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Chile: a decision on the main company's liability in the case of a violation of fundamental rights committed by the contractor

  • On 7 August 2023, the Supreme Court clarified that liability arising from the violation of fundamental rights by the direct employer (the contractor) cannot be extended to the main company in a subcontracting regime since this is an area in which the main company cannot intervene by express legal provision and in which it also has no power of control.

The case concerned a worker who claimed compensation for violating fundamental rights due to unjustified dismissal and recovery of employment benefits.

The Court of First Instance and the Court of Appeal upheld the employee's appeal, condemning the companies jointly and severally to pay the various indemnities due, except for the severance for violation of fundamental rights upon termination, which remained with the employer alone.

This was on the assumption that the circumstance giving rise to the claim for compensation was attributable only to the employer. In contrast, the contracting undertaking could not prevent or intervene (on the contrary, this would suggest that the main company is the de facto employer).

The worker then brought an appeal for unification of jurisprudence, invoking precedents from the Court of Appeals of Santiago and another from the Court of Appeals of Puerto Montt, which, on the contrary, had held that this indemnity was also attributable jointly and severally to the employer and the contractor.

The Supreme Court dismissed the appeal for the unification of jurisprudence, confirming that the severance for violation of fundamental rights upon termination is a sanction for a violation of the rule of law (a breach of an employer's obligation not to do something) and not a financial benefit for services rendered or compensation for damages.

Therefore, this sanction must remain with the perpetrator of the violation, the employer.

The decision clarifies the limits of the contractor's liability, which may have significant consequences in widespread contractual relationships such as service contracts.