Employment 2023 Comparisons

Last Updated September 07, 2023

Contributed By Allen & Overy

Law and Practice

Authors



Allen & Overy has an employment practice that stands out for its wide experience and knowledge of employment law, pensions, benefits and incentives, providing and developing individual and creative solutions to all workplace issues, from working terms and conditions, employee relations and HR policies, to restructuring and dispute resolution. The firm’s approach is very much that of a partnership, working in collaboration with clients to develop individual and creative solutions to their workplace and benefits needs. It is accessible, pragmatic and hands-on, with expertise in communicating directly with workers, employee representatives and regulatory authorities on HR and reward issues.

Generally, companies hire employees through an ordinary employment relationship. There are some distinctions between senior executive employment contracts and ordinary employment relationships. 

Executive contracts are regulated under Royal Decree 1382/1985 of 1 August 1985. Executives are defined as managers who exercise powers inherent to the legal ownership of the company and relating to its general purpose, limited only by the decisions and instructions from the governing person in charge of the company. These employment relationships have fewer regulated rights.

There are different types of employment contracts depending on the form, duration and nature of the relationship. Employment relationships may be distinguished by the number of hours worked by the employees (eg, part-time or full-time employment contracts with the same rights).

Form of the Employment Contract

The principle of freedom of form applies to employment contracts, which may be entered into either verbally or in written form. Verbal employment contracts are generally considered to be indefinite.

However, the following employment contracts must be made in writing:

  • temporary contracts;
  • contracts for employees hired through temporary employment agencies;
  • relief contracts to replace partially retired employees (contratos de relevo);
  • part-time contracts;
  • indefinite contracts that may be subject to interruption;
  • permanent employment contracts to support entrepreneurs;
  • contracts with employees hired in Spain for Spanish entities operating abroad;
  • the transformation of temporary contracts into indefinite contracts;
  • contracts for associated assistance (contrato de auxilio asociado);
  • co-operation contracts; and
  • contracts of employees who work remotely.

Duration of the Employment Contract

An employment contract is presumed to last, in general, for an indefinite period. In order to conclude a fixed-term contract, it is necessary to specify precisely the exact and detailed ground of the temporary contract, the specific circumstances that justify it and its connection with the expected duration. Currently, there are only two circumstances where fixed-term contracts are allowed:

  • due to production circumstances; or
  • in order to temporarily replace an employee.

Temporary contracts due to production circumstances

A fixed-term contract due to production circumstances may not last more than six months (extendable by another six months), and must be in response to the occasional and unforeseeable oscillations that generate a temporary imbalance of employment in the company. Contracting for a period determined by circumstances of production would also include contracts for occasional foreseeable situations of reduced duration and delimited within the fixed contract, duly identified in the contract. They may be used for a total of 90 days, but never consecutively.

Temporary contracts to replace employees

A fixed-term contract to replace an employee may be concluded if the employment of such employee has been suspended with a specific right to be reinstated in their position, to cover the reduced working day for legal or conventional reasons, as well as to fill vacancies during a selection process. In the last of these cases, the duration of the contract shall not exceed three months.

Training contracts

Training contracts now come in two forms. 

  • A work-linked training contract, the purpose of which is so that an employee may acquire the appropriate professional competence that corresponds to a certain level of study. It may not have a duration of more than two years. Working hours may not exceed 65% of the normal working hours in the first year and 85% in the second year, with no overtime, shift work or night work. The remuneration will be adapted to the collective bargaining agreement (CBA) and will not be less than the minimum official salary pro rata to the working day, nor less than 60% of that which is set out in the CBA in the first year and 75% in the second year.
  • A contract for obtaining professional practice, which may be concluded within the period of three years after obtaining the professional certification in question, and will have a duration of between six months and one year. The remuneration shall be that provided for in the CBA for the job position, unless specifically provided.

Fixed-term employment becoming indefinite

Employees who, in a period of 24 months, have been contracted for a period of more than 18 months, with or without interruption, for the same or a different job within the same company or group of companies, through two or more contracts due to production circumstances, either directly or through their provision by temporary employment agencies, will acquire the status of permanent employees. This provision will also apply when cases of transfer of undertakings occur in accordance with legal or conventional provisions.

Likewise, a person who has occupied a job, with or without interruption, for more than 18 months in a period of 24 months through contracts due to production circumstances, including secondment contracts entered into with temporary employment agencies, will acquire permanent status.

Formal Requirements

Specific information must be included in a contract of employment, such as:

  • the identity of the parties;
  • the initial date of the employment relationship;
  • the registered office of the company;
  • the place of work;
  • the applicable CBA;
  • the employee’s professional group;
  • remuneration;
  • hours of work;
  • probationary period (if any); and
  • holiday entitlement.

Maximum Working Hours and Flexible Arrangements

The weekly maximum working time is 40 hours. However, this maximum may be reduced by an applicable CBA or employment contract. As a general rule, daily working time cannot exceed nine hours unless a longer duration is provided for in a CBA.

Both employers and employees must comply with the minimum rest periods:

  • a minimum of 12 hours between working days;
  • one and a half days uninterrupted per week;
  • 14 bank holidays; and
  • 30 calendar days of vacation per year.

Companies may agree with workers’ representatives on an irregular distribution of working hours.

Part-Time Employees

Part-time employees cannot work overtime, but they can sign a complementary-hours agreement.

Overtime

Those hours worked over the maximum duration of ordinary working hours shall be considered overtime, which must be compensated with time off or payment in cash.

