New Labour Legislation in Spain
By Sonia Cortes, Cuatrecasa, Goncalves Pereira
The Spanish government recently approved new legislation[1]
aiming at providing employers the means to face the difficult financial
situation. The new legislation brings significant changes to employment law, particularly
extending flexibility at work and easening
both individual termination and collective redundancy requirements. It represents the most
relevant labour reform since the Workers’ Statute was approved in 1981. The
practical enforcement in the few months the reform has been in force shows that
employers have won considerable leverage in enforcing changes to employment or
terminations and that employees are more prepared to settle cases before
litigation.
The new law eases
enforcement of changes to employment terms, aiming at further flexibility at
work, including job mobility, work site move and other relevant changes to
working conditions.
(a) Floating
working time.- The labour reform grants employers the right to freely
change up to 5% of employees’ annual working time, ie approx 90 hours per
year to conform to business needs. This is only subject to mandatory rest time
(12 hour night rest, etc) and to the company’s annual schedule, ie. no
weekend work can be enforced through this system if the company schedule
does not provide for weekend work (unless otherwise agreed). This allows
greater flexibility at work. It entails a very relevant improvement for
employers’, given that very few collective bargaining agreements provided
for similar rights (eg chemical industry) and thus before the labour
reform employers needed agreement with employee representatives to achieve
this floating time right (which in practice required consideration in
exchange for this right and was usually subject to limitation).
(b) Changes to job
description.- Employers may freely move employees to other positions in
the same group, since the reference to the 'group' is much wider than the
previous more stringent category reference. Again, this entails
considerable flexibility at work and overcomes the prior rigidity resulting from narrow interpretation by the courts.
(c) Office move.-
The standard of justification to move employees to other locations is now
less stringent. The labour authority is no longer entitled to order
a 6-month stay on a collective work site move.
(d) Substantial
modification of working conditions.- Less stringent standards of
justification are required. This overcomes the difficulties to change
working conditions resulting from the very narrow interpretation held by
Spanish courts in the past. The modification of certain conditions
(salary, working day, working system, etc.) can be implemented by the
company unless provided in the collective bargaining agreement (CBA).
Besides, changes are only deemed to be collective if the threshold of
employees involved is exceeded, rather than the previous reference to the
individual or collective origin of the right. Individual substantial
modifications require a shorter notice period (15-day notice instead of 30
day notice).
(e) Part-time employment.-
Part-time employment has been amended to allow part-time employees to work
overtime, in addition to the so-called additional hours –horas complementarias- (which were
very limited). This allows considerably more flexibility and as a result part-time employment may become a very interesting tool for
flexibility at work.
(a) Company CBAs
are recognized to have priority over any other CBA with regards to certain
matters (base salary and salary supplements, schedule and working time
distribution, professional classification adjustment to the company
situation, work-life balance measures, etc.).
(b) A time limit of 2 years
has been set for negotiations for renewal of expired CBAs,
during which CBAs continue to be in force, thus setting a time limit to CBA
enforcement, which formerly dragged on indefinitely thus removing
employers’ leverage. With the new law, after two years of unsuccessful
negotiations, the former CBA of a broader scope (typically the national
CBA for the industry, if any) becomes effective.
(c) Employers may decide
not to apply all or part of the relevant company or industry CBA, subject
to agreement with employee representatives after a 15-day consultation term, notification to the labour
authority, and subject to their being sustained business grounds. Economic
grounds have been defined as for collective redundancy (see 3.c.i), although income decrease for two consecutive
quarters (instead of 3 for collective redundancies) is deemed justifying
grounds. However, if the company fails to reach an agreement with local
employee representatives, a very complex and almost unenforceable
procedure follows. This procedure involves submission of consultation to
the CBA interpretation commission and either arbitration or submission to
the National Consultation CBA Commission.
a.
