It is a common scenario in family businesses and projects between acquaintances: a person contributes work, management, or capital in exchange for a percentage of the profits, and over time ends up running the day-to-day operations of the project. When the relationship breaks down, the underlying question arises: was that person really a partner in the business, or did they actually provide their services as a subordinate employee, entitled to wages, social benefits, and severance pay? Colombia's Supreme Court of Justice, through its Labor Cassation Chamber, recently decided a case that sets clear criteria on this point.
The Case: Managing a Real Estate Project in Exchange for Profits
The case decided in ruling SL642-2026 (Case No. 25899-31-05-001-2023-00137-01, Reporting Justice Marjorie Zúñiga Romero, June 24, 2026) arose from two private agreements signed in 2016 and 2018 between an individual and the company Constructora Vivir Bien SAS for the development of a real estate project. Under those agreements, the plaintiff took part as an industrial partner, entitled to 9% of the project's profits, and took on management, administration, and marketing duties.
When the relationship ended, the project manager sued the construction company, arguing that, in reality, the parties had an employment contract for an indefinite term, and sought wages, social benefits, social security contributions, and the severance payments under articles 64 and 65 of the Labor Code. Both the first-instance labor court and the Superior Court of Cundinamarca, on appeal, denied his claims, concluding that the relationship was corporate in nature rather than an employment relationship. The case reached the Supreme Court on a cassation appeal.
The Decisive Criterion: Subordination, Not Profits or Management
The Court reiterated that the element that distinguishes an employment contract from any other type of relationship —including a corporate or commercial one— is subordination: that the person is subject to the orders, direction, and control of someone else within the organization. Article 23 of the Labor Code provides that an employment contract requires, among other elements, “the continued subordination or dependence of the employee on the employer, which entitles the employer to demand compliance with orders, at any time, as to the manner, timing, or amount of work.”
In this specific case, the Court found that project decisions were made by a partners' committee, in which the plaintiff himself took part with voice and vote, and that his management stemmed from the performance of an associative contract governed by article 98 of the Commercial Code —which defines a company as the contract by which two or more people undertake to make a contribution “for the purpose of sharing among themselves the profits obtained from the business or corporate activity”— rather than from the subordination inherent to an employment relationship.
What Is Not Enough, On Its Own, to Prove an Employment Contract
- Social security contributions made by a company on a person's behalf do not, by themselves, prove the existence of an employment contract. The Court reiterated that they amount to no more than circumstantial evidence, which must be weighed together with the rest of the evidence in the case.
- Performing management or technical direction duties on a project likewise does not automatically amount to subordination, if those duties are carried out under an associative agreement and the relevant decisions are made collectively.
- The fact that decisions are made by a committee or collective body of which the claimant is himself a member —with voice and vote— does not show that he receives orders in the terms of a subordinate employment relationship.
The Court also noted an important point for corporate practice: nothing prevents the same person from being, in relation to a company, a partner or shareholder (governed by corporate or commercial law) and, at the same time, a a subordinate employee (governed by labor law), since each relationship retains its own legal nature under article 25 of the Labor Code. What the Court ruled out in this specific case was that a genuine subordination relationship, rather than a mere corporate stake, could be inferred from the proven facts.
What Companies and Partners Should Do to Avoid This Risk
This type of dispute is more common than it may seem in family businesses, real estate projects with several investors, and ventures between acquaintances, where roles are not always precisely documented from the outset. Some practical measures:
- Document in writing, from the start of the project, whether each participant's relationship is corporate, commercial (for example, a business collaboration agreement or a joint account agreement), or an employment relationship, and remain consistent with that classification in how the business actually operates.
- If someone is enrolled in the social security system, expressly record whether that payment corresponds to a labor obligation or to a benefit agreed upon among partners, to avoid it being read as evidence of an unintended employment relationship.
- Keep evidence that key project decisions are made collectively (committee or board minutes), when the parties intend to maintain a corporate or associative relationship rather than an employment one.
- Review each situation on a case-by-case basis: classifying someone as a “partner” or an “employee” can completely change the financial outcome of a dispute —social benefits, severance, final settlement— depending on what can be proven.
This note is for general informational purposes only and does not constitute legal advice for any specific case. If you are a business owner, a partner, or perform duties within a company and are unsure about the nature of your relationship, at Iniciativa Legal we can help you review it, whichever side of the relationship you are looking at it from.
Sources
- Supreme Court of Justice, Labor Cassation Chamber, ruling SL642-2026, Case No. 25899-31-05-001-2023-00137-01, Reporting Justice Marjorie Zúñiga Romero, June 24, 2026. Search and verify Labor Chamber case law: Labor Cassation Chamber Case Law Search – Supreme Court of Justice.
- Labor Code, articles 23, 24, and 25: Senate Secretariat – Labor Code.
- Commercial Code (Decree 410 of 1971), article 98: Commercial Code, article 98.