The number of overtime hours may not exceed 80 per employee in a year. Overtime hours compensated with time off in the subsequent four months do not count towards the maximum yearly limit, but shall in any event be considered as overtime.

Certain categories of employees are not permitted to work overtime:

  • employees under 18 years of age;
  • employees rendering services on a part-time basis;
  • employees who are hired to work during night hours;
  • employees whose work hours have been reduced due to a decision of the company in respect of ETOP reasons; and
  • employees hired on a trainee contract.

Under Spanish employment law, companies must register the daily working hours of each employee, setting out the start and end times, including overtime. This obligation does not apply to the working hours of senior executives.

A minimum wage is fixed every year by the government, which must be paid in cash. However, applicable CBAs regulate the minimum wage to be paid for each job position in each specific sector, to which increases are applicable each year. 

Salaries must be paid in 12 monthly instalments, plus two extraordinary payments (in July and December).

Vacation

Employees are entitled to a minimum of 30 calendar days (22 business days) of vacation per annum. Annual vacations have to be taken within the calendar year and cannot be carried forward unless otherwise agreed with the employer. Vacation cannot be paid in lieu except in case of termination of employment. The employee’s remuneration during the vacation period must be the same as what they are entitled to receive during ordinary working days. In addition, employees are entitled to 14 bank holidays per year.                                                                                                                                         

Other Paid Leave

In addition to the above, employees are also entitled to the following paid leaves (which may be enhanced as per the applicable CBA).

  • For the time strictly necessary to undergo prenatal tests and childbirth preparation training and, in the case of adoption, custody with adoption purposes or fostering, for the attendance of information sessions and for undertaking the psychological and social reports necessary for the declaration of suitability for adoption; provided that these have to be done during the working day.
  • In the case of a birth, adoption, custody with adoption purposes or fostering, employees are entitled to one hour (or two fractions) of absence from work per day to breastfeed a child aged less than nine months. The duration of such leave shall be increased proportionally in cases of multiple childbirth and could be accumulated in full days as long as a collective agreement or the employer allows it. In addition, one of the parents will also be entitled to enjoy this leave as long as the child is aged between nine and 12 months, with a proportional reduction in salary.
  • In the case of the birth of a premature child who has to remain hospitalised, the mother or the father shall have the right to be absent from work for one hour per day.
  • Two days’ absence will be provided for in the case of a bereavement, accident or serious illness, hospitalisation, or a surgical operation without hospitalisation but requiring home rest.

Should the employee need to travel due to one of the above-mentioned circumstances, the leave shall be extended by two additional days.

Furthermore, employees are entitled to:

  • 15 calendar days in the case of a marriage;
  • one day in the case of change of residence;
  • the time strictly necessary to comply with an unavoidable duty of a public and personal character;
  • the time necessary to perform union or employee representative tasks; and
  • a reduction of their working hours if they are the victims of gender violence or terrorism, in order to make effective their protection or social assistance. 

Maternity leave

Employment for mothers is suspended for 16 weeks due to the birth of a child; this is extended in the case of multiple births by two weeks for each additional child. The first six weeks following the date of birth are compulsory. 

Paternity leave

This leave has been gradually increased, and since 1 January 2021, paternity leave is 16 weeks due to the birth of a child, being extended in the case of multiple births by two weeks for each additional child. Employees are obliged to take paternity leave for at least the first six weeks following the date of birth. After those first six weeks, paternity leave can be taken on a part-time basis.

Social security covers maternity and paternity payments up to 100% of the contribution base. Several CBAs oblige companies to supplement the social security allowance up to 100% of the employee’s salary. 

Unpaid leave to take care of children or family members

Employees may take up to three years’ unpaid leave from the date of a child’s birth, or from the administrative resolution in cases of adoption. Employees may also request unpaid leave, with a maximum duration of two years, to take care of family members who, due to age, accident or illness, cannot care for themselves. In both cases, employees have the right to be reinstated by the company after taking such leave.

Reduction of working hours

Employees with a child aged under 12 or who are responsible for a person with a physical, mental or sensory disability are entitled to a reduction in working hours with a pro rata reduction in salary of between one-eighth and one-half of the normal duration of the working day. This reduction in working hours constitutes an individual right of any employee.

Restrictive covenants are enforceable if certain requirements are met.

A non-competition clause in the course of employment is an employment obligation. No special regulation is needed.

Exclusivity restrictions must be adequately remunerated in order to be enforceable. The law does not make provision as to how much is "adequate" for this purpose.

Post-contractual non-competition restrictions may not exceed two years for technicians and six months for other employees. Post-contractual non-competition restrictions must meet the following requirements:

  • there must exist a real industrial and commercial interest in such a restriction; and
  • adequate compensation must be provided.

The law does not make provision as to what is adequate for these purposes although, on the basis of case law and depending on how restrictive the covenant is, the compensation should range from 70% to 100% of the employee’s fixed salary.

A post-contractual non-competition restriction is deemed to be a bilateral covenant, the waiver of which requires the agreement of both parties.

Non-solicitation of customers is considered to be included within the scope of a non-competition clause.

However, non-solicitation of employees is not regulated in Spain; therefore, this type of clause could raise enforceability issues.

Organic Law 3/2018 of 5 December 2018 on the Protection of Personal Data and the Guarantee of Digital Rights sets out a number of specific provisions that apply when processing an employee’s personal data.

