Employment 2019 Second Edition

Last Updated August 06, 2019

Spain

Law and Practice

Authors



Allen & Overy LLP is 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, employees are contracted to their employer by way of an ordinary employment relationship. This applies to both blue-collar and white-collar workers. However, there are some distinctions between senior executives and ordinary employees. 

Executive contracts are regulated under the Royal Decree 1382/1985 of 1st August; 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 criteria 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 interuption;
  • contracts of employees who work remotely;
  • 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); and
  • co-operation contracts.

Duration of the Employment Contract

The general rule is that all the employment contracts have an indefinite duration. It is only possible to enter into temporary employment contracts when specific and detailed grounds exist and such grounds justify the temporary duration of the contract. The most commonly used temporary contracts include the following:

  • Temporary contracts for the performance of a specific task or service. This type of temporary contract may be entered into to carry out a particular project or service different from the company’s normal activity, and in circumstances where the term of the employment contract is uncertain. Temporary contracts terminate when the relevant project or service rendered is complete. In any event, the maximum term for a temporary employment contract is three years, which may be extended for a further period of 12 months by the applicable collective bargaining agreement (CBA).
  • Temporary employment contracts for exceptional market circumstances. This type of contract may only be entered into when there is an unexpected workload or a need to provide services that fall within the company’s ordinary business activities. This type of temporary employment contract has a maximum duration of six months within a period of twelve consecutive months from the moment the need arises and may be extended once, subject to an applicable CBA, up to a maximum term of twelve months within a period of eighteen consecutive months.
  • Fixed-term contracts to temporarily replace an employee who has a right to return to work.
  • Training contracts.

This type of temporary contract can be used to hire employees who graduated no more than five years ago (or seven years in the case of disabled employees) for a period of six months to two years at a wage of 60% to 75% of the standard salary set out in the applicable CBA.

Without prejudice to the periods established above for each fixed-term employment contract, Spanish law considers the majority of contracts to be indefinite if within a period of 30 months the same employee has been hired for more than 24 months for the same or different positions by the same company through two or more temporary employment contracts.

The following information must be included in a contract of employment:

  • 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.

Even in circumstances where a written employment contract is not formalised, the employer is required to furnish its employees with the above information.

Maximum Working Hours and Flexible Arrangements

The maximum working time is 40 hours per week; however, this may be reduced by an applicable CBA or employment contract. As a general rule, daily work hours 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: (i) a minimum of 12 hours between working days; (ii) 1.5 days uninterrupted per week; (iii) 14 bank holidays; and (iv) 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 the 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, but 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 economic, technical, organisational and production-related 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 time, 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 to 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 (July and December).

Employees are entitled to 30 days holiday per annum, which must be taken within the calendar year and cannot be carried forward unless agreed with the employer. Holidays cannot be paid in lieu except in cases of termination of employment. The employee's remuneration during the vacation period must be the same as that he or she is entitled to receive during ordinary working days.                                                                                                                                                                                                                             

Employees are also entitled to 14 bank holidays per year.

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

  • Employees are entitled to the time strictly necessary to undergo prenatal tests and childbirth preparation techniques. Likewise in case of adoption and fostering, employees are entitled to take the time strictly necessary to attend the required sessions related to perceptive psychological and social reports which will determine their suitability to adopt a child, provided that such sessions must be done during the working day. In case of birth, employees are entitled to an absence of one hour or two fractions of one hour 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.
  • In the case of the birth of premature children who have 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 in the case of death, accident, serious illness, hospitalisation or surgical operation without hospitalisation (but requiring home rest) of a family member. Should the employee need to travel because of one of these situations, the leave shall be extended by an additional two days.
  • Fifteen calendar days in case of marriage.
  • One day in case of change of residence.
  • For the time strictly necessary to comply with mandatory public and personal duties.
  • To perform union or employee representative tasks.
  • Victims of gender violence or terrorism: in order to give effect to his or her protection or social assistance effective, the victim is entitled to a reduction of his or her working hours.

