared workers have been initiated in certain
Latin American countries. In Argentina, the National Labour Regularization Plan (PNRT)
mentioned above is run jointly by the Ministry of Labour, Employment and Social
Security, the Federal Administration of Public Revenue (AFIP) and the labour authorities
of the provincial governments, with the involvement of the Federal Labour Council.
Established in 2003, the plan seeks to ensure proper working conditions and to enhance
detection and corrective measures in the event of non-compliance with labour and social
security regulations. Its objectives include social security registration of previously
excluded workers, and ensuring that employers carry out registration on a voluntary basis.
It also raises awareness of the problems arising from undeclared work and the benefits of
regularization. The results have been positive: since 2002, there has been a 64 per cent
increase in registration of private sector employees (between the second quarters of 2002
and 2009). In 2009, a new regulatory framework was defined in response to the crisis,
involving state subsidization of employers’ contributions and facilities for regularizing
workers. Since 2008, the “Plan Reto” programme in Peru has been seeking to regularize
undeclared workers through a combination of raising public awareness and inspection of
certain types of labour activities where irregular employment is a risk. One objective of the
programme is to transfer workers to an electronic payroll system. The work programmes of
some inspectorates are based on an undeclared work strategy and/or policy. In Bulgaria,
the labour inspectorate incorporated undeclared work into its 2008-10 Strategic Action
Plan. In other countries, such as France, Hungary, Italy, Lithuania, Poland and Portugal,
undeclared work is increasingly being mainstreamed into annual plans and programmes of
inspection activity. In Belgium, quantitative inspection targets are laid down for each
inspector, with a priority focus on undeclared work. In addition, a national strategy has
been prepared to combat social and tax fraud. In parallel, it has proven essential for
inspectors to work with the social partners, both through partnership agreements in specific
sectors with a high incidence of undeclared work (for example, Belgium, Estonia, France,
Germany, Ireland and Italy) and through joint information and awareness-raising
campaigns on undeclared work (for example, Denmark and Portugal). The social partners
are involved in the design of programmes and activities concerning undeclared work, as
well as the preparation of inspection plans. This is the case in Lithuania, where the social

71
 partners participate at national level in the planning of measures to combat undeclared
work through consultations within the National Tripartite Council.

In Europe, some countries have established specific forms of collaboration between

the inspectorate and the judicial authorities to cooperate to the maximum extent possible
with a view to ensuring the effectiveness of inspection interventions, as well as the
enforcement of the labour law through prosecutorial action. In Belgium, for instance, there
is extensive formal collaboration between the inspectorate and judiciary in prosecuting
cases of undeclared work. Social inspection services and the Judicial Federal Police
cooperate in a new social entity, the so called mixt cell unit support, which was created in
2011 and that operates in the fight against serious and organized social fraud. In France, a
monitoring agency has been established within the General Labour Directorate to monitor
legal proceedings arising from the inspectorate's actions. It not only collates information
pertaining to administrative and criminal proceedings, but also manages the collaboration
process with the Ministry of Justice, in order to ensure a better follow-up of each case. In
certain countries, the judicial and administrative systems are integrated. In Austria, for
example, alongside administrative proceedings, which rely on ad hoc tribunals and involve
the inspectorate, parallel proceedings also exist to deal with violations of the criminal code.
Through this process, proceedings are instituted when a labour inspector submits
documents and reports to the Department of Criminal Investigations or the Department of
the Public Prosecutor. In any case, the courts must inform the inspectorate services of the
termination or completion of any proceedings, though not necessarily of the court's
decision. In Portugal, there are different means of informal collaboration based on
common training, joint publications and meetings, or the use of shared facilities. In other
countries such as Greece, inspectors have the authority to prosecute violators in a criminal
court for serious offences. However, because of delays in the court system, inspectors
often prefer to impose fines instead. In other EU countries, inspectors are called as
witnesses, though not as legal experts, whereas both these roles are recognized in Spain.

Labour inspectorates are also cooperating at cross-border level. The main aim of
collaboration consist usually on the exchange of information about enterprises and workers
from one country operating in the other, but also on capacity building by sharing views,
experiences and tools. Manuals and checklists are exchanged or commonly produced
providing information on applicable laws and regulations, exemplifying the models used
for official mandatory documents to be consulted by inspectors. Besides informal networks
and contacts, bilateral agreements have been signed, some in the frame of larger
agreements signed between ministries of labour. Administrative cooperation concerning
application of Directive 96/71 on posting of workers in the framework of the provision of
services is a major reason for these arrangements. Agreements were also signed in the
context of Regulations 1408/71 and 883/2004 on coordination of social security schemes.
Such cooperation is common for neighbouring countries or countries sharing cultural
identities or with expressive workforce flows. Cooperation exists also with Europol for
exchange of data. At EU level, the use of common platforms such as the KSS on
occupational safety and health has not yet found a match when talking about undeclared
work, mainly because of the limits imposed by protection of privacy of individual data.
Various European countries have also organized campaigns to regularize undeclared
workers calling for administrative sanctions and involving the supervision of the
inspectorate, something that has had a significant impact in terms of new registrations and
the formalization process. Several initiatives were also adopted to strengthen
administrative cooperation between labour inspectorates to fight against undeclared work,
as for instance ICENUW (Implementing Cooperation in a European Network against
Undeclared Work) which ended up with the signature of the Brussels Chart, where
participating authorities committed to increase efforts in the fight against transnational
social fraud, the Committee of Experts on the Posting of Workers on the application of
Directive 96/71 and Project Cibeles focusing on mutual assistance between European
labour inspectorates.

72
 Labour inspectors are often asked to cooperate with law enforcement or immigration
authorities to monitor the situation of foreign and migrant workers. Such cooperation
should be carried out cautiously, bearing in mind that the main objective of the labour
inspection system is to protect the rights and interests of all workers and to improve their
working conditions.

Conclusions
The role of labour inspection in the enforcement of labour legislation and hence in the
determination of an employment relationship is becoming increasingly important. In this
regard, the ILO’s Recommendation No. 198 sets up the structure in which national policies
should rely on in order to determine the criteria for the determination of an employment
relationship. The supremacy of facts functions becomes the backbone of the employment
relationship and should be considered as a basic principle under a legal system. Labour
inspectors deal with the reality of facts in workplaces on a daily basis, and every time an
inspection visit is carried out and they are considered the most accurate governance tool to
adequately address the growing concern on the variety of forms of employment contracts.

As globalization marches forward and entrenches, new challenges are likely to arise.
Original, creative and adaptable inspection approaches are needed in order to guarantee
decent working conditions and fundamental rights in any workplace.

From the above, we should recognise that the employment relationship remains one
of the most challenging issues in law and practice. The question of whether an employment
relationship exists is of crucial importance especially when considering the access to social
security by workers. From a comparative viewpoint, the trend towards more flexible
working arrangements generated to a great extent by globalization has affected the
employment relationship debate. It is no longer a matter of purely academic interest, but it
touches the day-to-day life of workers and employers in the world of work. Whereas many
countries have already adopted measures to deal with this issue, many others are in the
process of finding a sound approach to such an issue.

In several countries, the ILO Recommendation No. 198 serves the purpose of guiding
the major labour market players recognized to address the issue of the employment
relationship in a conscious manner while providing adequate legislative protection.

At the same time, the complexity of the problem continues to be there, and this is
proved by the various experiences that labour inspectorates have when dealing with the
determination of an employment relationship. This issue will continue to be under the
scrutiny of labour lawyers, judiciaries, and policy-makers in the coming years.

73
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