News & Publications

Liability of directors following labour actions

Submitted By Firm: Marval, O'Farrell & Mairal

Contact(s): Enrique M. Stile


Enrique Stile- Javier E. Patrón

Date Published: 4/10/2012

Article Type:

Share This:

Liability of directors following labour actions Contributed by Marval O'Farrell & Mairal December 21 2011 Introduction Legislative position Comment Introduction Directors, partners, shareholders or controlling persons of a corporation can face potential liability as a result of labour actions pursued against the corporation. In the case of an action claiming that an employment relationship was not registered (or was registered incorrectly), the corporation's liability may be jointly and severally extended to its directors, partners, shareholders or controlling persons, affecting their individual estate (under Sections 54,(1) 59(2) and 274(3) of the Companies Law). Legislative position The legislature has taken one of two positions regarding the responsibility of directors, partners and controlling persons for labour issues - the restrictive or the comprehensive position. In March 2003, in Palomeque v Benemeth,(4) the Supreme Court applied the restrictive position. It ruled that directors were not to be held jointly and severally liable with the corporation for unregistered labour relationships merely due to their capacity as directors. However, in a 2007 decision the court upheld a ruling by the National Labour Court of Appeals, imposing liability on directors or shareholders, that contradicted the criteria set forth in Palomeque v Benemeth.(5) Thus, the definitive ruling on the matter at present is that of the National Labour Court of Appeals. The National Labour Court of Appeals applied the comprehensive approach, thus extending the responsibility of directors to include the following circumstances: l hiring personnel and failing to register them in the labour records;(6) l registering a lower salary than that actually earned by an employee;(7) l registering an employment date that is later than the real date; l non-payment of social security contributions; l corporate infra-capitalisation;(8) or l in general terms, any situation that might be interpreted as abuse of the corporate veil, to the detriment of employees or the social security agencies. Of the circumstances above, the most common cause of directors' liability has been deficient labour registration, which is currently upheld by most panels of the National Labour Court of Appeals.(9) This position could be construed as a form of directors' objective liability derived from membership of the board of directors. In line with the increasing tendency of courts to take the comprehensive position, in a recent case(10) the National Labour Court of Appeals extended responsibility to directors, taking the view that they were, or should have been, aware of a discriminatory act by the corporation and should have prevented it. The case concerned the termination of an employee within the term of special protection for maternity (sevenand- a-half months) following the date on which the plaintiff had adopted four children. However, there is a tendency among legal authors to require caution when applying such penalties. Comment As the comprehensive position has been commonly upheld and its scope is still expanding, when taking up a directorial role (or acting in that capacity), directors should Employment & Labour - Argentina Authors Javier E Patrón Enrique M Stile ensure that systems are in place to monitor the enforcement of corporate discrimination policies and verify the enforcement of labour and social security laws should be implemented. In the event of a breach of a legal obligation, the regulations provide that leaving a written record of the breach in the corporation's minutes book and requiring the regularisation of such situation should help to exempt such persons from liability. In addition, the use of a directors' and officers' insurance policy is an option in today's litigious environment and it is common for corporations to grant letters of indemnity to their directors. For further information on this topic please contact Javier E Patrón or Enrique M Stile at Marval O'Farrell & Mairal by telephone (+54 11 4310 0100), fax (+54 11 4310 0200) or email ( or The Marval O'Farrell & Mairal website can be accessed at Endnotes (1) Section 54 states that: "Damages caused to the corporation due to willful or negligent behavior of its partners or those who, despite not being partners, control it result in the wrongdoers being jointly and severally liable for damages, without being able to claim that such damages were offset by profits obtained from other businesses as a result of their performance. Partners or controlling persons who use the corporate funds or assets for their individual purposes or businesses or those of third parties are required to hand over to the corporation any resulting profits, being individually liable for any related losses. Piercing of corporate veil. Any corporate activities performed as disguise for the fulfillment of non-corporate purposes and which constitute a means for breaching the law, public policy or good faith or frustrating third-party rights will be directly attributable to the partners or controlling persons who made it possible, who shall be jointly and severally liable for the damages caused." (2) Section 59 states that "directors who default on their obligations are unlimitedly, jointly and severally liable for the damages resulting from their acts or omissions". (3) Section 274 states that: "Directors are jointly and severally liable vis-à-vis the company, its shareholders and third parties for misperformance of duties, according to the criterion set forth in Section 59, and for breach of the laws, bylaws or regulations and any other damages caused by willful misconduct, abuse of authority or gross negligence." (4) Supreme Court of Justice, April 3 2003. (5) Davedere v Mediconex SA, Supreme Court of Justice, May 29 2007. (6) Oller Amilcar v Caled Vía Pública SRL, dismissal, National Court of Appeals in Labour Matters, Panel I, February 20 2008. (7) Doldan v Ted Bodin SA, dismissal, National Court of Appeals in Labour Matters, Panel IV, March 31 2006. (8) Arancibia v Rodríguez, National Court of Appeals in Labour Matters, Panel III, September 22 2008. (9) Canción v Fernández García SA, National Court of Appeals in Labour Matters, Panel III, July 23 2008; Ventura v Inverge SA, National Court of Appeals in Labour Matters, Panel II, April 23 2008; Oller v Caled Vía Pública, dismissal, National Court of Appeals in Labour Matters, Panel I, February 20 2008; and Caminata v Clínica Priovada Alcorta SA, National Court of Appeals in Labour Matters, Panel V, June 12 2007. (10) Solano v Liderar Compañía General de Seguros SA, dismissal, National Court of Appeals in Labour Matters, Panel VII, September 21 2011. The materials contained on this website are for general information purposes only and are subject to the disclaimer. ILO is a premium online legal update service for major companies and law firms worldwide. Inhouse corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription. Register at

Find an Employment Lawyer

View or print a complete ELA member list »

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel


Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.


We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel