The Fourth Chamber of the Supreme Court ruled, on May 22, 2026, on two complaint appeals (Dockets No. 5,463-2026 and 7,149-2026) that reaffirm a direct rule for companies with fee-based or service-provision schemes: when the employer denies that an employment relationship exists, the action for declaration of an employment relationship is governed by the two-year statute of limitations of article 510, first paragraph, of the Labor Code, and the actions for unjustified dismissal and labor protection —since they cannot be exercised independently of that one— are subject to the same deadline, neutralizing the 60-business-day lapse of article 168. If your company operates under models that in fact conceal an employment relationship, the risk window has just expanded from months to years.
What happened
In the first case (Docket No. 5,463-2026), a worker provided services to the Municipality of Chiguayante between October 1, 2019 and June 20, 2024 —the separation date recorded in recital One; recital Six refers to July 20, 2024 as the contract's end according to the complaint. On July 31, 2025 —more than a year after the end of the services— they sued for the judicial declaration of the employment relationship, unjustified dismissal, and collection of benefits. At the preparatory hearing of January 7, 2026, the Labor Court of Concepción upheld the lapse defense: more than sixty business days had elapsed since the separation. The Concepción Court of Appeals confirmed that ruling in February 2026.
In the second case (Docket No. 7,149-2026), a worker was dismissed by the Municipality of Talcahuano on April 30, 2025 and sued on July 31, 2025 for labor protection, declaration of an employment relationship, and unjustified dismissal. The trial courts also upheld the lapse.
The Supreme Court unanimously upheld both complaint appeals. Its reasoning: when the employment nature of the relationship is part of the conflict submitted to the court, it is not legally possible to apply the lapse of article 168 of the Labor Code before that nature is judicially established. The action for unjustified dismissal —and that for labor protection— are contingent on the declaration of the employment relationship. They cannot exist independently. For that reason, the applicable deadline is the two-year statute of limitations of article 510, first paragraph, of the Labor Code, counted from the end of the relationship. The Court further specified that the lapse of article 168 only reaches the actions for labor protection and unjustified dismissal; the actions for declaration of an employment relationship, nullity of dismissal, and collection of benefits are governed by the statute of limitations, not by the lapse.
"It is not acceptable to require (the worker) to bring their action for recognition of the relationship as an employment one, under subordination and dependence, during its term, given that they would be exposed to reprisals from the employer and even the termination of the employment relationship decided by the latter, which could end with the loss of their source of work and the support-related benefits derived from it" (recital Eight).
The Court ordered all the actions in both cases to proceed and summoned a preparatory hearing.
What it may mean for your company
The standard defense of companies facing fee-based contracts that conceal employment relationships was to raise the lapse defense if the former service provider took more than sixty business days to sue. Article 168 of the Labor Code provides that deadline for unjustified-dismissal actions. It functioned as a procedural shield: after those days, the complaint was declared inadmissible.
The Supreme Court has just eliminated that shield when the employer denies the employment relationship.
The criterion of dockets 5,463-2026 and 7,149-2026 —which reiterates positions adopted in dockets 43,766-2017, 43,763-2017, 3,415-2026, and 2,223-2026— establishes that when the employer denies the existence of the employment relationship, the accessory actions (unjustified dismissal, labor protection) are contingent on the main declaratory action. And that declaratory action is time-barred in two years from the end of the services, under article 510, first paragraph, of the Labor Code.
What this implies in practice: if your company terminated a fee-based contract on December 31, 2024 without recognizing the employment nature of the relationship, the former provider has until December 31, 2026 to jointly sue for declaration of an employment relationship, unjustified dismissal, and collection of benefits. The clock runs more slowly than many companies assume.
But that extension has limits. The rule applies when the employment nature is disputed —that is, when the employer denies it. Under the general rule of article 168, first paragraph, of the Labor Code —not addressed by the commented rulings— if the employment relationship is recognized and only the dismissal grounds are disputed, the deadline remains sixty business days. The distinction may seem technical. The economic effect is not: a complaint that includes a declaration of an employment relationship drags with it years of unpaid social-security contributions, vacations, bonuses, and severance for years of service. If there is also labor protection, the additional compensation can reach up to eleven months of remuneration (article 489, third paragraph, of the Labor Code).
There is another angle. In both rulings (recitals Five and Nine), the Court held that applying the lapse without first resolving the employment nature of the relationship constitutes "fault or abuse" and compromises the worker's effective judicial protection. That language is no small matter: it was the basis of the complaint appeal, the mechanism that allows the Court to directly correct rulings of judges who incur that type of error. That it applied it in two different cases on the same day reinforces that the criterion is consolidated.
Do you know how many of your current or terminated relationships would fall within this two-year window? Quantifying that portfolio and its potential liability in contributions, vacations, and severance allows you to anticipate the defense instead of improvising it. Schedule a diagnostic of your service-provision schemes.
What you can do
If your company employs workers under fee-based contracts, service orders, or other arrangements that in fact involve subordination and dependence, the immediate risk is a lawsuit that, at any time in the next two years, may include a declaration of an employment relationship plus all the accessory actions. Three concrete actions:
- Audit the ongoing service-provision contracts and identify which ones show indicators of subordination and dependence: fixed schedule, exclusivity, direct instructions from the principal, use of the principal's tools or platforms, organic integration into the operation. Those contracts concentrate the greatest risk.
- Review the relationships terminated in the last two years. If your company terminated fee-based contracts in that period without recognizing the employment nature of the relationship, there is a possibility of a lawsuit within the deadline. Assess the cases of greatest exposure before the window closes.
- Assess the regularization of concealed employment relationships that are still active. A negotiated agreement —with payment of contributions owed, signing of a settlement agreement, and waiver of actions— is usually less costly than a judgment declaring the employment relationship with full retroactive effects.
If any of these points raises questions, a 30-minute diagnostic session is enough to size up your gaps in this matter. Schedule here.
If you need to audit the structure of your service-provision contracts or assess the risk of lawsuits for an employment relationship in your company, schedule a meeting with our team.
This content is informational and does not constitute legal advice.