Employees are also entitled to:

  • Maternity leave – expectant mothers are entitled to maternity leave of 16 weeks, which shall be extended in the case of multiple births by two weeks for each additional child. The first six weeks following the birth are compulsory. 
  • Paternity leave – this leave will be gradually increased to match maternity leave. As of today, paternity leave is limited to eight weeks and employees are obliged to take the two weeks following the birth. As of 1 January 2020, this period will be extended to 12 weeks and as of 1 January 2021 will be extended yet again to 16 weeks. This leave may be taken on a part-time basis.

Social security covers maternity and paternity payments up to 100% of the contribution base. 

  • Unpaid leave to take care of their children or family members: the maximum duration is three years as from the date of birth (or in case of adoption as from the administrative resolution). Employees may also request unpaid leave for a maximum period of two years to take care of family members who due to their age, accident or illness are unable to care for themselves. In both cases the employee has the right to be reinstated after taking such leave.
  • Reduction of working hours: employees with a child aged under 12 or a person with a physical, mental or sensory handicap are entitled to a reduction in working hours with a proportionate reduction in salary of between at least one-eighth and a maximum of a half of the normal duration of the working day. This reduction in working hours constitutes an individual right.

Restrictive covenants are enforceable provided that certain requirements are met.

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

Exclusivity restrictions during the course of employment for ordinary employees 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: (i) there must exist a real industrial and commercial interest in such a restriction and (ii) adequate compensation. 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 (ie local/international etc) 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. However, from a practical point of view they are included with non-competition clauses.

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

  • The use of video-surveillance and sound recording devices 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 Royal Decree 2/2015 of 23 October which approves the revised text of the Workers’ Statute (WS) and by public service legislation, provided that these functions are exercised within their legal framework and within the limits inherent therein. The WS permits an employer to adopt such measures as it considers most appropriate (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 identifies 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, such as changing rooms, toilets, dining rooms etc. The use of sound recording systems will only be admitted if such use is relevant to the protection of installations, goods and persons in the workplace and are relevant and adhere to the principle of proportionality and minimum intervention, subject to the guarantees mentioned above. The data 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 from when the existence of the recording became known.
  • The use of digital devices in the workplace – employees and public employees shall 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 sole 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 employee's privacy in accordance with social practices and constitutional and legal rights. 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.
  • The use of geolocation systems in the workplace – employers may process data collected through geolocation systems to supervise employees or public employees as established by Article 20.3 WS and by public service legislation, provided that these functions are exercised within their legal framework and within the limits inherent thereto. 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 and restrictions on processing and erasure.
  • Whistle-blowing systems – employers may process data to facilitate the reporting of cases of misconduct committed within the company or by the action 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 human resource functions. Necessary measures must be taken to preserve the identity 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, if he or she has been identified. 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.
  • The data shall be removed from the system after a period of three months has elapsed, unless 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 and data related to the function or position held – theprocessing of personal data in the form of 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 for periods in excess of three months. However, simplified procedures apply to specially qualified employees.

EU social security Regulations 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 general rule, any foreign employee rendering services in Spain shall pay into the Spanish social security system unless he or she is entitled to make contributions in his or her 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 the employer to register him or her for social security purposes.

Unions are regulated under the Spanish Constitution, which provides for the fundamental right to constitute and affiliate unions as well as the right to participate in collective negotiations. Additionally, the fundamental rights of the unions are regulated in the Organic Law of freedom of Union Association 11/1985, 2nd August (LOLS). Unions have the right to appoint their own representatives in the company concerned.

The two national representative unions in Spain are the CCOO and the UGT. However, there are also other representative unions in specific autonomous communities. The CCOO and the UGT are entitled to represent employees and perform the following functions set forth in Article 6.3 of the LOLS:

  • institutional representation before public administrations;
  • CBAs;
  • to 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;
  • obtaining temporary assignments of the use of public assets under the terms established by law; and
  • 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; that 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 work centre 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 work centres with more than 10 but less than 50 employees; and
  • a works council may be appointed in work centres with at least 50 employees. The number of members of the works council will depend on the number of employees in the work centre.

Elections to a works council can be promoted by: (i) the most representative trade union; (ii) a trade union with a minimum of 10% of the workers in the company; or (iii) employees in the work centre (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 work centre. The number of union delegates will depend on the number of employees in the company.

Information and consultation obligations:

  • to be informed on a quarterly basis about 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 about termination documents, serious sanctions imposed, individual termination and substantial modification of working conditions, as well as 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 work centre and about the adoption of measures designed to reduce risks at work;
  • the employer must issue a non-binding report prior to the company carrying out decisions on the following matters: (i) restructuring of the workforce or when terminations are implemented; (ii) reductions in working hours; (iii) a total or partial relocation of the company’s facilities; (iv) a merger process or amendments to the company’s legal status; and (vi) 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
  • negotiate collective measures (collective agreements, redundancies, suspension of employment, geographical mobility, substantial amendment of terms and conditions etc).

Rights and guarantees of union representatives:

  • to commence an appeal in the event of sanctions due to serious breaches of obligations;
  • in cases of suspension or termination due to technical or economic-related reasons, they possess seniority over other employees;
  • not being dismissed or sanctioned during the exercise of their representative tasks or during the year following, provided that the dismissal or sanction was based on the acts of the employee in the exercise of his or her mandate. He and she enjoy freedom of speech and so are able 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 who are bound by them. These agreements regulate matters such as minimum salaries, annual working hours, professional groups, probationary periods, holidays and paid leave, and disciplinary measures among others.

There are various types of CBAs:

  • sectorial CBAs negotiated between the most representative unions and the employer’s associations, ie: (i) state and national sectorial agreements; (ii) regional sectorial CBAs; (iii) provincial sector CBAs; and (iv) interprovincial sectorial CBAs; and
  • company CBAs negotiated between the unitary workers’ representatives in the company and the employer. Company CBAs have priority over sectorial ones.

The termination of employment contracts is highly regulated. Nevertheless, employment contracts may be terminated on the following grounds:

  • mutual agreement of the parties;
  • expiry of the term of the contract;
  • resignation by the employee, who must communicate his or her decision to the employer with 15 days’ notice;
  • retirement, severe disability or permanent disability of the employee or the employer;
  • force majeure;
  • individual or collective dismissal based on economic, technical, organisational or technological reasons;
  • the decision of the employee based on a breach of contract by the employer. In this case, the employee is entitled to receive the same legal compensation as applies for unfair dismissal;
  • disciplinary dismissal; and
  • individual redundancy based on other objective grounds.

Without prejudice to the fact that there are differences in the types of termination applicable to general/ordinary employees and special employment relationships, the most important rules are those that relate to ordinary employees. 

Regarding the termination of employment contracts by the unilateral decision of the employer, it should be noted that under Spanish employment law employment termination processes differ depending on the employee status, the grounds for termination and the number of employees impacted.

Individual Dismissals

Disciplinary dismissals

This is the type of dismissal based on the employee’s serious and wilful non-compliance with his or her contractual duties. Legal causes for this type of dismissal are explained in 6.3 Dismissal for (Serious) Cause (Summary Dismissal).

Objective dismissals

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 his or her position. However, the employer must have offered the employee a training course aimed at facilitating adaptation to such changes. Termination cannot be considered by the employer until at least two months have elapsed since the changes were introduced or since the training aimed at adaptation has ended;
  • a proven objective need to amortise an employment position if there are technical, economic, organisational or production reasons (so-called redundancies). If a specific number of employees affected is reached, the collective dismissal process (explained below) will be triggered; and
  • absences from work under certain circumstances.

Collective Dismissal

It is understood that there is a collective dismissal when a company terminates employment contracts on the basis of economic, technical, organisational or production grounds if within a period of 90 days such a measure affects at least:

  • 10 employees in companies with less than 100 employees;
  • 10% of the workforce in companies with 100 to 300 employees;
  • 30 employees in companies with more than 300 employees; or
  • when such measure affects all the employees of the company provided the number of employees affected is over five and is based on the total cessation of the company’s activities.

