The Labour and Employment Disputes Review: Spain

Introduction

The power to govern is distributed between Spain's central government, the 17 autonomous regions and the two autonomous cities in the north of Africa. However, with regard to employment legislation, Article 149.7 of the Spanish Constitution of 1978 gives exclusive power to the central government, including the power to issue all laws and regulations. In this sense, basic regulations regarding employment relationships and disputes are common to the whole of Spain.

The main sources of employment regulations are the Spanish Constitution itself, which contains certain basic provisions, laws passed by parliament, and different types of decrees and orders issued by the government or government bodies.

However, certain employment matters are regulated by collective agreements entered into between companies (or associations of companies) and employee representatives or trade unions. Spanish law provides that these agreements, which must meet requirements regarding content and the representative authority of the negotiating parties, bind all employers and employees – including those not directly represented by the negotiators – within specific economic and geographic areas.

In addition, certain international provisions regarding employment matters are applicable in Spain. International treaties and conventions are ranked higher than national regulations when the two come into conflict. The main international provisions applicable in Spain regarding employment matters are those issued by the European Union (most of which are Directives) and the International Labour Organization (ILO) (Spain has ratified a significant number of ILO conventions). Finally, employment regulation is also affected by the European Convention of Human Rights, including the rulings of the European Court of Human Rights.

Employees are not strongly unionised in Spain, although the representative power granted to the main trade unions allows them to enter into collective bargaining agreements with employers' associations, and these are mandatory for all employers and employees within a particular geographical and economic area. In addition, Spain's employment law and labour courts are oriented to protect employees' rights. The legislation has been made to protect what is considered to be the 'weak party' in an employment relationship, and limits the freedom of employers and employees to establish the terms and conditions of the bilateral relationship within the contract.

Procedure

In general, employment conflicts are understood to be disputes between an employer and one or more employees, and that relate to any matter arising from an employment relationship. These conflicts may be resolved by the labour courts. However, it is also possible to reach an out-of-court settlement with or without the intervention of an administrative or judicial body.

One obvious method of resolving an employment dispute is through a private agreement between the employer and the employee or employees affected.

However, if no agreement is reached, in general, Spanish law requires a claim to be filed with a conciliation service as a prerequisite to initiating a court action. These conciliation services are usually administrative bodies within the administrative structure of each autonomous region. The administrative body will summon the parties to conciliation and will try to get them to come to an agreement. If no agreement is reached, the claimant is entitled to file a claim with the competent labour court. Exemptions apply in specific proceedings that involve especially urgent matters (e.g., proceedings on annual leave or collective claims challenging collective redundancy procedures), when the claimant is entitled to file the claim directly with the competent labour court.

Additionally, the most prominent trade unions and employers' associations within certain geographical areas have established conciliation and arbitration bodies that can be used for some types of claims – these are usually class or group actions. These bodies have extended their services to include some individual actions. Spanish law gives the same effect to claims registered with these private bodies as to those registered with the public conciliation bodies of the autonomous regions.

The Spanish court system does not include a separate court with exclusive jurisdiction over labour and employment claims. However, this does not mean that every individual court deals with all subject matters. Instead, there are court divisions specialising in one of the following areas: civil, criminal, administrative, labour and military. The labour division is made up of several courts, with different powers and different territories:

  1. Labour courts are formed by only one judge, whose jurisdiction covers a province, or a smaller territory when necessary because of the distance between the capital city of the province and that geographical area, or for demographic reasons. There can be one or more labour courts within the same territory or province. If there are several labour courts within the same territory, they are assigned disputes according to rules agreed by the judges. These labour courts are the first instance courts for all individual disputes and collective claims which impact is limited to the geographical territory assigned to the labour court.
  2. The labour chambers of the High Courts of Justice include at least one president and two magistrates. If the labour chamber consists of more than three magistrates, the chamber will be divided into sections with three members. Some autonomous regions, for geographical or historical reasons, have decided to divide their territory and have set up more than one labour chamber for this purpose (e.g., Andalusia, Castile and León, and the Canary Islands). Labour chambers decide collective claims the impact of which is limited to the geographical territory assigned to that labour chamber and the 'appeals for reconsideration' of certain disputes resolved by the labour courts within their jurisdiction. The labour chambers of the High Court of Justice of Andalusia are also competent to hear disputes from the two Spanish autonomous cities in North Africa.
  3. The labour chamber of the National Court is also a collegiate court, consisting of a president and two magistrates. It is located in Madrid and has jurisdiction over the nation as a whole. This chamber decides collective claims which impact extends beyond the territory of one autonomous region.
  4. The labour chamber of the Supreme Court is the highest court in Spain, with powers throughout the Spanish territory. The Supreme Court is the court of second instance for those claims judged at first instance by the labour chambers of the High Courts of Justice or the National Court, and under very limited circumstances it will hear individual claims if the judgment of one labour chamber of the High Court of Justice contradicts that of another High Court of Justice, the Court of Justice of the European Union, the Constitutional Court or the Supreme Court itself in a similar case.
  5. The Constitutional Court is not a jurisdictional court but is the final instance court in disputes regarding breaches of fundamental rights.

