By Ricardo Foglia*

One of the top issues in current labour relationships is productive decentralization, which is the result of the new productive paradigm based on organizational and business fragmentation. The key words of this phenomenon are externalization, outsourcing, and delocalization.

The new production paradigm demands a shift from a centralized model (Taylorism – Fordism), focused on the large industrial company that used to dominate the business world until the oil crises of the 70’s, to a decentralized, flat model (with less hierarchical structures). This decentralized model has a preponderance on services, uses a lot of technology and is characterized by the diffuse property of large companies caused by the needs of gathering large capitals.

Decentralization has different versions, such as: externalization, which consists on delegating some of the company’s activities to third parties in order to complement the productive processes; the division of the productive cycle among several companies, each of whom develops a part of the cycle; the division of the company in different locations, even in different countries; and the use of workforce suppliers.

This process still lacks clear limits and cannot be addressed using just one regulation, as it admits multiple combinations and variants, which tend to change quickly.

Therefore, there is no doubt that the regulatory framework in our country, which was developed in 1974, is both insufficient and old fashioned. Our legislation rules just a few variables of the complex universe of decentralization (intermediation, cession and subcontracting, temporary employment firms and economic groups), and it turns out it is not properly prepared for the current productive model. A sample of these deficiencies is the large number of litigations on the subject and the diversity of interpretations over similar matters.

The general opinion is that the current regime must be replaced by a different one. However, that is where agreements end, as there are different solutions suggested.

Some consider that decentralization hides the possibility of a labour fraud, as the figure of the employer and liability become blurry. Consequently, they suggest a more restrictive system that sterilizes the intervention of third parties in the productive cycle, stating that this is the suitable way to grant the worker’s protection.

Others think that decentralization is the modern and effective way to organize productive processes, as well as to create jobs, introducing worker into the labour world.

Neither of these trends suggest unprotecting the worker, they just state two different ways to do things. Maybe the solution is somewhere in the middle of both propositions, developing a regulatory framework that protects workers but that also enables companies to develop and grow, preventing the legislation to become a burden for real employment creation, which is a scarce good. In order to do that, the future regime should start by differentiating fraudulent situations from regular situations, punishing the first and enabling the second by applying reasonable regulations.

*Ricardo Arturo Foglia is a lawyer, graduated from the Catholic University of Argentina (UCA). He has a Master’s Degree in Labour Law and Social Security from the University Rey Juan Carlos – Madrid. He is the Director of the Department of Labour Law at University Austral, where he is also a professor. He is also a Professor at UCA.  Foglia is a member of the Scientific Committee of the Labour Law and Social Security Magazine (UCA) and Director of the Argentinian Magazine of Labour Law.