However, according to the latest case law, which is also looking at the case law of the European Court of Justice, a collective dismissal will also arise where the number of redundancies within a single work centre affects:

  • 10 or more employees in work centres with 20 to 100 employees; at least 10% of the staff in work centres with 100 to 300 employees; or 30 or more employees in work centres with more than 300 employees; within a period of 30 days; or
  • at least 20 employees within a 90-day period.

As indicated above, the decision to collectively dismiss must be based on economic, technical, organisational or production grounds.

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

It is understood that technical grounds which 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 which the company offers to the market.

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

Individual Dismissals

Disciplinary dismissal

See 6.3 Dismissal for (Serious) Cause (Summary Dismissal).

Objective dismissal

The employer must communicate the dismissal to the employee in writing, which should include a detailed description of the grounds. Fifteen days’ 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 (so-called redundancies), a copy of the notice of communication must be provided to the employees’ representative, if appointed.

Qualification of individual dismissals

In the event that the employee challenges his or her dismissal, he or she can take the case to the labour courts to challenge the grounds or reasons given by the employer or contend that the facts do not justify his or her dismissal. The competent labour court may deem the dismissal as:

  • fair – the court considers the dismissal justified; or
  • unfair – the court considers that the dismissal was not justified. In this case, the employer is granted the option to either: 
    1. reinstate the employee, in which case the employer must pay to the employee his or her 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
    2. 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 above also applies to employee representatives. 
  • 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 his or her salary accrued from the date of termination up to the reinstatement date – and, possibly, damages.

Collective Dismissal

Process

Collective dismissals can only be implemented following a formal statutory procedure. The main aspects of the collective dismissal procedure are as follows:

  • announcement – prior to the start of the negotiation period, the employer must serve notice on the employees’ representatives or, in their absence, the employees directly stating an intention to initiate a negotiation period to implement a collective dismissal. This will give the employee’s representatives the opportunity to appoint a negotiation body. The maximum period for the constitution of the representative commission will be seven days where employees’ representatives are appointed or fifteen days where there is only one work centre affected and no employees’ representatives have been appointed.
  • starting the negotiation period – the employer must deliver a written notice to the representative commission to open the negotiating process. A copy of this written notice must also be sent to the appropriate labour authority.

The written notice must include:

  • a report on the grounds for collective dismissal, which must enclose the necessary supporting technical documents. If the collective dismissal is based on economic grounds, the documents must evince 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 of the company and the evolution of the market and the position of the company in the same. If the company forms part of a group of companies which is under an obligation to file consolidated annual accounts, the annual accounts and management reports of the dominant company, duly audited for the last two years, must also be attached if the said dominant company has its registered office in Spain. If an obligation to file consolidated accounts is not applicable, the audited annual accounts of the rest of the companies of the group with corporate addresses in Spain and with the same activity or within the same sector of activity or with debts or credits towards the entity undertaking collective dismissals will have to be attached;
  • 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 number and professional classification of employees affected by the collective dismissal. If the collective dismissal affects employees at more than one work centre, this information should be broken down by work centre and location;
  • the number and professional classification of the employees rendering services during the last year. If the collective dismissal affects employees from more than one work centre, this information should be broken down by work centre and location;
  • the term envisaged for the implementation of  the dismissals;
  • the criteria used to designate the employees subject to dismissal, which must be objective and non-discriminatory;
  • a copy of the written notification by the company to the employees of its intention to start a consultation period to implement a collective dismissal;
  • information about the employees who form part of the representative committee or, in its absence, information as to the lack of a 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 communication presented by the company and on the development of the consultation process.

The employer must hold negotiations with the representative committee within a maximum term 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 or, at least, reduce the number of employees affected or options to ameliorate its consequences using other social measures such as redeployment, training or professional recycling, 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.

During the negotiation period, 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 would not stop or suspend the procedure.

