In this article, we are going to analyze the differences between the employment contract and the professional services contract in Nicaraguan legislation and jurisprudence. These two types of contracts have different implications for the parties involved, both in terms of rights and obligations, as well as liability and taxation.
Definitions:
The employment contract is one by which a person undertakes to provide their personal services to another, under the dependence and subordination of the latter, in exchange for remuneration. The employment contract is governed by the Labor Code and the Political Constitution, which establish the principles and guarantees that protect the worker, such as the minimum wage, vacations, bonuses, social security, stability, and compensation for unjustified dismissal, among others.
The professional services contract is one by which a person undertakes to perform a certain work or service, with technical autonomy and independence, in exchange for a fee. The professional services contract is governed by the Civil Code and the Tax Code, which regulate the contractual and fiscal aspects of the relationship between the parties. The contractor does not have the same rights and benefits as the worker but is also not subject to the same obligations and restrictions.
Criteria for differentiation:
The distinction between the employment contract and the professional services contract is not always clear or simple, as it depends on the specific circumstances of each case. The jurisprudence of labor courts has established a series of criteria to determine the legal nature of a particular contract, such as:
- The degree of dependence or subordination of the contractor to the contracting party.
- The form and periodicity of the agreed remuneration.
- The exclusivity or not of the service provided.
- The working day and schedule.
- The integration or not of the contractor into the organizational chart and culture of the contracting party.
- The provision or not of the means and inputs necessary for the execution of the service.
- The assumption or not of business risk by the contractor.
These criteria are not exhaustive or absolute but must be valued together and in harmony with constitutional and labor principles. The objective is to prevent the professional services contract from being used as a way to evade or violate the rights of workers.
In conclusion, the employment contract and the professional services contract are different legal figures that respond to different needs and realities. Good advice is important to know their characteristics, advantages, and disadvantages, as well as the jurisprudential criteria that allow differentiating them and thus avoid unnecessary legal and tax conflicts.