Understanding False Self-Employment: Risks, Indicators, and Remedies

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The term false self-employment has gained prominence in recent years within the labor landscape. This worker status, far from being a legitimate form of employment, represents an irregular condition that affects a significant number of workers, undermining their rights and exposing them to unfavorable working conditions.

One who is labeled a self-employed contractor but maintains a working relationship that mirrors an employer-employee contract is considered a false self-employed. In practice, even though the person presents as an independent contractor, they operate under the same conditions as a traditional employee, including fixed schedules, direct supervision, and economic dependence on a single client or company. This misclassification deprives the worker of rights and protections established by law, while the employer avoids the cost of social security contributions.

As noted on the website of the Union of Associations of Workers, Self-Employed, and Entrepreneurs (UATAE), identifying a false self-employment situation is not always straightforward due to the diversity of labor relationships in today’s market. However, three key indicators can help discern this condition:

  1. Work tools and materials. Often the false self-employed rely on resources supplied by the company, signaling a hidden employer-employee relationship. This is commonly described as the concept of “agency” or acting as if one works for another with another’s means.
  2. Work hours and position. If a person operates under a fixed schedule, has a dedicated workspace, receives directions from a supervisor, and/or has predetermined vacation days, they may be in a false self-employment arrangement. This reflects “dependency.”
  3. Economic dependence. If the company determines earnings, how pay is calculated, and there is limited room to negotiate wages, bonuses, or profit sharing, the arrangement may be that of a false self-employment.

What consequences arise from being a false self-employed worker?

According to UATAE, these are the potential harms associated with this status:

  • You bear the same obligations as other workers but you pay your own Social Security contributions.
  • You may not receive the rights enshrined in the sector’s collective agreement.
  • You may lose paid vacation, leave entitlements, or reductions in working hours.
  • You can be dismissed at any time, without cause, indemnity, or severance pay.

What steps should a worker take if they suspect false self-employment?

If an employee concludes that they are in a false self-employment situation, taking action to correct the irregularity and protect rights is crucial. The recommended steps include:

  • Legal counsel. Securing guidance from a lawyer specializing in labor law is essential to understand options and actions. UATAE offers free advisory services that can help clarify next steps.
  • Filing a complaint. The worker should report the situation to the Labor and Social Security Inspectorate. This type of report can be filed anonymously, and leaving the company is not a required step.
  • Judicial remedy. As a last resort, filing a legal claim before the Social Court may be necessary.

Is there a risk of penalties for the worker in such a case?

UATAE emphasizes that workers themselves are not sanctioned. Instead, the company may be required to pay back retroactive social security contributions, potentially with penalties. In cases where unpaid contributions exceed a threshold, fraud charges could apply and, in some situations, lead to criminal penalties for the employer, including possible imprisonment in severe cases based on the jurisdiction and facts involved. [Citation: UATAE]

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