Surveillance and Recording in the Workplace

Employers may process data collected through camera or video camera surveillance systems to supervise employees or public employees, as established by Article 20.3 of the Workers’ Statute and by public service legislation, provided that these functions are exercised within their legal framework and within the limits inherent therein. The Workers’ Statute permits an employer to adopt such measures (having regard to the employees’ dignity and the capacity of workers with disabilities) to verify that employees are fulfilling their employment obligations. Employers must provide advance, express, clear and concise notification to their employees or public employees and, where appropriate, to their representatives about the use of camera surveillance systems.

In the event that a flagrant commission of an unlawful act by an employee or public employee has been captured by such a system, the duty to inform shall be understood to have been fulfilled when an information notice has been placed in a suitably visible location, which gives notice of the processing, the identity of the controller and the data subjects’ rights. In no case shall the installation of sound recording or camera/video camera surveillance systems be permitted in places intended for the rest or leisure of employees or public employees.

The use of sound recording systems will only be allowed if such use is relevant to the protection of installations, goods and persons in the workplace and adheres to the principles of proportionality and minimum intervention. The data collected in this way must be deleted within a maximum period of one month from its capture, except when it must be kept to prove the commission of acts that threaten the integrity of persons, goods or facilities. In this case, the images and sounds must be made available to the competent authority within a maximum period of 72 hours.

Digital Devices in the Workplace

Employees and public employees have the right to protection of their privacy when using digital devices made available to them by their employer. The employer may only access content from such digital media for the purpose of monitoring compliance with work or statutory obligations and maintaining the integrity of such devices. Employers shall establish criteria for the use of digital devices, always respecting the minimum standards for the protection of employees’ privacy. The employees’ representatives shall participate in establishing such criteria.

The employer’s access to the content of digital devices shall precisely specify the authorised use thereof and establish guarantees to preserve the privacy of workers, such as, where appropriate, those periods when the devices may be used for private purposes. Employees shall be informed of the said criteria.

Geolocation Systems in the Workplace

Employers may process data collected through geolocation systems to supervise employees or public employees as explained above. The employer must expressly, clearly and unequivocally inform employees or public employees and, where appropriate, their representatives about the use of geolocation systems. They shall also inform employees about their right to access and rectify data gathered through geolocation systems and restrictions on the processing and erasure of that data.

Whistle-Blowing Systems

Employers may process data to facilitate the reporting of cases of misconduct committed within the company or through the actions of third parties. The employees and relevant third parties must be informed of the existence of such systems. Access to the data contained in these systems shall be limited exclusively to those who, whether or not employed by the entity, carry out internal control and compliance functions and are in charge of the processing that may be designated for that purpose. However, access by other persons, even their communication with third parties, shall be lawful when it is necessary for the adoption of disciplinary measures or for the processing of legal proceedings.

Without prejudice to the notification to the competent authority of acts constituting criminal or administrative wrongdoing, it is only when disciplinary measures are to be taken against an employee that access to the systems shall be granted to personnel with managerial and HR functions. Necessary measures must be taken to preserve the anonymity and guarantee the confidentiality of the data relating to the persons affected by the information supplied, in particular the person who brought the facts to the attention of the entity. The data relating to the complainant, and of employees and third parties, shall be kept in the complaints system only for as long as is necessary to decide whether it is appropriate to initiate an investigation into the alleged facts.

Data Storage and Removal

The data shall be removed from the system after a period of three months has elapsed, unless it is being kept for evidential purposes. Thereafter, the data may be investigated by the appropriate body. Complaints that have not been dealt with may only be recorded in anonymised form unless an obligation to block the data applies.

Contact Details

The processing of personal data in the form of the contact data of individuals who work in a legal entity and individual entrepreneurs and freelance professionals shall be assumed (unless proven otherwise) to have a lawful basis, provided that the processing relates only to data necessary for professional purposes and the purpose of the processing is to maintain relations with the legal entity in which the data subject works.

There are no maximum or minimum hiring quotas for foreign employees.

Non-EU citizens require a work and residence permit to work. Simplified procedures apply to specially qualified employees.

EU Regulations relating to social security and social security bilateral agreements signed between Spain and other countries must be considered to determine the social security obligations applicable to temporary employees who have been hired by a foreign employer.

As a general rule, any foreign employee rendering services in Spain shall pay into the Spanish social security system unless they are entitled to make contributions in their country of origin, whether under EU Regulations or a bilateral agreement on social security matters signed between the country of origin and Spain. In the latter case, a formal communication must be submitted to the labour authorities.

A foreign employee will need to apply for a social security number before the beginning of the contract, which will enable their employer to register them for social security purposes.

Law 10/2021 of 9 July 2021 on Remote Working regulates labour relationships that are performed remotely on a regular basis (the work must be performed for at least 30% of the working day over a three-month reference period). This law, along with the Personal Data and Digital Rights Law (3/2018) of 5 December 2018, the Occupational Risk Prevention Law (31/1995) of 8 November 1995 and the General Social Security Law (8/2015) of 30 October 2015, cover the following issues related to remote work.

Regarding data privacy.

  • The employer must inform the employees’ representatives of the remote work agreements, without disclosing personal data, and comply with the data protection legislation.
  • The remote work agreements must contain the employer's instructions on data protection and information security, taking into account the employees’ representatives’ opinions.
  • Remote employees have the right to privacy and data protection, which implies that the employer cannot oblige them to use their own devices or programs, or interfere with their personal use of the employer's devices, in accordance with the law and social customs.
  • Employees also have the right to digital disconnection outside their working hours, which the employer must respect and foster through an internal policy and training, with the participation of the employees’ representatives. These rights may be further regulated by collective or company agreements.

Regarding occupational safety and health.