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

  • After the consultation period has ended, the company must report the results of the consultation to the labour authority. If an agreement has been reached, the company must provide the labour authority with a full copy of the same. In any case, the company shall communicate to those employees who were part of the negotiation committee and to the labour authority the decision on collective dismissal. Such communication should be made within a maximum period of 15 days from the last meeting held in the consultation period.
  • Execution: the company has to 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 (ie the same as in individual redundancies). 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. 

During negotiations, employers tend to increase the minimum statutory severance, particularly whenever the grounds for redundancy are not solid (eg the economic grounds are easier to evidence than other objective grounds) keeping in mind the company’s own precedents and severance packages paid by other companies in the same sector of activity or within the same region.

Other obligations to be included in the social plan

  • Outplacement programme – companies which carry out a collective redundancy which affects more than 50 employees must offer the affected employees an outplacement plan through authorised outplacement companies for a minimum period of six months and shall include training and professional orientation measures, personal attention to affected employees and active employment research.
  • Special social security contributions for employees aged 55 and above – Spanish Labour law sets out that, 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 for their social security contributions until they reach the age of 61 (in the event of economic grounds) or until they reach the age of 63 (in the event of organisational, productive or technical grounds). The application of the special agreement must be made during the collective dismissal procedure.
  • Contributions to the Public Treasury – 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: (i) the grounds argued by the company to justify their dismissals do not exist; (ii) the formal process has not been followed; or (iii) the decision as 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 was concluded without reaching an agreement.

The judgment would render the company’s decision:

  • 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 this case, the employer will have to pay to the affected employees the same compensation regulated for unfair individual dismissals; or
  • 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.

Special Mention: Termination of Top Executive Contracts

Top executives’ contracts, regulated by Royal Decree 1382/1985 of 1st August may be terminated as follows:

Termination by the employer

  • Unilateral withdrawal: 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.
  • Dismissal: the employer can terminate a top executive contract for a serious breach of his or her 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 him or her 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 thereof 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:

  • a substantial change to the top executive’s employment terms and conditions which resulted in damage to the top executive’s professional training or dignity (decided by the employer in a serious breach of contractual good faith);
  • lack of payment or repeated delay in the payment of the remuneration agreed;
  • any other serious breach of contractual duties by the employer; and
  • 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 his or her 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 his or her 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 his or her 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 for dismissal 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 membership to which he or she belongs 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 under this option 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 before 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 end up 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.

Under Spanish law certain groups of employees are especially protected from dismissal, ie:

  • 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 related situations during the period of suspension of his or her 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.

The 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 him or her a procedural salary (ie the salary accrued from the date of termination up to the reinstatement date).

Please refer to 6.2 Notice Periods/Severance.

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 condition, trade union membership, language or disability, or employees who have familial relationships with the employer.

Employees who consider 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 who 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 his or her 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 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 case of discrimination, the company may be sanctioned with:

  • a penalty of between EUR6,251 and EUR187,515;
  • 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
  • exclusion of access to such subsidies, rebates or benefits for a period of six months to two years.

Judicial proceedings deal with several areas of conflict, eg: 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, ie:

  • 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 up 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 limit 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 their own costs. However, the court may impose the payment of costs on any party who acted with recklessness or bad faith.

Allen & Overy LLP

Serrano 73
Madrid
28006
Spain

+34 91 782 98 00

info@madrid.allenovery.com www.allenovery.com
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Trends and Developments


Author



Grant Thornton has an employment area in Spain that is best known for its tailor-made employment advisory services as an HR legal business partner, including advice on day-to-day management of employment relations, legal representation and support in all types of proceedings, collective bargaining, health and safety at work, restructuring, labour compliance and Gender Equality Plans. The key clients mainly belong to the retail and pharmaceutical industries, and some of the firm’s lawyers are requested for implants as in-house lawyers (ie, Boehringer Ingelheim). The main areas of recent growth include legal advice to start-up companies (tech industries), HR consultancy (labour environment surveys, salary studies, HR policies such as whistle-blowing, etc), actuarial calculation and legal advice to public companies such as AENA. The employment team in Spain includes approximately 25 professionals and even though the firm has ten offices in Spain, its labour lawyers are mainly based in Valencia, Madrid and Barcelona.

