Practice Area Articles


February 05, 2024

By Paul Hastings Professional

Back to International Employment Law



Collective terminations

There have been several judicial and legislative developments in relation to collective terminations. In July 2023, the Government implemented a legal requirement for six months’ notice to labour authorities and unions in situations of collective dismissals connected with closure of the relevant workplace or company. Employers should be aware of possible changes to timings and feasibility of the restructuring process and the workers’ rights to information and consultation. Additionally, recent case law has declared that departures through mutual agreements in a restructuring context could be included in the threshold upon which a collective termination procedure is deemed compulsory. There is a risk of these terminations triggering the Economic Contribution to the Public Treasury. Employers should take the triggering threshold into account and review their dismissal polices accordingly.

Political developments

The political agreements reached following the general elections have given rise to significant changes in the regulation and practice of internal and external flexibility measures, affecting the employers’ ability to adapt to the market conditions and the workers’ protection and participation. The modification of the regime on working conditions and the non-application of collective agreements may limit the scope and effectiveness of these measures as tools to cope with economic, technical or production reasons, and may additionally increase the requirements and guarantees for workers affected by them. Companies should analyse the impact of the proposed reforms on their business models, considering the new legal framework and the collective bargaining context, and ensure compliance with procedural and substantive rules. Additionally, the minimum wage (currently set at €15,120 annually) will continue to grow throughout the period of the new Government, and the Workers’ Statute will guarantee that it increases in line with 60% of the average wage. Employers should therefore plan salary policies and reviews in light of this increase.

Judicial conflict

The ongoing jurisprudential debate in relation to a myriad of issues is creating legal uncertainty and inconsistency. For example, there is a debate about the approach to disciplinary dismissal hearings, what justifies objective dismissal and the application of certain rules certain protections and due process. Other judicial debates concern the sufficiency of legal severance pay, particularly where the employees have short service, as certain courts consider that the legal severance pay is not high enough and does not comply with the European Social Charter. Further, there has been a legal decision on the registration of equality plans approved unilaterally by the company when the unions did not reply and there was a breakdown in negotiations. Due to a lack of negotiators on behalf of employees, the employer was unable to implement the compulsory equality plan. In these circumstances, employers are accruing infractions for breach of their equality obligations and risk being banned from competing for and winning public tenders. Employers should therefore ensure there is proof that every effort has been made to negotiate the equality plan and comply with their equality obligations.

With thanks to Jorge Aranaz Benito and Ana Campos of CuatreCasas for their invaluable collaboration on this update.




Policies, protocols, codes and compliance measures (the protocols)

Several regulations have been passed or are to be passed which impact on companies’ policies or protocols. Companies will have to implement new policies or systems, such as the policy regarding whistle-blower protection and reporting systems, the policy for protection against sexual violence and the policy for equal treatment. These policies are added to the existing compulsory policies such as prevention of harassment, use of digital devices, right to disconnect or occupational risks, which must be periodically reviewed and updated.

Since these protocols and policies sometimes overlap with each other, they must be coordinated to optimize them and avoid different regulations. Also, most of them require a negotiation or consultation with employees’ legal representatives, which will need to be carefully planned and executed.


Crisis labor plans

The current socio-economic context forces companies to face (more intensely) scenarios of uncertainty and instability, which can suddenly affect supply chains, translate into shortages or rising prices of raw materials or problems in the distribution of their products, reduce the availability of labour, lead to inflationary periods with their effects on wages and the market or materialize in cyber-attacks.

The economic damage of unpredictability can be very high, so many companies are increasingly aware of the need to increase their legal response capacity for a prompt recovery of its activity in these situations, for which they require the necessary advice to enable them to optimally apply their organizational powers, saving the difficulties arising from the labour law itself, which is particularly protective, as it imposes long periods of preparation and negotiation, along with the concurrence of causes, negotiation with workers’ representatives and the uncertainty of possible legal challenges, which impede the required speed of response.

Employers should plan and, if necessary, negotiate a labour response that, through coordinated internal flexibility measures (functional or geographic mobility, substantial modifications of working conditions, ERTEs, non-application of collective bargaining agreements, compensation and absorption of salary increases, etc.), will help to ensure the continuity of production activity in complex scenarios.


Social Security contribution

It has been proposed by the Government in the National Budget for 2023, that as of 1 January 2023, the maximum contribution base to Social Security will be increased by 8.6%, from the current €4,139,40 to €4,495,50 per month. The National Budget will be voted in the Parliament in the next weeks.

This increase would affect the contribution of workers with a salary of €54,000 gross/year or more, which would rise by €100/month for the employer and €20/month for the worker.

With thanks to Jorge Aranaz Benito and Ana Campos of Cuatrecasas for their invaluable collaboration on this update.




New labour reforms introduced by The Royal Decree Law 32/2021

The Royal Decree Law 32/2021 ("RDL") was published in the Official State Gazette on 30 December 2021 after several months of negotiation between the Spanish Government, trade unions and employer association representatives. The RDL will come into force progressively but affects a number of key labour arrangements.

Fixed-term contracts:

The RDL imposes restrictions on fixed-term employment, and as of 30 March 2022, only two types of fixed-term contracts will be valid: (i) temporary contracts owing to production overload; and (ii) replacement contracts. The RDL makes the presumption that all contracts are indefinite and sets out circumstances where they could become fixed-term contracts.

The maximum duration of any fixed-term employment contracts entered into between 1 December 2021 and 30 March 2022 will  be 6 months. Non-compliance with the temporary recruitment regulations is considered an infringement for each worker affected by the breach, with penalties ranging from €1,000 to €10,000.

Companies will have to adjust their hiring policies to the new regulations to avoid incurring infringements and penalties.

Permanent seasonal employment contracts:

The RDL encourages the use of permanent seasonal contracts. As of 30 March 2022, these contracts shall include seasonal jobs and also jobs requiring an intermittent provision of services that must be performed during specific, definite or indefinite periods. Companies that usually procure staff on a contractor basis must now enter into permanent seasonal contracts with workers employed under a contractor agreement, and the periods of inactivity of those workers are limited.

The possibilities of this employment contract must be studied in order to adjust to the productive and organizational needs of the company

Training contracts and the construction sector:

The training contracts system has been reviewed and streamlined, and a unique discharge regime for indefinite employment agreements in the construction sector has been established. Companies will have to review the training contract subscribed in order to adapt to the new legislation.

Furlough schemes:

The RDL facilitates temporary employment restructuring measures (ERTE) and promotes training while they are in force. The RED Employment Flexibility and Stabilization Mechanism is implemented, to be activated by the Government. Furlough schemes will continue to be a useful tool for employers to upfront temporary crisis.

Conditions applicable to services providers:

Contractor companies will be subject to the sector-specific collective bargaining agreement applicable to the activity carried out under the services provider agreement, or any other sector-specific agreement applicable. Services provider agreements may therefore need to be reviewed in order to re-adjust the costs.

Priority of company collective agreements over sector (industry wide) collective agreements:

The priority of company-wide collective agreements regarding remuneration is removed under the RDL. Companies that have their own agreement in place establishing lower salary scales, will be obliged to apply the scales set out in the RDL once the company agreement expires, and in any case, within one year from the date of publication of the RDL. Companies will therefore have to review their salary scales and adjust them if necessary. 

Duration of collective bargaining agreements:

The unlimited extended validity of collective bargaining agreements is restored. The bargaining strategies in collective agreements must be adapted to this change, in order to avoid the indefinite continuity of a collective agreement.

Compulsory retirement in collective agreements:

Limits on compulsory retirement in collective agreements are also established. Collective agreements with such clauses should be reviewed and adjusted accordingly.


Regulation of equality plans and their registration

Companies with between 50 and 100 workers are required to have designed and applied an equality plan by 7 March 2022, in compliance with Royal Decree 901/2020. The same date applies to the remuneration audit in accordance with Royal Decree 902/2020. Companies who have not done so already must comply with this requirement in order to avoid penalties and discrimination claims.


Consumer Price Index at an all-time high of 6.5%

The Consumer Price Index (CPI) closed the year 2021 at 6.5%, the highest in almost three decades. Depending on the circumstances (e.g. applicable agreements, practices previously followed on the application of increases, possible application of absorption or compensation mechanisms, etc.) companies must analyse the possibilities of the legal system to mitigate the consequences of this increase, which can cause a notable increase in salary costs in companies to which CPI-linked agreements are applied, or ensure that pressure strategies are initiated if different percentages are applied and are lower than the real CPI.




Management of the COVID‑19 pandemic

Companies operating in Spain have continued to deal with the pandemic crisis and its effect on employment. This has involved temporary redundancy plans (for suspension of employment contracts or reduction of working hours) as well as termination of employment contracts (individual or downsizing procedures). The measures, which were approved to help employers deal with the crisis, were subject to obligations on maintaining employment, which were to be strictly observed and therefore taken into account in every decision‑making process.


Management of remote working – new ways of work

A recent regulation (Royal Decree‑Law 28/2020) on remote working established the concept of remote working as the work regularly performed from home for 30% of the working time in a three‑month reference period. The regulation also sets some limits to remote working and its regime of obligations and rights.

Companies with remote working systems already in place have had to adjust to this regulation within a deadline, which varied depending on how the existing system was implemented. In order to achieve this adjustment, and to take full advantage of these flexible working arrangements, collective bargaining was essential.

The regulation on remote working provides that remote workers must have the same rights they would if they were working onsite, it regulates the right of access to remote working and its reversibility, establishes the expenses to be assumed by companies, and prevents the company from making unilateral changes to working conditions of remote workers.


Equality plans and equal pay

Regarding equality and equal pay plans, there are deadlines in which to implement the measures under Royal Decrees 901/2020 and 902/2020, of October 13, which reinforce companies' obligations regarding equality plans and equal pay must be implemented.

Jobs of equal value deserve equal pay, and there cannot be different salaries between men and women, neither through collective bargaining agreements, nor because of company's improvement of conditions. The new regulation provides criteria for determining when jobs are of equal value, and companies are obliged to assess the job positions adequately, inclusively and objectively.

All companies are required to register the workforce salaries, including those of management positions. This register must be accessible to workers' representatives, and limited, to employees.

Companies with a workforce of 100 or more employees must have an equality plan in place. These companies are also obliged to carry out salary audits, and if the arithmetic average and median of the total salaries for workers of one gender is higher than the salaries of the other gender by 25% or more the register must include an objective justification of the difference.


Restrictions on temporary employment contracts for outsourcing companies

The Spanish Supreme Court has declared, changing its position that it is not possible to enter into temporary employment contracts for specific works or services to cover the activities companies carry out in the performance of outsourcing contracts, when the undertaking of these contracts is the contracting company's ordinary activity.

The temporary employment contract for specific work or services is the industry standard policy. Therefore, this decision directly affects companies whose ordinary activities involve offering services to third parties, e.g., sectors such as cleaning, surveillance and security, contact centres, construction, installation and maintenance.

With thanks to Jorge Aranaz Benito and Ana Campos of Cuatrecasas for their invaluable collaboration on this update.




Extension of Spain's ERTE furlough scheme

In light of the ongoing COVID-19 pandemic, businesses on temporary furlough (also known as ERTE) will continue to be exempt from paying employer Social Security contributions until 31 January 2021 under certain circumstances and conditions, such as the commitment to maintain employment for six months and the prohibition to distribute dividends corresponding to the tax year in which these ERTE were carried out (usually 2020). Workers on an ERTE and permanent seasonal workers will also continue to receive unemployment aid until that date.


Regulatory changes in employment law

The new Government has announced its intention of reformulating certain aspects of the 2012 labour reform. The most relevant changes that were announced affect termination (grounds for redundancies), internal flexibility (limiting the right for employers to make unilateral decisions), collective bargaining (limitation of the company agreement), decentralisation of production, and the regulation of employment contracts. However, the actual scope of the reforms are yet to be seen.

In February 2020, the Government eliminated the right for companies to make employees redundant on the basis of the number of absences (even if those terminations would otherwise be justified).

In June 2020, the Ministry of Labour drafted a new regulation in relation to remote working. According to the draft legislation, companies will have to pay all expenses (both direct and indirect) incurred by the worker while working from home. The draft legislation also allows those who telework to alter their ordinary working hours while respecting the general regulations on working time, provided that the period of availability is previously agreed with the company.


