Chile: Workers Win Right to Negotiate With Parent Company, Bypass Subsidiary

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By Tom Azzopardi

Oct. 15—Workers have the right to negotiate labor conditions with the parent company rather than the local subsidiary for which they work, under a ruling issued by a court in the city of Caldera.

The principal union representing its workers took Hipermercados Tottus SA, a unit of the Falabella retail group, and its local subsidiary Servicios Generales de La Calera to court in a bid to show that they constituted a single employer, a view the court supported.

The ruling follows the promulgation of the so-called MultiRUT law (Law No. 20,760) by President Michelle Bachelet in July of this year. The name of the law refers to the practice among large companies of establishing legal entities for each division with individual tax IDs or Rol Unitaria Tributaria (RUT), requiring employees to negotiate on a site-by-site basis rather than with the parent company.

A Long-Held Desire

In its ruling, issued Sept. 29, the court held that the two companies constitute a single employer under the Labor Code and are therefore jointly responsible for the fulfillment of legal labor and safety requirements and individual or collective agreements. Employees of both entities can constitute one or more unions and hold collective negotiations with both or either company.

The MultiRUT legislation creates the legal entity of “employer,” which differs from an individual company “by coordinating and directing those who work there, under different models of subordination and dependence.”

“The law establishes that one or more companies constitute the same shared employer when they have common labor and fulfill certain requisites such as providing similar or complementary products or services,” said Labor Minister Javiera Blanco on Sept. 29.

Companies found to have breached the law can face fines of 20 to 300 monthly tax units (1.28 million pesos or $21,800).

Approval of the law represented a long-held desire of Chile's labor movement to increase its negotiating power against large companies.

Special Investigations

The law “allows unions that represent employees of several companies . . . to present collective proposals and forces the employer to negotiate with them,” Marcela Salazar, a labor lawyer with law firm Philippi, Yrarrázaval, Pulido & Brunner, told Bloomberg BNA.

In some cases, employees of companies with different owners may be able to have them recognized as a single employer, allowing the creation of intercompany unions and obliging the firms to negotiate collectively, something that does not currently occur in Chile, said Juan Andrés Perry, senior manager in human resources at professional services firm EY.

To have different companies recognized as a single employer, however, requires a report by the Labor Authority to confirm that the companies fulfill the required conditions (shared address, controlling relations and similar or complementary activities) and a court ruling based on that report.

The Labor Authority has created a special investigative unit to deal with sensitive and high-impact investigations, including application of the MultiRUT law. According to Blanco, the unit has so far received 83 requests from the courts to undertake investigations and issued 29 reports.

Investigations to date have been concentrated in a handful of sectors led by construction and real estate (20.3 percent), retail (15.7 percent) and telecommunications and transport (15.3 percent).

To contact the reporter on this story: Tom Azzopardi in Santiago at

To contact the editor responsible for this story: Rick Vollmar at

For more information on HR law and regulation, see the Chile primer.