In Peru, the Labour Outsourcing Act came into force in 2008, establishing a mechanism of productive decentralisation that allows companies to delegate part of their business activity to other specialised companies. The essential condition is that these companies must carry out the service with technical, economic, and organisational autonomy, that is, assuming the risks inherent in their work. From the outset, the Labour Outsourcing Act expressly prohibited the mere “assignment of personnel” ; in cases of non-compliance, workers would be recognised as having a direct employment relationship with the principal company, and the labour outsourcing contract entered into would be considered null and void.

This prohibition does not restrict labour outsourcing itself, but rather seeks to prevent its misuse. We can therefore affirm that the Labour Outsourcing Act, in its original conception, already contained a protective mechanism for workers, by sanctioning cases in which labour outsourcing conceals direct employment relationships.

In 2022, the regulations of the Labour Outsourcing Act were amended, leading to a period of intense debate, regulatory challenges, and judicial pronouncements both in favour of and against this amendment.

Indeed, the amendment to the regulations introduced the concept of “core business”, supposedly with the aim of limiting the negative effects of improperly applied labour outsourcing. However, in practice, this reform generated an almost absolute restriction on the use of labour outsourcing, with the principal objections being as follows:

• It was issued in excess of regulatory authority
The regulation, being a norm of lower hierarchy, cannot restrict the scope of applying the Labour Outsourcing Act. By prohibiting the labour outsourcing of activities considered part of the “core business”, it imposes a restriction not provided for in the Labour Outsourcing Act.

• Lack of definition of the concept “core business”
Although the regulation prohibits labour outsourcing activities that form part of the core business, it does not clearly define this concept. In practice, this makes it impossible to determine with certainty which activities fall within the core business and which do not. This vagueness created a constant risk for companies: any activity could be deemed part of the core business, even those that had historically been outsourced.

Faced with the uncertainty generated by the regulatory amendment, various stakeholders pursued defensive mechanisms and judicial challenges against the amendment. At the administrative level, the application of the regulation was suspended, as INDECOPI declared it a “bureaucratic barrier”.

In addition, constitutional claims were filed, alleging that the regulatory amendment in question infringed constitutional rights such as freedom of conduct business and freedom of contract. Thus, in October 2025, the Constitutional Court dismissed these challenges and, consequently, upheld the constitutionality of the amendment to the regulations of the Labour Outsourcing Act. In its reasoning, the Constitutional Court stated that none of the rights allegedly affected are absolute; therefore, the State may establish reasonable limits, thereby recognising that the regulatory amendment introduces restrictions or limitations not foreseen in the Labour Outsourcing Act.

In this regard, we consider that the ruling fails to analyse the legality of the regulation introducing these amendments from the perspective of regulatory authority, focusing solely on its compatibility with the Constitution.

In this context, and despite the validation granted by the Constitutional Court, the Supreme Court of Justice issued a ruling of particular relevance to the controversy surrounding the Labour Outsourcing Act, upholding the popular action claim well-founded and annulling the amendment to the regulations.

This decision addresses the main objections to the regulatory amendment, namely:
(i) regulatory overreach; and,
(ii) the lack of clarity surrounding the concept of core business.

On this point, we concur with the Supreme Court of Justice in highlighting the practical difficulties arising from the lack of clarity in defining “core business”. In our view, this deficiency makes it impossible to determine with certainty which activities could be outsourced, thereby creating a constant risk for any company using this contractual modality of being sanctioned and having its labour outsourcing contract declared void.

Indeed, even activities traditionally outsourced could be considered part of the core business, affecting both companies and workers, who would see their employment opportunities restricted. With this ruling, the distinction between “core business” and “main activity” is removed from the legal framework, restoring the original regulatory framework of labour outsourcing.

The legal debate on the possibility of limiting the use of the contractual figure of labour outsourcing leaves us with the reflection that, although its current regulation has been validated by both the Supreme Court of Justice and the Constitutional Court, its main criticism remains, as it focuses on questioning the misuse of labour outsourcing.

In this regard, the Supreme Court emphasises that any regulation aimed at correcting abuses must identify and sanction harmful effects, rather than prohibiting the figure in an abstract or general manner. Furthermore, we must add that, contrary to the proposals put forward by the Peruvian Legislature, eliminating labour outsourcing would not resolve the problems it seeks to remedy. In the absence of this figure, companies would resort to civil contracts for specific works or services, which could generate even greater precariousness and lack of protection.

For this reason, we consider that the discussion should not focus on eliminating labour outsourcing, but on ensuring its proper application, sanctioning cases of abuse, and protecting workers’ rights without undermining business competitiveness. Labour Outsourcing, when applied in accordance with the law, remains a valid, necessary, and constitutional tool for the modern organisation of work in Peru.

[1] Labour Outsourcing Act (Peruvian Ley de Tercerización)

[2] “Assignment of personnel” (cesión de personal) refers to the transfer of workers from one employer to another company, while maintaining their employment rights, salary, and seniority with the original employer

[3] INDECOPI = The National Institute for the Defence of Competition and the Protection of Intellectual Property is an autonomous public body of the Peruvian State, specialising in administrative matters relating to commercial competition and copyright within Peru.

Author: María Elena Acuña Arrestegui

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