  • The employer must ensure the health, safety and wellbeing of the remote employees, paying special attention to the following occupational hazards of the home-office.
    1. Mental health – due to isolation and stress.
    2. Ergonomic issues – the safety of home-office equipment, such as screens, keyboards and chairs.
    3. Organisational risks.
  • The employer’s responsibility towards the remote employees is limited to the area of the employees’ residence designated as the home-office.
  • The employer must carry out home-office risk assessments to help create a healthy and safe home-office environment, but the employees’ consent is required.

Regarding social security:

  • The same rules apply to all employees who are part of the Social Security system, regardless of their occupation, type and amount of income. The company's reimbursement of expenses derived from the remote work provision (teleworking costs) are not included in the contribution base.
  • When the remote work provision involves an international element, the national Social Security law that governs the employees’ affiliation and contribution depends on the location where the teleworking is deemed to take place.

Finally, the new Law 28/2022 marks a significant step towards adapting the legal framework to the changing realities of the global labour market. As a result, international teleworkers can benefit from various measures such as a new visa category that simplifies the legal requirements and procedures.

Employees can enjoy sabbatical leave (excedencia voluntaria) for a period of no more than 5 years and no less than 4 months, as long as:

  • they have at least one year of seniority in the company; and
  • in case they have previously enjoyed a period of sabbatical leave, more than 4 years has elapsed since the end of the same.

Unless otherwise established by the applicable collective bargaining agreement, no particular reasons need to be alleged in order to be granted this type of leave.

The main characteristics of sabbatical leave can be summarised as follows.

  • It is an unpaid leave.
  • During this time, the employment relationship is not terminated, although it is reduced to its minimum expression.
  • The leave time does not count for seniority purposes.
  • The employee retains a preferential right to re-entry in the event that, from the time when they request re-entry, there is a vacancy of the same or similar professional category to the one they held.

The right to be reinstated will be extinguished if, during the leave of absence, the employee does not request their reinstatement. In addition, once reinstatement has been requested and denied by the employer, the employee does not need to reiterate this request, but the employer is obliged to offer it as soon as the first suitable vacancy arises.

The organisation of workspaces in Spanish firms has undergone significant changes, driven by remote work and digitalisation. With a reduced need for permanent facilities for the whole staff, firms have adopted flexible spaces that adapt to the needs of each scenario and that promote collaboration and integration among employees.

One of the most common forms of this flexibility is hot-desking, whereby employees do not have a fixed desk, but rather can use any one that is vacant each day. In the absence of specific regulation, Spanish case law has confirmed that the firm has the authority to introduce this system, after informing and consulting the employees’ representatives, without this constituting a substantial modification of the working conditions.

Another growing tendency is coworking, a practice that involves professionals from various fields sharing office facilities, where they can perform their tasks, establish connections and create opportunities.

As of today, there is no existing regulation in Spain that regulates this matter.

Unions and their rights are regulated under the Spanish Constitution and the Organic Law 11/1985 of 2 August 1985 on the Freedom of Union Association. Unions have the right to appoint their own representatives at the company concerned.

The two national representative unions in Spain are the Confederación Sindical de Comisiones Obreras (CCOO) and Unión General de Trabajadores (UGT). However, there are also other representative unions in specific autonomous communities. CCOO and UGT are entitled to represent employees and:

  • provide institutional representation before public administrations;
  • negotiate CBAs;
  • determine working conditions with the government;
  • participate in non-jurisdictional systems for the resolution of labour disputes;
  • promote elections for personnel delegates and company committees and corresponding bodies of the Public Administration;
  • obtain temporary assignments of the use of public assets under the terms established by law; and
  • perform any other representative function established by law.

There is a dual representation system within companies:

  • unitary representation, composed of works councils/personal delegates; and
  • trade union representation.

It is not compulsory to appoint employees’ representatives; it is the right of the employees and the trade unions, who may or may not exercise their right to elect and appoint representatives.

Unitary Representation

Unitary representation covers all employees in the workplace or the company. The number and type of employees’ representatives depends on the number of staff, ie:

  • individual delegates may be appointed in companies or workplaces with more than ten but fewer than 50 employees, or even with six to ten employees if decided by majority; and
  • works councils may be appointed in workplaces with at least 50 employees (the number of members of the works council will depend on the number of employees in the workplace).

Elections for workers’ representatives can be promoted by:

  • the most representative trade union;
  • a trade union with a minimum of 10% of the workers in the company; or
  • employees in the workplace (by majority agreement) and following a specific procedure.

Trade Union Representation

Trade unions have the right to designate union delegates where there is a minimum workforce of 250 employees in any company or workplace. The number of union delegates will depend on the number of employees in the company.

In regards to information and consultation, union delegates have the right:

  • to be informed on a quarterly basis of the company’s economic situation and other special matters;
  • to be informed at least once a year about the implementation of rights to equal treatment and equal opportunities between men and women and to participate in the negotiation of the equality plan;
  • in the event of a transfer of undertaking and the subcontracting of employees, to be informed of:
    1. termination documents;
    2. serious sanctions imposed;
    3. individual terminations;
    4. substantial modification of working conditions; and
    5. balance sheets, profit and loss accounts, annual reports and other documents provided to the company’s shareholders;
  • to be informed and consulted about the situation and structure of employment in the company or workplace and about the adoption of measures designed to reduce risks at work;
  • to issue a non-binding report prior to the company carrying out decisions on:
    1. the restructuring of the workforce or when terminations are implemented;
    2. reductions in working hours;
    3. a total or partial relocation of the company’s facilities;
    4. a merger process or amendments to the company’s legal status; and
    5. organisational and work control systems;
  • to check that the company is complying with all labour and social security obligations;
  • to participate in measures of inspection and control of health and safety; and
  • to negotiate collective measures (collective agreements, redundancies, suspension of employment, geographical mobility, substantial amendment of terms and conditions, etc).

