Spanish Supreme Court rules that algorithmic management is a criterion for unlawful assignment

The Spanish Supreme Court, in its judgment of 27 March, ruled that an unlawful assignment of workers occurs when the principal company exercises, through real-time technological control systems, effective and comprehensive managerial control over the workers of its subcontractors.

Criteria for managerial control

The Spanish Supreme Court equated the principal company's control via a personal digital assistant (PDA) with that of GPS geolocation, as it involves real-time and permanent monitoring and control throughout the provision of the service. The PDA was connected to the principal company's central computerised database, which enabled it both to monitor the individual performance of each delivery driver and to process the invoicing for the service.

One factor demonstrating that actual managerial authority rested with the principal company is that only it had access to the parcel tracking system, while the subcontractors were limited to requesting route data for their own delivery drivers from the principal company.

Furthermore, through the PDA device, the principal company did not merely assign the provision of the service to the subcontracted delivery drivers but issued all instructions necessary for the day‑to‑day performance of the work. It exercised effective and comprehensive control over compliance.

The dependence arising from algorithmic control was reinforced by the regularity and continuity of the provision of the service. These were not specific, one-off transport assignments but a daily service, subject to a timetable, that permanently integrated the worker into the principal company's production organisation.

Drawing on the case law of the Court of Justice of the EU (Case C-441/23, Omnitel Comunicaciones), the Spanish Supreme Court noted that the fact that subcontracting companies performing certain functions, such as granting annual leave or exercising disciplinary authority, does not preclude the relationship from being classified as an unlawful assignment of workers.

Effective control

The Supreme Court expressly rejected the argument that the control exercised via a PDA constitutes mere technical or quality control.

Three factors determined the effective and comprehensive nature of the control: the principal company was the one that organised and managed the day-to-day activities of each delivery driver. It received and resolved any incidents arising during delivery (while the subcontractor only intervened occasionally. Through the centralised computer system, it had complete and individualised visibility of the status of each delivery.

These elements demonstrate that the principal company did not merely supervise the outcome of the service but directed its execution.

Osborne Clarke comment

How can companies minimise the risk of unlawful worker assignment in subcontracting arrangements? The use of algorithmic systems that involve the constant monitoring and control of subcontracted workers is one of the main risk factors in determining whether the supply of workers is unlawful. Companies should identify which technological tools are used within the framework their contracts and the degree of effective control these tools exert over the day-to-day activities of workers.

Companies should establish internal review protocols that define the use of algorithmic management systems, distinguishing between functions aimed at cooperative coordination and those involving continuous monitoring of the individual performance of subcontracted workers, which could be interpreted as one of the employer’s inherent powers.

If you would like further information on how this ruling may affect your company or your subcontracting arrangements, please do not hesitate to contact our Employment team.