One Step Forward: From Formal to Effective Gender Equality

In March 2019, new regulations aimed at ensuring equal treatment and opportunities for men and women came into effect, and they are having a significant impact on labour relations for companies in Spain.

To start with, some parts of the Workers’ Statute Act were modified in the sense that, for instance, birth interrupts the duration of training contracts and pregnancy or maternity are shielded situations during the term of probationary periods. Additionally, the new Royal Decree has introduced measures to prevent employers applying salary policies that are discriminatory based on gender, by setting the obligation to have a registry on the salaries paid for equal works, to which the employees’ legal representation will have access.

However, the most important change affects the employees’ rights after having a child. The traditional paternity leave has been increased to 16 weeks of contract suspension, which means that the biological mother’s leave and the other parent’s leave will have the same duration in this country.

Both parents are obliged to have six weeks of full-time leave in a row right after childbirth, and after these six mandatory weeks, the suspension of the contract of each of the parents can be exercised until the child reaches twelve months, distributed, at will, in weekly periods of accumulated or interrupted working days and on a full or part-time basis.

It should be emphasised that this change, which tends to equal rights derived from maternity and paternity to avoid discrimination in the employment market based on sex, is entering into force gradually and it will not be fully effective until 2021.

Finally, another important change is that more companies are now obliged to have Equality Plans as basic tools to help to achieve equal treatment and opportunities for men and women. So far, the obligation to have such a plan has only affected companies with more than 250 employees, whilst according to the new legislation, companies employing 50 or more people are obliged to negotiate and approve Equality Plans (this new obligation is entering into force gradually, too).

Equality plans will need to be mainly focused on recruitment and hiring, promotion, remuneration, training, prevention of sexual harassment and co-responsible exercise of family and work lives, so appropriate and concrete measures will need to be approved (and applied) to ensure that a company’s policies in those areas do contribute to achieve gender equality within the organisation.

In practice, there is still legal uncertainty involving this obligation for companies, because it is not established by law with whom to negotiate the Equality Plans in specific cases (eg, when there is no employees’ legal representation or when there are many works councils for different work centres) or how to proceed if no agreement is reached, for instance.

What is known for sure is that these plans, beyond being a mere tool for labour compliance, are becoming one of the main goals for HR directors as they can be an effective means of talent retention – among others – if properly aligned with the company’s strategy.

New Conciliation Rights Within the New Era

On 7 December 2018, the Spanish Act on Data Protection and Guarantee of Digital Rights came into force and although it is a non-labour regulation, it contains employment-related matters. In particular, it legally recognises (for the first time in Spain) what is known as the right to digital disconnection within the scope of the employment relationship (Section 88).

By doing so, and in line with other jurisdictions, authorities intend to reconcile work with private and family life, and, more specifically, to protect workers’ health and safety by guaranteeing that rest time, leave and vacations are not formal but effective rights enjoyed by any employee (even those in managerial positions).

This new concern is directly derived from the recent change on how we, as employees, work. Where, when or for how long we work are not important factors any more, as long as our goals are met. The only thing that most people need to provide services is having appropriate devices (mobile phone, tablet, computer, etc), so the idea of “smartworking” (beyond teleworking) is becoming a reality in a lot of companies. This, however, implies that some employees have a hard time in finding a way to separate their professional and personal lives when a sole device englobes both and without limits.

Considering how employment relationships have therefore changed in this new era, rights to digital disconnection is one of the trending topics in Spain. As usual, how to exercise such rights will need to be included in future collective bargaining agreements or, in the absence of these, in internal policies by companies. Now the employer must design, after hearing the workers’ representatives, an internal policy to determine the modalities for the exercise of the right to disconnection, so that, as this firm sees it, the company will have to define the technical means to be used to guarantee such digital disconnection. However, some aspects have been left unregulated and this matter will entail further debate.