Under Spanish employment law, group actions are permitted if the following requirements are met:

  1. there is a labour-related dispute that arises from the application or interpretation of a statutory or collective bargaining agreement provision or from the application or interpretation of a labour-related decision or practice of an employer;
  2. the dispute affects a homogeneous group of employees considered as a whole and not individually; and
  3. the action is primarily aimed at obtaining a benefit for the group considered as a whole and not for the employees individually.

A group action may be initiated either by an employer (or company association) or by employee representatives. The court that is competent to hear the group action will depend on the territorial scope of the conflict. Briefly, for conflicts with a local scope, jurisdiction lies with the labour courts; for those with a regional scope, it lies with the High Courts of Justice; and, for those with a national scope, the National Court has jurisdiction.

Types of employment disputes

Under Spanish employment law, there are different proceedings depending on the subject matter of the claim being made by the employee (and, theoretically, by the employer).

Thus, there are two main types of proceedings: ordinary, for claims concerned with individual rights or breaches of contract, including all kinds of salary items and overtime; and a set of special proceedings that differ from ordinary proceedings in a number of ways, one of which is the urgent treatment given by the labour court to speed up a claim. Of these special proceedings, the most important and most common are those relating to infringements by an employer of employees' fundamental rights (including gender discrimination), annual leave, termination of employment relationships, appropriate professional category, substantial modification of working conditions and geographical mobility.

This chapter provides an update on case law since last year's publication on severance compensation in the event of termination, particularly regarding temporary employment contracts, and briefly analyses developments in case law on the platform economy, working time and the effects of transfers of undertakings on employment. We also look at changes to regulations on employees' fundamental rights (privacy and data protection, and the balance between these and an employer's right to supervise its employees' activity) arising from the new law on the protection of personal data and guarantee of digital rights (see Section IV). Claims regarding infringements of employees' fundamental rights are usually linked to termination-of-contract situations but can also take the form of damages claims.

Employment legislation provides different severance calculation rules (avoiding damages) depending on the type of termination: objective dismissal (20 days' salary per year of employment with a maximum limit of 12 months' salary), unfair termination (between 33 and 45 days' salary per year of employment with a maximum limit of 42 months' or 24 months' salary, depending on the length of service), and termination of certain temporary employment contracts (12 days' salary per year of employment). However, if the termination infringes the employee's fundamental rights, the dismissal will be declared void (which triggers the employee's reinstatement and provision of back pay accrued during the proceedings) and the employee will be entitled to claim damages.

As mentioned above, there are also special proceedings for collective or class actions. These must (1) refer to the application or interpretation of a statutory or collective bargaining agreement provision or practice by an employer; (2) affect a homogeneous group of employees; and (3) have the aim of obtaining a benefit for that group.

Year in review

In recent months, there have been several significant legislative changes to employment law in different fields: the covid-19-related measures, which are certainly worth mentioning, remote working, gender equality and and 'rider'-related developments.

The covid-19 outbreak has led to a series of regulations providing different measures to deal with the employment-related issues that have arisen.

The most significant of these measures has been the mechanism for the temporary suspension of the employment contract or reduction in working hours (known as the ERTE in Spanish). Since the state of emergency was declared, many different rulings have been enacted seeking to ease the previous legal proceeding to implement these measures. In particular, force majeure and objective (economic, productive, technical and organisational) reasons as defined by law are valid grounds to implement an ERTE.

