In depth

What does the class action ruling resolve?

• It declares the claim partially founded and, therefore, annuls or eliminates certain parts of Article 1° that defines the core of the business, as well as the only transitory complementary provision that establishes a term for adaptation.
• It provides that Article 2, on the prohibition of outsourcing the core business, must be interpreted as specified in the judgment: the core business may be outsourced if the use of this figure is not indiscriminate and abusive (fraudulent), harming the rights of workers. In other words, the outsourcing of core activities has been validated by the judgment if it is not fraudulent.
• It urges the Ministry of Labor and the representative organizations of workers and employers to engage in dialogue, discuss and reach an agreed solution on the issue of outsourcing in the National Labor Council. 

The popular action is a process that allows the annulment of a regulation when it presents a flaw of legality or unconstitutionality. It is processed before the judicial power and does not go to the constitutional court.

What are the central arguments of the judgment?

• The judgment considers that the definition contained in the standard on "core business" is imprecise and generates uncertainty. In that line, companies can define what their core business is.
• The judgment establishes that measures other than the restriction on outsourcing nuclear activities could have been issued or implemented in order to ensure that the figure (of outsourcing) is not used indiscriminately and/or fraudulently (inspections by the Administrative Labor Authority and lawsuits before the judiciary).
• The chamber has interpreted Article 2 of the law giving it an interpretative meaning that, in its opinion, prevents it from being illegal or unconstitutional and may subsist. The interpretation to be made of Article 2 of the Regulation, according to the chamber, is that it is possible to outsource the activities that are part of the core of the business, if its use is not "indiscriminate" and/or "abusive (fraudulent)," to the detriment of the workers. This interpretation assumes that the outsourcing of the core business is not prohibited per se, being that it would only be distorted if it is used indiscriminately or abusively. In other words, the burden of proof is on the person who alleges that any of these situations are present in each specific case.

Could the chamber have annulled or eliminated the challenged regulations?

Yes, it has only ordered the nullity of two articles. The chamber, following the theory and jurisprudence of the constitutional court, has issued a "manipulative interpretative judgment." This type of judgment, as mentioned above, does not eliminate the literal text of Article 2 of the Supreme Decree. It maintains it but gives it a different meaning to prevent it from being illegal or unconstitutional and to allow it to survive.

Is it a final judgment, does it affect the amparo proceedings in process and does it have effects on the precautionary measure issued by INDECOPI?

It is not final. As the sentence has not been totally favorable to any of the parties, it could be appealed by any of them. If this does not happen, according to the law, it will be reviewed ex officio by the constitutional chamber of the Supreme Court, i.e., it would go in "consultation" to that chamber.

The sentence does not affect the amparo proceedings in process, as it is not a final decision. If it is not appealed, it will be sent to the Supreme Court for consultation and will be suspended until it is reviewed. 

In addition, the injunction of general scope issued by INDECOPI remains in force, as the controversy has not concluded.

What problems does the sentence introduce?

• It does not consider that the challenged regulation violates the principle of legality, as a regulation, being of lower hierarchy, cannot limit constitutional rights. The Outsourcing Law does not prohibit the subcontracting of the core business of the main company. 
• It recognizes that constitutional rights and principles have been violated but does not completely eliminate the challenged norm (Article 2). It issues an "interpretative sentence" to maintain it, when it could have eliminated it as unconstitutional.
• The interpretation made, according to which the outsourcing of activities that are part of the core business is constitutional, if its use is not "indiscriminate" and/or "abusive (fraudulent)" to the detriment of the workers, is not sufficiently clear and precise.
• The exhortation made by the judgment transfers the substance of the controversy to the National Labor Council to solve the outsourcing issue. An "exhortative sentence" should be more precise so that its execution can be guaranteed.

We hope that this information will be of relevance to you and your company. If you require any further information, do not hesitate to contact us.

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