One of the most recent cases regarding commercial agency agreements in Colombia involves the Supreme Court’s distinction between an employment contract and a commercial agency agreement. This article will discusses decision No. SL1642-2024 by the Supreme Court of Justice issued on April 29, 2024.[1]
Background of the case
Hernán Vargas Lozano filed a lawsuit against Duquesa S.A., claiming that he worked for the company from March 16, 2004, to February 6, 2018, under an indefinite-term labor contract. He argued that the company used commercial agency contracts to evade labor laws and sought various labor benefits, including severance pay, interest on severance, service bonuses, vacation compensation, and compensation for unfair dismissal.
First Instance Judgment
The Fifth Labor Court of Bogotá ruled in favor of Vargas, declaring the existence of an employment contract and ordering Duquesa S.A. to pay various labor benefits, including severance pay, interest on severance, service bonuses, vacation compensation, and compensation for unfair dismissal. The court also ordered the payment of contributions to the social security pension system.
Second Instance Judgment
The Labor Chamber of the Superior Court of Bogotá reversed the first instance judgment, concluding that Vargas did not prove the existence of an employment relationship. The court found that Vargas was an independent contractor under commercial agency contracts, which did not involve labor subordination.
Appeal in Cassation
Vargas appealed the second instance judgment, arguing that the court failed to properly evaluate the evidence and misapplied the law. He claimed that the court imposed an excessive burden of proof on him and failed to recognize the presumption of an employment relationship under Article 24 of the Substantive Labor Code.
Article 24 of the Colombian Substantive Labor Code establishes a presumption regarding the existence of an employment relationship. This article is crucial in labor law as it helps to determine whether a relationship between an employee and an employer should be classified as an employment relationship, which carries specific rights and obligations.
1.Presumption of Employment Relationship
Article 24 presumes that any personal service provided by an employee to an employer is governed by an employment contract, unless proven otherwise. This means that if a person is performing work for another, it is assumed to be under an employment contract unless there is clear evidence to the contrary.
2.Elements of the Employment Relationship:
For the presumption to apply, the following elements must be present:
- Personal Service: The employee must perform the service personally.
- Subordination: The employee must be under the direction and control of the employer.
- Remuneration: The employee must receive payment for the service provided.
3.Burden of Proof:
The burden of proof lies with the employer to demonstrate that the relationship is not an employment relationship. This means that if an employer claims that an employee is not an employee (e.g. an independent contractor), the employer must provide evidence to support this claim.
Supreme Court’s Analysis
The Supreme Court of Justice analyzed the evidence and found that the second instance court correctly concluded that Vargas was in fact an independent contractor under commercial agency contracts. The court noted that the contractual conditions, such as rendering reports and following instructions, were normal in commercial agency contracts and did not imply labor subordination. It stated that:
“The contractual conditions of rendering reports or submitting to instructions and guidelines, are normal and essential in the development of a commercial agency contract, since they do not involve the provision of a personal service, in subordinate conditions, but constitute the result of the fulfillment of the objective of the legal bond that joined the parties, since it is aimed at the proper distribution of products and the knowledge and analysis of the market.”
The Court concluded that the defendant had demonstrated the full autonomy and independence of the plaintiff, in the performance of the contracted activity, as stipulated in the commercial agency contracts signed by the parties and, therefore, there was no evidence of a “personal service” being rendered.
The court also emphasized that the burden of proof was on Vargas to demonstrate the existence of an employment relationship, which he failed to do.
Conclusion
The Supreme Court upheld the second instance judgment, confirming that Vargas worked under commercial agency contracts and was not entitled to the labor benefits he claimed.
The relevance of this judgment lies in the fact that the Court gave prevalence to the commercial agreement of the parties over the presumption of subordination of the labor law, emphasizing the characteristics of independence of the commercial agent and switching the burden of proof under article 24 of the Substantive Labor Code from the defendant to the plaintiff.
[1] SCJ, proceedings 99007, 29 April 2024, available at: http://consultajurisprudencial.ramajudicial.gov.co:8080/WebRelatoria/csj/index.xhtml
Gabriela Mancero-Bucheli, IDI Country Expert for agency and distribution in Colombia