With regard to covid-19, force majeure includes:

  1. actions taken by the government in connection with the state of emergency involving the suspension of business activities, the closure of public places, restrictions on the transportation of people or goods;
  2. supply shortages that make it materially impossible to continue a business activity; and
  3. infection or quarantine of the majority of the workforce. The force majeure event must be verified by the labour authorities after reviewing the documents filed by the employer. If the labour authorities do not respond within five to 10 days (depending on the region), the force majeure should be deemed to exist.

As regards objective reasons:

  1. production grounds include those affecting the demand for products or services that the company offers;
  2. economic grounds exist when a company is in a negative financial situation (e.g., persistent decrease in ordinary income or sales levels);
  3. technical grounds are linked to changes in production means or equipment; and
  4. organisational grounds refer to changes in the working methods or in the way in which production is organised.

For this type of ERTE, the covid-19 regulations have shortened the applicable periods: now the company needs to provide five calendar days' notice (as opposed to the seven- or 15-day period applied pre-covid) to the employees' representatives for them to appoint a negotiating committee, and the duration of the mandatory consultation period with the employees' representatives has also been shortened from 15 days to seven days. The consultation period can conclude with or without an agreement but the company can implement the ERTE in both scenarios (according to the agreement's terms and conditions or on the terms it sees fit, respectively).

During the pandemic, the government has continued to extend the force majeure measures implemented (which are currently in place until 31 May 2021 as per the criteria of the Labour Ministry) and has allowed for this regime to be applied to companies whose businesses are not completely impeded but are somewhat limited or restricted owing to the government's covid-19 measures (e.g., curfew, restrictions on opening hours) and to specific sectors that have suffered particularly during this crisis.

The main effects of an ERTE are that, for its duration, salaries are not paid (if employment has been suspended) or are reduced in proportion to the reduction in working hours. Employees are entitled to public unemployment benefits at the employer's request.

Employers can apply for an exemption from paying a percentage of social security contributions for a period of time. If an employer implements an ERTE with the social security contribution exemption, it must maintain employment levels (by not dismissing employees or downsizing) for six to 12 months (depending on the particular circumstances applying) after the end of the ERTE. Additionally, it will not be allowed to distribute dividends in the tax year in which it applies the exemption.

For the duration of an ERTE, with or without the social security contribution exemption, companies are not allowed to:

  1. have employees work overtime;
  2. outsource activities; or
  3. hire new employees directly or through temporary agencies.

The goal of these prohibitions is that before doing any of these, an affected employee be called back from the ERTE. This is why the prohibitions do not apply if functions cannot be performed by the employees included in the ERTE due to their training, qualification or other objective and justified reasons and if this is previously notified to the employees' representatives.

Finally, one of the most important measures taken to protect employees during this crisis is the prohibition on carrying out covid-19-related dismissals. In Spain, dismissals need to be based on a legal ground (mainly disciplinary or objective grounds – economic, production, organisational and technical) and, according to this prohibition, until 31 May 2021 (term which is likely to be extended), covid-19-related grounds are not deemed as valid grounds to justify a termination of an employment contract. The consequences for breaching this prohibition are not established by the new covid-19 regulations, which has caused some controversy. Although case law on the matter is not unanimous, it seems that the dismissal should be classed as unfair (entitling the worker to the maximum statutory severance payment) rather than null (in which case the employee is reinstated and paid back-dated salary).

For example, the High Court of Justice of the Basque Country ruled (judgment of the Labour Chamber of 26 January 2021) that a dismissal based on grounds related to covid-19 was null and void, since internal flexibility measures must be taken before employment contracts are terminated. It ruled that an interpretation of the legislation in line with the objectives pursued by the legislator must result in a dismissal that had been carried out in fraud of law (i.e., in an attempt to avoid having to comply with the prohibition) being declared null.

In contrast, the (for now) majority group of judgments are based on the fact that the nullity qualification of the termination is legally foreseen in particular cases established by law and the new covid-19 regulations have not included an additional case in the Statute of Workers. Therefore, terminations based on a covid-19-related ground should be considered to be without cause and, as such, entitle the dismissed worker to the maximum statutory severance payment (judgment of the Labour Court 26 of Barcelona of 10 July 2020, judgment of the Labour Chamber of the High Court of Justice of Castilla-León (Burgos) of 15 January 2021 and judgment of the Labour Chamber of the High Court of Justice of Madrid of 25 November 2020 on a collective redundancy).

There are also rulings that have not applied the prohibition, such as the judgment of the Labour Chamber of the High Court of Justice of Catalonia of 11 December 2020, which held that the dismissal prohibition does not apply in those cases in which the dismissal is not directly due to covid-19. As a result, the dismissal was declared to be fair under ordinary labour law. This judgment included a dissenting opinion.

Another significant legislative change to employment law is the new Royal Decree-Law 28/2020 of 22 September on remote working, which was published in the Official Gazette on 23 September 2020 and entered into force 20 days after its publication. It defines remote working as when services are carried out from the employee's home or from another location of his or her choice, during all or part of his or her working day on a regular basis. As a general rule, employees are considered to work remotely on a regular basis when they do so for at least 30 per cent of their working time within a three-month reference period, or the proportional percentage depending on the duration of the employment contract. Collective bargaining agreements may stipulate lower percentages or reference periods. Remote working is also defined as being voluntary for both the employer and the employee (i.e., it cannot be unilaterally imposed on the employee by the employer) and must be agreed in writing before the employee begins to work remotely.

The remote working agreement must include provisions on, among other things, its duration, working hours, rules for returning to the workplace, monitoring the employee's activity (which must respect the employee's data protection, digital and dignity rights) and the inventory of resources needed to work remotely. In this regard, the Royal Decree-Law requires employers to provide remote employees with sufficient means, equipment and tools for remote work and its maintenance and to compensate the cost that the remote working may entail for the employee (i.e., the employee has the right to be paid and have his or her expenses reimbursed). The aim of this provision is to ensure that the employee does not bear extra costs as a result of working remotely.

The new regulation gives collective bargaining agreements an important role in remote working, such as regulating compensation for the costs arising from remote working (for example, the banking sector collective bargaining agreement establishes the obligation to pay a fixed monthly amount), the right to flexible hours and registering working time, among other things.

The Royal Decree-Law on remote work expressly provides that it does not apply to remote working implemented in extraordinary circumstances during the covid-19 outbreak. Therefore, as long as remote working is linked to covid-19-related measures and is not deemed to be maintained, it does not fall within the scope of the new regulations. Despite this exclusion, while extraordinary measures are in place, employers must provide and maintain the necessary means, equipment, tools and consumables to work remotely.

Another important bloc of legislative changes have introduced measures on the negotiation of equality plans and instruments to promote salary transparency between women and men.

Royal Decree 901/2020 of 13 October on the regulation of equality plans and their registration entered into force four months after its publication (14 January 2021). According to this Royal Decree, all companies are obliged to respect the right to equal treatment of men and women in the labour market. The obligation to negotiate and implement an equality plan applies to:

  1. companies with 50 or more employees;
  2. companies, regardless of their headcount, obliged to do so according to the applicable collective bargaining agreement; and
  3. companies, regardless of their headcount, obliged to draft a plan as a consequence of a sanctioning procedure.

To calculate whether the company employs 50 or more employees and is therefore obliged to draft and implement an equality plan, its headcount in July and December of each year should be considered and, if at any of those points in time the 50 people threshold is reached, the obligation to draft and apply the equality plan will be triggered. The obligation will remain when the number of employees drops below 50 if the negotiation committee has been created and until the agreed period elapses or for a period of four years.

The term to initiate the negotiation of the equality plan is three months as from when the 50-employee threshold is reached. If the obligation to negotiate and implement an equality plan comes from a collective bargaining agreement or a sanction, the negotiations should start when stipulated. In any event, the plan should be negotiated, approved and filed for registration within one year from the start of the negotiations.

The plan must be negotiated with the employees' representatives, or if there are no employees' representatives in the company, the negotiating committee will be composed of the main trade unions in the sector. The Royal Decree stipulates that the equality plan must contain a diagnosis of the situation (Article 7 of the Royal Decree), minimum essential content (Article 8) including its parties, scope, a report on the diagnosis of the situation in the company, the results of the remuneration audit (as per Royal Decree 902/2020), quantitative and qualitative objectives, specific measures to be adopted (including term and prioritisation), means and resources, calendar and a monitoring procedure.

Royal Decree 902/2020 of 13 October on equal pay between men and women establishes a group of specific measures with the aim of there being effective equal treatment and no discrimination between women and men in terms of pay, and to develop mechanisms to identify the existence of unjustified or discriminatory pay gaps. This Royal Decree will enter into force on 14 April 2021.