In such a context, another legal development earlier this year is the modification of Section 34 of the Workers' Statute Act, which regulates the working time under common employment relationships. Specifically, on 12 May 2019 a new obligation for all companies operating in Spain and employing at least one worker came into force.

Specifically, the amendment requires companies to make a record of daily work that must include, at least, the specific time of the beginning and end of the working day for every employee (and, if any, the relevant breaks for employees). This new obligation, which affects all employees within organisations (except for Top Employers, which have a special employment relationship), is intended to control the number of hours that employees work, with the main objective of ensuring that overtime is paid and done according to legal limits and, thus, to finish overtime abuse.

There are no clues regarding the specific mechanism that companies need to use to carry out such daily registration, which means that, in principle, companies are free to decide which system works best (for instance, card access, fingerprint or specific software). However, new legislation is clear when establishing that the organisation and documentation of the working time record must be consulted with the employees’ legal representation before its implementation by the employer.

On the other hand, this obligation has an impact on the data protection practice area. As key points, new regulations establish the duty for employers to store this data for a period of four years, and that only those authorised by the company and the worker themselves can have access to such data. Also, these records must always be available to the Labour and Social Security Inspectorate at the specific work centre (not in the headquarters or central office).

It is important to emphasise that failure to comply with this “universal” registration of ordinary working hours might be considered a serious infraction and thus subject to a fine of up to EUR6,250. And this, together with other possible fines by the Labour Inspectorate (for instance, up to EUR187,515 for not consulting with the employees’ legal representation on the specific system for these purposes) and potential individual claims by employees regarding overtime worked, might entail significant consequences for non-compliant organisations.

Above all, there are some questions yet to be answered by Spanish Tribunals; in general, regarding how to make this rigid regulation compatible with the way we work now, which is based, mainly, on flexibility.

Thirdly and finally, another change in labour legislation in Spain is that workers now have the right to request to HR areas an adaptation of the duration/distribution of the working hours and type of work (including the possibility of changing the schedule and to telework) in order to make effective their conciliation rights. Such petition can be made even if the employee does not want to reduce their working hours for legal guardianship, thus avoiding the proportional reduction of salary.

Before this new regulation, such adaptation needed an agreement between the employer and the employee (which, in practice, meant that the company could always decide), whilst, according to the current legal framework, the judge has the last word. Also, having a child was necessary before, whilst employees who do not have children can also make such a request now.

Regarding how to exercise this, employees only need to allege their personal needs and how the proposed measure will help to reach a better conciliation, whilst the company must provide a reasonable explanation based on organisational or production grounds if the request cannot be granted. From this, a negotiation process will begin for a maximum of 30 days, which may end with an acceptance, an alternative proposal or refusal. In the latter case, discrepancies will be resolved by the Labour Courts, whose first rulings are issued in favour of the employees and therefore oblige companies to take this matter very seriously.

Grant Thornton

Paseo de la Castellana, 81
28046 Madrid

Avenida Diagonal, 615
08028 Barcelona

+34 91 576 39 99

Aurora.Sanz@es.gt.com www.grantthornton.es
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Law and Practice

Authors



Allen & Overy LLP is 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.

Trends and Development

Author



Grant Thornton has an employment area in Spain that is best known for its tailor-made employment advisory services as an HR legal business partner, including advice on day-to-day management of employment relations, legal representation and support in all types of proceedings, collective bargaining, health and safety at work, restructuring, labour compliance and Gender Equality Plans. The key clients mainly belong to the retail and pharmaceutical industries, and some of the firm’s lawyers are requested for implants as in-house lawyers (ie, Boehringer Ingelheim). The main areas of recent growth include legal advice to start-up companies (tech industries), HR consultancy (labour environment surveys, salary studies, HR policies such as whistle-blowing, etc), actuarial calculation and legal advice to public companies such as AENA. The employment team in Spain includes approximately 25 professionals and even though the firm has ten offices in Spain, its labour lawyers are mainly based in Valencia, Madrid and Barcelona.

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