Subcontracting & Outsourcing Liability in Chile

Who is responsible when a contractor does not pay

Law 20.123, which added articles 183-A to 183-E to the Código del Trabajo, regulates subcontracting in Chile. A principal company (the empresa principal or dueña de la obra) that hires a contractor to perform work or services with the contractor's own workers is generally treated as jointly responsible for that contractor's labor and social security debts to those workers, including termination compensation, for the period the workers served the principal.

This catches many foreign companies off guard. A mining supplier, a retail chain, a US manufacturer with a Chilean plant or a developer building a project can all find themselves facing a claim from the employees of a contractor they barely know. The law also provides tools that move the exposure from joint to subsidiary liability if the principal uses them properly. The rest of this page explains those tools. For the related risk of unpaid contributions making a dismissal ineffective, see our page on nullity of dismissal.

What we handle

Joint versus subsidiary liability

Under article 183-B, the principal company is jointly liable (solidariamente) for the contractor's labor and social security payment obligations, and the worker can sue the direct employer and anyone who might be liable at the same time. Article 183-C gives the principal two practical tools: the right to demand proof from the contractor that wages and contributions have been paid, and a right of retention, which lets it withhold sums owed to the contractor and pay the workers directly.

If the principal exercises those rights as the law describes, its responsibility becomes subsidiary, which means the worker must first pursue the contractor. If it does not, it remains jointly liable. Courts apply this strictly. A principal that never asked for a certificate, or that asked once at the start of the contract, is in a weak position. This is why many compliance programs build a monthly cycle of requests and records.

Certificates, outsourcing and temp agencies

The Dirección del Trabajo issues certificates of compliance with labor and social security obligations, and contractors commonly provide them as part of monthly invoicing. They are not magic, but they are the standard evidence that the principal checked. Law 20.123 also regulates temporary-service companies (empresas de servicios transitorios), which can supply workers only in the situations the law lists.

A contractor arrangement is genuine only when the contractor works at its own risk, with its own staff under its own direction. Where the contractor is a shell that supplies labor under the principal's day-to-day orders, the Labor Code treats the arrangement as a subterfuge and the workers can claim an employment relationship with the principal. Foreign groups that outsourced a whole function to a local provider should have this reviewed early, before a claim does it for them.