Other rights and guarantees of union representatives include:

  • the ability to commence an appeal in the event of sanctions due to serious breaches of obligations;
  • the possession of seniority over other employees in cases of suspension or termination due to technical or economic reasons;
  • not being dismissed or sanctioned during the exercise of their representative tasks or during the year following, provided that the basis for the dismissal or sanction was grounded in the acts of the employee in the exercise of their mandate;
  • freedom of speech and the ability to publish and distribute publications on matters of labour and social interest; and
  • the right to paid leave to carry out their representative tasks.

Statutory CBAs, which carry the force of law, are negotiated by the workers’ representatives and the employer. Statutory CBAs are directly applicable to all employees and employers included within their scope, and those employees and employers are bound by them. These agreements regulate minimum salaries, annual working hours, professional groups, probationary periods, holidays and paid leave, and disciplinary measures, among other matters.

There are various types of CBAs.

  • Sectoral CBAs negotiated between the most representative unions and the employers’ associations; examples include:
    1. state and national sectoral agreements;
    2. regional sectoral CBAs;
    3. provincial sectoral CBAs; and
    4. interprovincial sectoral CBAs.
  • Company CBAs negotiated between the unitary workers’ representatives in the company and the employer; company CBAs have priority over sectoral ones.

This section is concerned with dismissal based on an employee’s serious and wilful non-compliance with their contractual duties. Legal causes for this type of dismissal are explained in 7.3 Dismissal for (Serious) Cause.

Objective Dismissal

Termination of employment for objective reasons can be based on the following grounds.

  • The incompetence of the employee, discovered after recruitment.
  • The employee’s inability or failure to adjust to reasonable technical changes in their position; however, the employer must have offered the employee a training course aimed at facilitating adaptation to such changes, and termination cannot be considered until at least two months have elapsed since the changes were introduced or the training began.
  • A proven objective need to amortise an employment position if there are technical, economic, organisational or production reasons; if a specific number of employees affected is reached, the collective dismissal process will be triggered.

Collective Dismissal

A collective dismissal occurs if a company terminates employment contracts on the basis of economic, technical, organisational or production grounds, and if, within a period of 90 days, such a measure affects at least:

  • ten employees in companies with fewer than 100 employees;
  • 10% of the workforce in companies with 100 to 300 employees;
  • 30 employees in companies with more than 300 employees; or
  • all the employees of the company, provided the number of employees affected is over five and the redundancy is based on the total cessation of the company’s activities.

However, according to latest case law, which takes into account European Court of Justice case law, a collective dismissal will also arise where the number of redundancies within a single workplace affects:

  • ten or more employees in workplaces with 20 to 100 employees;
  • at least 10% of the workforce in workplaces with 100 to 300 employees;
  • 30 or more employees in workplaces with more than 300 employees, within a period of 30 days; or
  • at least 20 employees within a 90-day period.

Grounds

If dismissal is based on economic grounds, those grounds exist when there are current or foreseeable losses or a persistent decrease in the level of income or sales. A decrease qualifies as persistent if it takes place over three consecutive quarters compared with the same period in the previous year. The performance of a group as a whole is also relevant if the group can be considered to act as a single employer.

The technical grounds that justify dismissal apply when there are changes in the scope, means or instruments of production. Organisational grounds are those which justify the dismissal whenever there is a change in the scope of the working systems or in the way production is structured, among others. Finally, justification may be based on productive grounds whenever there are changes in the demand for the products or services that the company offers to the market.

The dismissal process is different depending on the employee status, the grounds for the termination and the number of employees impacted.

Individual Dismissal

Disciplinary dismissal

See 7.3 Dismissal for (Serious) Cause.

Objective dismissal

The employer must communicate the dismissal to the employee in writing, which should include a detailed description of the grounds. Statutory notice must be served (or longer if contractually agreed). Alternatively, the company may pay the employee a sum of money in lieu of notice. On the date of communication of the dismissal, the employee shall be entitled to statutory compensation equivalent to 20 days’ salary per year of service, up to a maximum of 12 months’ salary.

Should the termination be based on technical, economic, organisational or production reasons, a copy of the notice of communication must be provided to the employees’ representative, if one has been appointed.

Qualification of individual dismissals

The employee may take their case to the labour courts to challenge the grounds or reasons given by the employer for the dismissal or contend that the facts do not justify it. The competent labour court may deem the dismissal as one of the following.

  • Fair – the court considers the dismissal justified.
  • Unfair – the court considers that the dismissal was not justified.
  • Null and void – the court considers that the dismissal was based on grounds which violated the employee’s fundamental rights; therefore, the employer must reinstate the employee and pay their salary accrued from the date of termination up to the reinstatement date as well as, possibly, damages.

If the court deems the dismissal unfair, the employer is permitted to:

  • reinstate the employee, in which case the employer must pay to the employee their salary accrued from the date of dismissal up to the date of reinstatement; in the case of an objective dismissal, the employee would have to return the severance package made; or
  • pay the employee compensation equal to 33 days’ salary per year of service (subject to a limit of 24 months’ salary) for the period of service accrued as from 12 February 2012 and equal to 45 days’ salary per year of service (subject to a limit of 42 months’ salary) for the period of service up to 12 February 2012; in the latter case, the resulting severance payment cannot be higher than an amount equal to 720 days’ salary unless the amount resulting from the calculations corresponding to the first tranche (ie, the calculation of severance corresponding to the period from the start date to 12 February 2012) is higher, in which case the said amount shall apply but it may not be higher than an amount corresponding to 42 months’ salary.

The choice between the two above options will belong to the employee if they are an employee representative. 

Collective Dismissal

Process

Collective dismissals can only be implemented following a formal statutory procedure. The main aspects are as follows.

  • Announcement – the employer must serve notice on the employees’ representatives or, in their absence, the employees, stating an intention to initiate a negotiation period to implement a collective dismissal in order for them to appoint a negotiation body; the maximum period for the constitution of the representative committee will be seven days where employees’ representatives are appointed or 15 days where no employees’ representatives have been appointed.
  • Starting the negotiation period – the employer must deliver a written notice to the representative committee to open the negotiating process; a copy of this written notice must also be sent to the appropriate labour authority.

Notice

The written notice must include a report on the grounds for collective dismissal, which must enclose the necessary supporting technical documents as well as a technical report.

If the collective dismissal is based on economic grounds, the documents must evidence economic and financial changes in the company during the last two years and must be duly audited. Whenever the grounds are based on foreseeable losses, the information provided shall include the criteria used for such forecasts. Also, a technical report on the forecast of losses must be provided, based on data extracted from the annual accounts, the sector in which the company operates and the evolution of the market and the position of the company in the same. Special requirements and documentation need to be included if the company forms part of a group of companies.

If the collective dismissal is based on technical, organisational or production grounds, the report must enclose technical reports justifying the dismissal, the measures to be adopted and their impact on the viability of the company.

The written notice must also include:

  • the number and professional classification of employees affected;
  • the number and professional classification of the employees rendering services during the last year;
  • the term envisaged for the implementation of the dismissals;
  • the criteria used to designate the affected employees, which must be objective and non-discriminatory;
  • a copy of the written notification of the company’s intention to start a consultation period to implement a collective dismissal;
  • information about the employees who form part of the representative committee; and
  • a request from the representative committee of a report on the collective dismissal.

Once the labour authority has received this notice, it will inform the public entity managing unemployment benefits and apply for a compulsory report to be issued by the Labour and Social Security Inspectorate on the content of:

  • the communication and the development of the negotiation process; and
  • the existence of the specific grounds used by the company to justify the dismissal. 

Negotiations

The employer must hold negotiations with the representative committee within a maximum of 30 days, or 15 days in case of companies with fewer than 50 employees. The negotiations must include possible options to avoid the collective dismissal, reduce the number of employees affected or ameliorate its consequences, as well as on the severance packages to be paid. A minimum number of mandatory meetings must be held and a calendar followed unless otherwise agreed.

The parties must negotiate in good faith. The labour authority will safeguard the effectiveness of the negotiation period and is entitled, if appropriate, to send recommendations and warnings, but these will not stop or suspend the procedure.

The negotiation period will be concluded whether or not an agreement between the parties is reached. If sufficient grounds exist the employer can unilaterally execute the terminations.

After the consultation period has ended, the company shall communicate to those employees who were part of the negotiation committee and to the labour authority the decision on collective dismissal. This communication should be made within a maximum period of 15 days from the last meeting held in the consultation period. The company must also communicate notice of dismissal individually to each of the affected employees. The individual communication must follow the formal procedure for individual objective dismissals.

Severance

The statutory payment in case of collective redundancy is 20 days’ salary per year of service up to a maximum of 12 months’ salary. The final amount of severance is negotiated during the consultancy period, which is usually increased by companies in order to reduce the risk of litigation. 

Other obligations to be included in the social plan

Outplacement programmes must be provided for a minimum of six months if the collective redundancy affects more than 50 employees.

Special social security contributions will be made for employees in the case of employees aged 55 years or above who did not make social security contributions prior to 1 January 1967 and who are included in a collective dismissal process which is not based on an insolvency. The employer must pay their contributions until they reach the age of 61 (in the case of economic grounds) or 63 (in the case of organisational, productive or technical grounds). The application of the special agreement must be made during the collective dismissal procedure.

An additional contribution to the Public Treasury must be paid by companies which make profits and carry out a collective dismissal that affects employees aged 50 or above.

Qualification of collective dismissal

Collective dismissals can be challenged collectively by workers’ representatives on the basis that:

  • the grounds argued by the company to justify the dismissals do not exist;
  • the formal process has not been followed; or
  • the decision has been reached after wilful coercion, fraud or abuse of law.

Normally, the workers’ representatives only launch a claim against collective dismissal if the negotiation period concludes without an agreement.

The subsequent judgment may render the company’s decision as one of the following.

  • Fair – where the company has complied with the legal procedure and has evinced the existence of the grounds for the dismissal.
  • Not according to law – when the company has not proved the grounds justifying the dismissal, in which case the employer will have to pay to the affected employees the same compensation regulated for unfair individual dismissals.
  • Null and void – when the legal process has not been followed or when the company’s decision was taken in breach of fundamental rights or public liberties or wilful coercion, fraud or abuse of law (in this case the employer must reinstate the affected employees and pay them the salaries accrued from the date of termination up to the reinstatement date).

Termination of Top Executive Contracts

Top executives’ contracts, regulated by Royal Decree 1382/1985 of 1 August 1985, may be terminated as set out below.