Termination
without cause.-
Termination without cause no longer entitles employees to salaries during
litigation (which used to imply a 6 month salary cost for employers in addition
to severance). This grants employers much stronger leverage in termination
litigation and negotiation for settlement, since the employee will no longer be
receiving severance upfront as was the case before to avoid those salaries. In
fact, in the event of litigation, the employee will not be receiving severance
for around six months and even eighteen months if the employer appeals. This is
creating much broader opportunities for the parties to settle termination
disputes before litigation and for amounts below the usual practice in the past.
b.
Termination
Severance.- The
standard severance for termination without cause has been reduced from the previous
45 days’ salary per year of service (capped at 42 months) to 33 days’ salary
per year of service, (capped at 24 months). For current employees, this applies
as of 12 February 2012 and thus their previous seniority still accounts at 45
days’ salary per year of service up to such date and at 33 days’ salary per
year of service thereon. The resulting severance is capped at 24 months’ salary,
except where the stand-alone previous accrued seniority exceeds this amount
(which takes place for seniorities over 14 years), in which case the old 42
months’ salary per year of service applies.
c.
Business
Grounds Termination.- The grounds
(economic, technical, organizational or productive) justifying business
termination have been considerably eased. Economic reasons occur where the
company is under a “negative economic
situation”, usually but not necessarily related to the company’s current or
foreseen losses and there is a persistent decrease in the company’s income.
Such a decrease is deemed to be persistent if it takes place during 3
consecutive quarters. As for productive, technical and organizational grounds,
the law simply requires changes thereto. The law no longer requires the company
to prove the reasonableness of the dismissal as a measure to prevent a negative
performance of the company or to ensure the company’s viability or
competitiveness. Termination based on these grounds entitles employees to 20
days’ salary per year of service, capped at 12 months’ pay, which remains unchanged.
d.
Collective
redundancy.-
Collective redundancy has considerably changed.
ii.
The
former requirement to obtain prior authorization by employment authorities has
been removed. Employers may now implement collective redundancies provided
business grounds (economic, technical, organizational or productive) occur and
following a 15 or 30-day consultation term with employee representatives
(consultation term depending on whether the company has more or less than 50
employees).
iii.
The
redundancy plan may be challenged in labour courts, but limited grounds for challenge exist. The main risk now is that the redundancy may be declared null
and void if the consultation procedure or other procedural requirements are not
followed or if the selection criteria are discriminatory. However should court
declare the plan to be unlawful due to lack of justifying grounds, the consequence
is simply that the severance of 33 (or 45) days’ salary per year of service,
capped at 24 months’ salary applies, instead of the 20 days salary per year of
service, capped at 12 monthly payments.
iv.
The
fact that implementation is easier, risks minor and that the company may implement
the redundancy plan with no need to have the work force’s support or the
authorities approval places the company in a much stronger position, thus
removing the need (as was the case under the previous legislation) to give in
to paying higher severance in order to avoid risks.
v.
A
relocation plan for at least 6 months is to be implemented for redundancies
involving more than 50 employees. This plan should include social measures for
redeployment such as outplacement, relocation, training, etc. The
implementation of the social plan is subject to judicial review.
vi.
A
number of procedural requirements that were implemented in 2011 still apply,
including the need for the employer to disclose related affiliates’ annual
accounts in the event of economic grounds or to justify the selection criteria.
The
following issues also result from the labour reform:
(a) New
contract of employment to hire employees on training under 30 years of age for
a maximum term of 3 years, having relevant social security contribution reductions;
(b) New
contract of employment for employers with less than 50 employees, having a 12
month probationary term[2]
and entitling the employer to relevant social security discounts
(c) Teleworking
employees to be assigned to employer job centres
(d) Measures
regarding work-life balance.
This new legislation provides interesting opportunities for employers to
conform their workforce to business needs, thus providing a much better framework
legislation for businesses in Spain. The experience of this legislation short
enforcement shows a clear improvement in employers’ leverage in the employment
relationship.
[1] Royal Decree Act 3/2012 on Urgent Measures regarding the Labour Market
[2] This term might be eventually amended
