In a Spanish business context, the figure of a company group is of particular relevance both in the commercial and labour spheres. Whilst the existence of groups of companies is recognised and regulated in the commercial sphere, transfer of this figure to the labour sphere is neither automatic nor direct. Considering a set of companies as a group of companies for employment purposes has many important consequences, especially when in relation to joint and several liability before workers and to the justification of objective dismissals on economic grounds. This article will analyse said consequences and identify the requirements necessary according to case law in order to determine the existence of a group of companies for employment purposes.
A corporate group is defined as an organisation of various legally independent companies under a sole economic management system, where one company has or may have, direct or indirect, control over the others. Pursuant to Article 42 of the Commercial Code, this control may materialise through the possession of the majority of voting rights, the power to appoint or dismiss the majority of the members of a management body, or through statutory or contractual agreements that allow a company to direct the management of its subsidiaries, among other circumstances. However, a company group does not have its own legal personality that can be separated from the companies that make it up. It is the constituent companies of the group, and not the group itself, that are considered subject to the legal relations with third parties, including the employees of their respective workforces.
However, from a labour point of view, the mere existence of corporate links or control does not determine, on its own, the extent to which liability can be extended to other companies in the group. Each company maintains its legal personality and is responsible for its own obligations to its employees, except in those cases in which certain additional elements justify the application of the doctrine that applies to company groups for employment purposes.
Requirements for the existence of a group of companies for employment purposes
Supreme Court case law has restrictively outlined the requirements for a group of companies for employment purposes. The existence of a corporate group is not enough, and it is necessary for at least one of the following additional elements to be present.
(i) Consolidated Operations
Consolidated operations occur when employees provide their services indistinctly for various companies in the same group, without it being possible to clearly distinguish which they actually work for. This phenomenon known as ‘workforce confusion’ is indicative of the fact that the group of companies operate as a single economic and organisational unit, such that it is not the company by which the employee is formally employed that holds the status of employer, but the group of companies as a whole. However, the mere occasional provision of services for another company in the group is not sufficient; it must be regular and significant.
(ii) Confusion of Patrimony and Joint Fund
Confusion of patrimony implies the indistinct and unjustifiable use of the assets and resources of different companies of the group, such that the separation of each company’s patrimony is not respected. A joint fund, on the other hand, is an extreme manifestation of confusion of patrimony, in which companies act as if they had the same liquid assets, carrying out transfers of funds without commercial justification. Case law requires that these situations are anomalous and do not follow the logic of ordinary financial transactions between related companies.
(iii) Fraudulent Use of Legal Personality
This element occurs when a ‘front’ or ‘shell’ company is created with the aim of evading labour responsibilities, which constitutes a case of fraudulent evasion of the law. A real company, with its own activity and material and human resources cannot be considered as such.
(iv) Abusive Use of Consolidated Management
Consolidated management is inherent to all groups of companies, but it is only relevant in an employment context when it is used anomalously to the detriment of the rights of the workers. For example, when the parent company imposes decisions that sacrifice the interests of the subsidiary to the benefit of the group, causing labour breaches or detriment to the workforce. The mere existence of common management bodies, collaboration policies or shareholder control is not enough to constitute this element.
Legal consequences of the existence of a group of companies for employment purposes
The main consequence of the consideration as a group of companies for employment purposes is the extension of joint and several liability among the companies within the group with regards to employment and Social Security obligations towards employees. This means that the employee can claim the fulfilment of his or her rights against any of the companies of the group, and all of them will be joint and severally liable.
Furthermore, in the context of objective dismissals on economic grounds, case law requires that, if there exists a group of companies for employment purposes, the negative economic situation that justifies the dismissal must be considered in relation to the group as a whole not only in relation to the company acting as the formal employer. In such cases, the letter of dismissal must set out the economic situation of the group, and the omission of this information may lead to dismissal being considered unfair.
In conclusion, the figure of a group of companies for employment purposes is a predominantly legal concept, which responds to the need to protect the rights of workers before complex, and at times opaque corporate structures. Although corporate groups are defined and regulated in the sphere of Company Law, the extension of joint and several liability between companies of the group in the employment sphere requires the concurrence of the additional elements described above. The Supreme Court’s case law maintains that these requirements must be met, and thus preventing the mere fact of belonging to a group of companies from automatically implying joint and several liability between the member companies.
Joan Lluís Rubio
Vilá Abogados
For more information, please contact:
2nd May 2025
