Wednesday, October 14, 2015

Spain - Age as an Acceptable Selection Criteria in Collective Redundancy Plans

By Sonia Cortés, Abdon Pedrajas & Molero (Spain)

The Spanish Constitutional Court decision (STC 66/2015 of 13th of April) addresses whether age can be deemed a valid criterion to select employees in a redundancy plan or whether it is a discriminatory practice. Targeting elder employees for redundancy has been a fairly common practice by employers, often with unions’ consent, in the belief that their redundancy has a softer impact due to their closeness to retirement age and higher severance. Very few court decisions addressed the issue and these were often based on abstract criteria of proportionality and justification.

In the ruling at hand, the company used four selection criteria to decide which employees were to be included in the collective dismissal: (i) employees who worked in the department affected by the redundancy process, (ii) employee skills and expertise, (iii) employee qualifications and know-how and (iv) proximity to retirement age. Employees challenged the redundancy plan by arguing that this selection criterion was discriminatory on the basis of age (art. 14 of the Spanish Constitution and art. 21.1 of the Charter of Fundamental Rights of the European Union).

The Court reiterated that it is the employers’ right to select employees for redundancy, as long as such decision is not discriminatory. The Court went on to say that while selection of age is discriminatory, the selection criterion may be deemed acceptable if it is accompanied by appropriate measures to compensate the affected workers. The Court dismissed the company’s first argument to try to justify the differential treatment, ie that the training costs of retaining older employees would be too high because the company would have to retrain new employees in the short period of time. The Court dismissed this based on the fact that termination of older employees left them with hardly any chance to find a new job.

On the other hand, the second argument was upheld. The company argued that proximity to retirement along with the compensatory measures could be read under an objective light given that the measures were appropriate and effective to mitigate the negative impact caused to the selected employees. The measures included social security contributions for employees over 55, which is compulsory for employers in collective redundancies, an additional monthly consideration to such employees and finally the public benefit for unemployed individuals older than 55 who have low income.

The Constitutional Court concluded that there had been unequal treatment based on age but that this was justified on objective grounds and compensated with appropriate and proportional measures to mitigate the harm.

It remains to be seen whether, in years to come, the court sustains the same interpretation, now that the labour reform has decreased severance entitlement and the social benefits granted to elder individuals.