According to this Royal Decree, all companies are obliged to have a remuneration register of all staff members, including senior executives and highly ranked employees, in order to guarantee transparency in determining the employees' remuneration and access to remuneration information, regardless of the companies' size.

The remuneration register should include average salaries, bonuses and benefits, broken down by sex and distributed by professional group, group category and equal job positions of the same value. To this end, the mean and median values of the amounts received should be established and broken down as described and disaggregated according to the nature of the remuneration.

Employees are entitled to access the register through their representatives (who have the right to access the entire register) or to access directly details of the percentage differences between women and men in terms of average remuneration.

Finally, new legislation on riders is also to be passed. The Riders Act has not yet been enacted but the Employment Ministry, the most representative unions and the most important employers' associations have reached an agreement on the regulation of this relationship in March 2021.

According to the agreement, the new Riders Act would include a presumption that the activity carried out by a person consisting in the distribution of any kind of product to third parties by employers that exercise the organisation, management and control of the activity directly or indirectly through a digital platform and through an algorithmic management of the service and working conditions is of a labour nature. This implies that riders will be presumed, in the absence of proof to the contrary, to be employees of the companies and not self-employed.

There have been several judgments regarding the nature of the relationship between collaborators and the relevant company. Since 2016–2017, it has been a constant topic in the case law directories for each year. Recently, the judgment of the Labour Chamber of the Spanish Supreme Court of 23 September 2020 held that the relationship between food-delivery riders and the associated company is an employment one and therefore the worker is not self-employed. The Court found that all the elements inherent in employment relationships were present and that the employer is not merely an intermediary that provides delivery services between businesses and delivery companies through a digital platform, but rather decides the essential conditions for the provision of the services.

The new Riders Act will also include the employees' representatives right to access the applicable algorithmic information.

Finally, regarding developments in case law, although case law has a limited impact on employment regulation in Spain, there has been a very important recent ruling from the Supreme court that may trigger significant changes regarding the validity of the temporary employment contracts for a specific task or service.

In particular, the judgment of the Labour Chamber of the Supreme Court of 29 December 2020 amends its previous doctrine on temporary employment contracts for the performance of a specific task or service linked to the contracting of services. Traditionally, the Supreme Court considered that the term of this type of contract was, in principle, the term of the underlying service contract between companies and that the termination of the service contract between the employer and a third company was a valid ground for termination of the temporary employment contracts assigned to that service as it would respond to a limited temporary need of work objectively defined.

In the case analysed, a temporary employment contract entered into in March 2000 linked to a maintenance service contract between the company and a third party was extended until the end of 2015. Upon termination of the service contract, the temporary employment contract was also terminated. The Supreme Court, rectifying its previous doctrine, considered that the activity to be performed was not sufficiently autonomous and substantive in its nature to be covered by a temporary employment contract. In its reasoning, the Supreme Court considered that companies whose activities consist in the contracting of services cannot resort to temporary employment contracts for a specific task or services because the activity of the company is precisely rendering services to other companies and therefore it cannot be considered that it entails an autonomous limited temporary need of employees but a permanent need to be addressed by a permanent employment contract. This ruling has been applied by some labour courts such as the Social Court No. 3 of Bilbao in its ruling of 4 January 2021, which held that the dismissal of employees incorrectly hired under this type of contract was null and void, as it should have been done according to the collective redundancy procedure.

Outlook and conclusions

With regard to imminent developments in the next 12 months, there will probably be new regulations on the extension or termination of the ERTE period and the new Rider Act is likely to be enacted.

The government is likely to try to repeal some aspects of the labour reform implemented in 2012. There are also areas of employment law (particularly the subcontracting of services and the limitation of the use of temporary employment contracts for specific task or service) that left-wing parties are seeking to modify. One of the left-wing parties is proposing that, under no circumstances, should a temporary employment contract be used to perform services linked to the ordinary activity of the company or in the context of subcontracting activities.

In addition, we expect to see further developments in Spanish case law on the implementation of the new regulations on equality plans and equal pay together with the collective bargaining agreement regulations on remote working. It is likely that there will be more clarity (which we currently lack) on the tax and social security treatment of the amounts paid to remote workers as compensation for remote working costs.

In conclusion, after a period of significant legislative changes and perhaps further covid-19-related measures, we expect a period of consolidation as these changes are applied by employers and interpreted by the labour courts.

Footnotes

1 Isabel Rodríguez León is a senior associate at Uría Menéndez Abogados, SLP.

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