Termination by the employer

The employer can terminate a top executive contract at any time without giving any reason. The company must deliver to the employee a termination letter stating the date of the termination, serve three months’ notice (or a longer notice if contractually agreed) or make payment in lieu of salary. The employee is entitled to the compensation agreed in the employment contract or, in its absence, the legal compensation of seven days’ salary per year of service subject to a limit of six months’ salary.

The employer can terminate a top executive contract for a serious breach of their contractual duties. The company must deliver to the employee a dismissal letter, which should include a detailed description of its reasons and the date of termination, which may be immediate. Should the employee challenge the dismissal and the labour court rules it to be unfair, the company will have to pay them severance equal to 20 days’ salary in cash per year of service with a limit of 12 months’ salary.

In the case of objective dismissal, the same procedure applicable to ordinary employees shall apply.

Termination by a top executive with severance entitlement

Top executives are entitled to terminate their contract at will with the right to receive:

  • the severance agreed in their contracts, if any; or
  • in the absence of contractually agreed severance, severance pay equal to seven days’ salary (in cash) per year of service subject to a limit of six months’ salary in the case of:
    1. a substantial change to the executive’s employment terms and conditions which resulted in damage to the executive’s professional training or dignity (decided by the employer in a serious breach of contractual good faith);
    2. lack of payment or repeated delay in the payment of the remuneration agreed;
    3. any other serious breach of contractual duties by the employer; or
    4. a transfer of undertaking or relevant change in the ownership of the company which involved the restructuring of senior executive positions, provided that the top executive exercises their right to terminate within three months following the transfer.

A top executive may have to serve the employer with three months’ notice (or a longer period if agreed in their employment contract). Should this not be served, the employer will be entitled to be paid the salaries corresponding to the period in lieu of notice.

Statutory Severance of Temporary Contracts

Upon the termination of temporary contracts, due to the expiry of the time agreed or completion of the work or service subject to the temporary contract, employees are entitled to a severance payment equivalent to 12 days of salary per year of service (except in cases of replacement and training contracts).

This type of dismissal is based on an employee’s serious and wilful non-compliance with their contractual duties. Legal causes for dismissal must be proven by the employer and include the following:

  • unjustified repeated absence or lack of punctuality;
  • lack of discipline or disobedience;
  • verbal or physical offences against the employer or other people who work in the company or to their relatives who live with them;
  • breach of good faith or betrayal of trust;
  • continued and wilful unsatisfactory performance;
  • habitual drunkenness or drug addiction affecting work performance; and
  • harassment on grounds of racial or ethnic origin, religion or belief, disability, age, sexual orientation and sexual or gender-based harassment of the employer or persons working in the company.

Additional causes may be set out in applicable CBAs or individual employment agreements.

Unless further requirements are set out in an applicable CBA or an employment contract, the company shall terminate the employee concerned by way of a written letter of dismissal stating the date on which the termination takes effect as well as the grounds for dismissal. This type of dismissal will not entitle the employee to statutory severance pay. 

Should the employee be an employee legal representative or a union delegate, a contradictory procedure shall be opened in which the affected employee and works council shall be heard. Should the employee be affiliated to a union and the employer is aware of that, it must give a prior hearing to the union delegates.

Disciplinary dismissal is the most serious sanction that a company may impose on an employee and is subject to a statute of limitation of 60 days, as from the date on which the breaches became known to the employer or six months from the date on which the breaches took place.

An employment relationship can be terminated by mutual agreement between the employer and the employee. The advantage of this route is that the parties are free to agree the terms and conditions of the termination unconstrained by statutory compensation. The drawback is that the employee shall not be entitled to collect unemployment benefits and the tax treatment of any compensation agreed will be impacted.

Apart from the above, when a company follows the dismissal route and the employee challenges the termination before the conciliation authorities or a labour court, the parties will have the chance to settle the case and avoid further disputes. For such purposes, the employee has to file a conciliation claim within a maximum period of 20 working days from the effective date of termination. Thereafter, the parties shall attend a hearing in which they will have the opportunity to settle the dismissal.

Upon completion of the conciliation process, the officials will issue the relevant minutes of the hearing. Should the conciliation process end without an agreement, the employer will have to submit the relevant judicial claim before the labour courts if it wants to pursue its claim, and the court will have to admit the claim and schedule a judicial conciliation hearing and trial. Nevertheless, the parties will have an opportunity to reach an agreement before judgment is issued.

Certain groups of employees are especially protected from dismissal. These include:

  • pregnant employees and employees during the 12 months following a birth;
  • employees on reduced hours of work to take care of a child or a disabled person;
  • employees in maternity/paternity during the period of suspension of their employment contract;
  • employees who are victims of domestic violence;
  • employees’ representatives;
  • data protection delegates; and
  • employees who have filed and won a claim against the company.

Courts are very protective towards these employees, and dismissals affecting them are presumed to be contrary to their fundamental rights unless otherwise evidenced by the company. If the employer is unable to provide objective criteria and adduce strong and sound evidence to justify termination, the dismissal will be rendered null and void. This will entail an obligation on the part of the employer to reinstate the employee so affected and pay to them a procedural salary (ie, the salary accrued from the date of termination up to the reinstatement date).

See 7.2 Notice Periods.

It is unlawful to directly or indirectly discriminate against employees or potential employees on the grounds of sex, marital status, age, race, ethnic or racial origin, social status, religious or political beliefs, sexual orientation or identity, trade union membership, language or disability, or against employees who have familial relationships with the employer.