New ways of work

The Government and trade unions have also announced the need to review the current legislation in order to decide whether it should be modified to account for new ways of work, brought about by platform companies and the gig economy. Opinions are divided on this issue, as some believe that new ways of work are adequately covered by the current legislation, whereas others believe it is not adequate and should be reformed accordingly.


Recording working time

The European Court of Justice has to rule on whether paid leave should start on the first working day after the event triggering the leave takes place, or on the day after the event (Rulings nº 229/2020 and nº 257/2020 of the Labour Chamber of the Supreme Court of 11 March 2020 and of 17 March 2020 respectively).

Due to the new regulation regarding the obligation of companies to record the effective working time of each employee daily, it is also foreseeable that more rulings on the consideration of time as 'effective working time' may be issued, as it has become a source of conflict in employment relations.




Pensions and public benefits increases

The maximum public pension limit has increased from EUR 2,580 per month to EUR 2,659. Recipients of pensions that were re-valued in 2018 will be compensated in 2019 with a single payment equivalent to the difference between the pensions received in 2018 and the Consumer Price Index.


Increase to standard pay

A proposal to increase the minimum standard pay (salario mínimo interprofesional) by more than 22% (up to 900 euros from 735.9 euros) is likely to come into force in 2019. This has raised considerable concern for employers, as some collective bargaining agreements salaries are linked to the minimum.


CBAs to include clauses allowing for mandatory retirement

Collective bargaining agreements can include clauses allowing for mandatory retirement when the employee has reached the legal retirement age set out in the social security regulations, provided that (1) the worker complies with the requirements of the social security regulations to be entitled to receive 100% of the ordinary contributory retirement pension and (2) the termination must be linked to coherent employment policy objectives set out in the bargaining agreement, for example improving employment stability or hiring new workers.




Legislation Affecting Subcontractors

A change in how subcontracting is regulated is predicted for the first quarter of 2018. The modification is expected to extend working conditions of subcontractors’ employees to be similar to the conditions enjoyed by the principal company’s employees, either because they are set forth in the applicable collective bargaining agreement or because they are actually applied by the company. Essential working conditions will include remuneration and salary amount, hiring conditions, working time and rest periods, equality, paternity and maternity rights and risk prevention.


Potential Modification to Employment Contract Regulation

Trade unions and employers’ associations are negotiating modifications to the employment contract regulation, in order to reduce reliance on fixed-term employment. Severance payments may be introduced, to reduce the difference between permanent employment and fixed-term employment contracts.


Amendment to Law for Autonomous Employees

The Law for Autonomous Employees has been modified to facilitate their professional activity and increase their social rights. The modifications affect tax and social security obligations and many of them come into force on January 1st, 2018.




More changes to labour law

The Law for Autonomous Employees has been modified to facilitate their professional activity and increase their social rights. The modifications affect tax and social security obligations and many of them come into force on January 1st, 2018.




CJEU decision affecting termination of fixed-term employment contracts

On September 2016, the Court of Justice of the European Union (“CJEU”) held that the current Spanish regulation on fixed-term contracts is contrary to the Framework Agreement on fixed-term work as it breaches the principle of non-discrimination. Namely, it does not establish any compensation for the termination of cover contracts, while granting compensation to “comparable permanent workers,” but with no objective reason for this different treatment.

Since this ruling, some courts have applied the compensation typically awarded for termination of a permanent contract (i.e. 20 days’ salary per year of work, capped at 12 monthly salaries) to fixed term contract terminations for this reason.


CJEU considers specific issues on collective dismissal regulation against the EU directive

The CJEU has considered Spanish legislation relating to collective dismissals in the context of the applicable EU directive in relation to the number of employees that need to be affected in order for them to use the collective redundancy procedure.

Several court decisions after the ruling have applied this interpretation.

With thanks to Jorge Aranaz of Cuatrecasas, Gonçalves Pereira for his invaluable collaboration on this update.

For More Information

Image: Suzanne Horne
Suzanne Horne

Partner, Employment Law Department

Image: Aashna Parekh
Aashna Parekh

Associate, Employment Law Department

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