On May 7, 2021 Chamber X of the Labor Court of Appeals in Buenos Aires decided that a franchisor is not liable for the labor debts of franchisees as provided under Section 1520 of the new Commercial and Civil Code that came into effect as from August 1, 2016.
This decision declared that the liability of franchisor could only be claimed proving that they do not infringe Section 30 and 31 of Argentine Labor Law, which, after reviewing the facts of the case and the involvement of franchisor, were deemed not applicable.
The Court of Appeals based its decision on the fact that, under the new Code, franchising is a typified contract which is regulated describing the obligations of each party and its independence of franchisee and establishing that the franchisor is not liable for the success of the franchisee.
Furthermore, since they are separate companies and there is no labor relationship between the franchisor and the franchisee, the personnel of franchisee do not have a labor relationship with the franchisor, except in case of fraud which was not proven by the plaintiff as established by the First Instance Court.
Therefore the Chamber X from the Labor Court rejected the claim and affirmed that the decision of the First Instance Court reversed the doctrine of former decisions of other Chambers of the said Labor Court of Appeals which considered that the lack of liability of a principal could only be established by a specific labor legislation and not by applying a principle developed by commercial legislation.
As a result of this decision, great expectations have arisen between the franchisors, creating the hope that other Chambers of the Court of Appeals may follow and accept, through a full meeting of all the Chambers of the Labor Court, the new doctrine, as an exception to Labor Laws for franchise agreements.
Osvaldo Marzorati, IDI Country Expert for Argentina