The corporate veil is pierced only in the case of a sham or fraudulent company (CSJN, «Palomeque v. Benemeth»)

«Palomeque v. Benemeth» (2003) is the leading case that consolidated the restrictive standard of art. 54 LGS: the Supreme Court held that it is improper to extend the judgment jointly and severally to directors and shareholders for the failure to register part of the wage if it was not established that the company was a sham or fraudulent one, formed in abuse of the law and to violate the law.

What was at issue

Whether the directors and shareholders of the employing company could be held jointly and severally liable for the partial registration of the worker's wage, by applying the unenforceability of legal personality.

What was decided

The Court reversed the extension of liability: the failure to register part of the wage is not enough to pierce the corporate veil.

It limited the effect of art. 54 to cases of a sham or fraudulent company, formed in abuse of the law and for the purpose of violating the law, which avails itself of the corporate personality to affect labor public order or evade rules.

Source: CSJN, «Palomeque, Aldo René c/ Benemeth S.A. y otros», 03/04/2003 — CSJN case-law

Practical application

It is the essential reference in labor claims seeking to extend the judgment to shareholders and directors: it sets a demanding evidentiary standard and protects the separation of assets, except in cases of proven fraud or abuse.

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