Filing Claims

Employees who believe that they have been discriminated against may file a claim against such discriminatory treatment and be awarded compensatory damages. The burden of proof lies with the employer, which should objectively and sufficiently demonstrate that the decision was not based on discriminatory grounds. If the court finds evidence of discrimination, the judgment may provide for compensation and nullify the company’s discriminatory action, order the immediate cessation of the discriminatory action and order the reinstatement of the employee under the same conditions that applied prior to the episode of discrimination. If an employee’s termination of employment is nullified, the employee will be reinstated to their role and be paid the salary accrued – but not paid – from the termination date for the length of the judicial process.

The prejudicial treatment of employees on the basis that they requested that their rights be upheld or have reported anomalies within the company is not permitted. Any sort of claim (which need not be a judicial claim) may be sufficient to argue the existence of retaliation, even if done through an informal procedure. Dismissals and any other detrimental employment measures adopted on the basis of retaliation shall be null and void. The affected employee can also claim for damages.

In cases of discrimination, the company may be sanctioned with:

  • a penalty of between EUR7,501 and EUR225,018;
  • the automatic loss (proportional to the number of employees affected) of subsidies, rebates or bonuses or any state benefit granted in the context of employment programmes; and
  • loss of access to the above-mentioned subsidies, rebates or benefits for a period of six months to two years.

Royal Decrees Related to Equality

The Spanish Government approved two Royal Decrees related to equality between men and women in companies.

  • Royal Decree 901/2020, of 13 October 2020, which regulates equality plans and the obligation to register it. This Royal Decree entered into force on 14 January 2021, with the aim of promoting effective equality between men and women, eliminating any discrimination that may exist, through the obligation to develop and apply an equality plan in those companies who employ more than 50 employees. The equality plan has to be negotiated with the workers’ representatives and will consist of three phases:
    1. diagnosis of the company situation;
    2. preparation of an equality plan; and
    3. monitoring, evaluation and review of the equality plan.
  • Royal Decree 902/2020, of 13 October 2020, on equal pay between women and men. This Royal Decree entered into force on 14 April 2021, with the aim that there are equal salaries for jobs of equal value, without any discrimination based on gender. By virtue of this Royal Decree, employers must keep a record with the average values of salaries, salary supplements and extra-salary payments of their workforce, disaggregated by gender and distributed by professional groups, professional categories or jobs with equal value. Workers may access this registry through their legal representatives, or directly if they do not have legal representation.

Article 230 of the Organic Law of the Judiciary had a general rule that courts and tribunals should use any available technology to do their work and exercise their functions. However, the COVID-19 pandemic made it necessary to adopt more specific measures for this purpose.

Law 3/2020 of September 18, 2020 established that, whenever possible, courts and tribunals should use electronic means to carry out trials, hearings, statements, and other procedural acts. This law applied only as long as there was a health crisis scenario in our country.

This measure, the effectiveness of which was subject to the existence of a health crisis in our country, ceased to be in force on July 4, 2023 with the publication of Order SND/726/2023, which contained the Agreement of the Council of Ministers declaring the end of the health crisis situation caused by COVID-19.

Judicial proceedings deal with several areas of conflict. These include ordinary dismissals, collective conflicts, the breach of fundamental rights, holidays, workers’ representative elections, professional classifications, amendment of working conditions, geographical mobility and social security.

Depending on the geographical scope of the claim and/or the number of employees impacted, different competent courts deal with the matters raised.

  • Labour courts of first and unique instance – these courts resolve individual and social security claims. 
  • Superior courts (one per autonomous community) – these courts resolve appeals filed against judgments of the labour courts as well as certain collective conflicts in the first instance phase.
  • National Audience – this Audience hears, at first instance, collective conflicts that affect employees based in more than one autonomous community.
  • Supreme Court – the Supreme Court resolves appeals filed against judgments of the superior courts and the National Audience, and even judgments issued by the Supreme Court at first instance.

Prior to the filing of a judicial claim, there is a general requirement to file a claim for conciliation (some matters are excluded from this preliminary conciliation hearing).

Collective matters are subject to a compulsory mediation process. If that ends without agreement, the parties may expressly agree to submit the collective case to arbitration as an alternative to the judicial process.

Pre-dispute arbitration agreements are not enforceable in Spain.

Under Spanish employment law, employees are beneficiaries of so-called free justice; they are entitled to an appointed lawyer, free of charge. In view of this, there can be no award of legal fees.

A judgment may impose costs on the prevailing party in an appeal, except where the party enjoys the benefit of free justice or in the case of unions or public officials or statutory personnel. Such costs shall include the fees of the lawyer of the opposing party that had acted in the appeal with a maximum of EUR1,200 in the appeal phase before the superior court and EUR1,800 in the appeal phase before the Supreme Court.

The above does not apply in cases involving collective conflict; each party is responsible for its own costs. However, the court may impose the payment of costs on any party that has acted with recklessness or bad faith.

Allen & Overy LLP

Serrano 73
28006, Madrid
Spain

+34 917 82 9800

allenoveryspain@allenovery.com www.allenovery.com
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Law and Practice in Spain

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Allen & Overy has an employment practice that stands out for its wide experience and knowledge of employment law, pensions, benefits and incentives, providing and developing individual and creative solutions to all workplace issues, from working terms and conditions, employee relations and HR policies, to restructuring and dispute resolution. The firm’s approach is very much that of a partnership, working in collaboration with clients to develop individual and creative solutions to their workplace and benefits needs. It is accessible, pragmatic and hands-on, with expertise in communicating directly with workers, employee representatives and regulatory authorities on HR and reward issues.