The line is thin, and the importance of knowing whether you are on one side or the other is of vital importance, taking into account the reform published last April 23, which categorically prohibits outsourcing, unless it is:
Of specialized services or specialized works.
Provided that such specialized activities are not part of the corporate purpose or the main economic activity of the beneficiary.
And that the contractor is registered as a specialized subcontractor with the Ministry of Labor and Social Welfare.
This kind of specialized subcontracting (which is the only possible subcontracting), results in an avalanche of tax, social security and joint and several liability obligations for the contractor. Therefore, it is of vital importance to distinguish whether a contracting can be considered perfectly mercantile, or whether it is a form of subcontracting. This is how we can simplify it:
If I hire a painting company (PINTURAS DE OCCIDENTE, S.A. DE C.V.) to paint the building I am constructing: (i) am I having a commercial contracting with PINTURAS DE OCCIDENTE, S.A. DE C.V.? or (ii) am I subcontracting the workers of PINTURAS DE OCCIDENTE to paint my building?
The thin dividing line between both sides is the definition of the concept of subcontracting. Article 12 of the Federal Labor Law textually defines it as: “when an individual or legal entity provides or places at the disposal of its own workers for the benefit of another”.
In other words, in the cited example there will be subcontracting if the workers of PINTURAS DE OCCIDENTE were provided or placed at my disposal. Which is interpreted as: if I can directly give orders to the workers of PINTURAS DE OCCIDENTE.
This interpretation is based on the nature of the reform, as well as on the general provisions regarding subcontracting, issued by the Ministry of Labor and Social Welfare on May 24, 2007.
Suggested test to know if the contracting of PINTURAS DE OCCIDENTE is on side A or side B: To give instructions on how the painting should be done or to make any corrections, do I tell it the management of PINTURAS DE OCCIDENTE or the painters on the construction site? The first option puts you on side A, and the second on side B.
The example given above is a case that could be considered borderline. Now I justify my position with 2 extreme examples:
When hiring a cell phone service: do I sign a contract with TELCEL so that they provide me with one of their employees to give me the cell phone service? Or does TELCEL only assign an executive to attend me on behalf of the company, without this implying that the executive was provided to me or is at my disposal?
If the word subcontracting is interpreted in a very extensive way, we could reach the nonsense of considering that the contracts with BANAMEX or TELCEL are “subcontracting specialists (the respective account executives) to provide me with financial or telecommunications services”. And that is out of all logic.
The other extreme example: I hire LIMPIEZA DE OCCIDENTE, S.A. DE C.V. to send people to my office to clean the building. There clearly LIMPIEZA DE OCCIDENTE is providing me and placing at my disposal the people who will do the cleaning. The instructions, corrections and the terms in which the cleaning will be done, are seen directly with the workers placed at my disposal.
This explanation of course generates the initiative to point out in all contracts: “A hires B, but B’s workers are not at A’s disposal; therefore, any question related to the execution of the service, must be seen by A with B’s administration”. And it’s certainly a good idea, but it won’t be a bulletproof shield in case the authority inspects.
Additional tip: make it clear that the remuneration that A is going to pay B is based on the service or work performed. Not by the number of workers that are actually working.
The particularities of the contracted service or work will have a great influence. Even if my contract with LIMPIEZA DE OCCIDENTE states that “I cannot give direct orders to the person in charge of the cleaning, and that any observation must be made directly to the administration of LIMPIEZA DE OCCIDENTE”, (very) hardly this relationship will not be considered as a subcontracting of cleaning personnel.
We conclude with the already expected recommendation: before taking a decision (especially in a boundary case), it is advisable to analyze the specific case with a lawyer specialized in the matter.
