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backEUROtalk April, 2012

Spain: New, more flexible regulation on collective dismissal

The Royal Decree 3/2012 of February 10th.

This Royal Decree on urgent measures to reform the labour market came into force on February 12, 2012. Amongst other things, the Royal Decree introduced a new regulation on collective dismissals. According to the Royal Decree, the previous collective dismissal provisions did not provide sufficient flexibility required in restructuring processes.

In particular, the fact that companies, when implementing collective redundancies, were required to begin an administrative process and receive prior authorization from the Labour Authority, was criticized. As this delayed the effective date of the redundancies, it negatively affected the restructuring process; in most cases, increasing the restructuring costs.

The new regulation has eliminated the need for such authorization from the Labour Authority.

The new collective dismissal regime

Following the introduction of the Royal Decree, collective dismissal requirements are as follows:

1.       Collective redundancies can be made for the following reasons:
a.      Economic: When the company's results reflect a negative economic situation, including actual or foreseen losses, or the persistent reduction of income. A reduction is deemed to be persistent if it lasts for three consecutive quarters.

b.      Technical: Relevant changes in means of production

c.      Organizational: Relevant changes in the systems or methods of work or in the way of organizing the production; and/or

d.      Production: Relevant changes in the demand for products or services.

2.       A collective redundancy arises where a certain number of employees are affected within a period of 90 days:
a.     10 employees, in companies which employ less than 100 employees;

b.      10% of the employees, in companies which employ between 100 and 300 employees;

c.      30 employees, in companies which employ more than 300 employees; and

d.      the termination of all employment agreements within the company (with at least 6 employees) caused by the cessation of all activities due to economic, technical, organizational or production-based reasons.

3.       The collective dismissal process requires a prior period of negotiation with the employees' representatives of 30 days or 15 days for companies employing less than 50 employees.

4.       The employer must communicate the start of the period of negotiation to the employees' representatives. The communication shall include certain information such as the dismissal reasons, number and positions of affected employees, etc. Furthermore, an explanatory report on the dismissal reasons shall be attached to the communication.

5.       The start of the period of negotiations must also be notified to the Labour Authority. A copy of the communication to the employees' representatives must be attached to the notification. The Labour Authority will require from the Labour Inspection a report on the reasons for the collective dismissals and the progress of the mandatory negotiation period.

6.       During the period of negotiation:
a.       The Labour Authority will ensure the correct progress of the negotiations.

b.       Employer and employees are obliged to negotiate the possibility of avoiding or reducing dismissals or minimizing their impact through the implementation of social measures (such as the hiring of training services or employment agencies).

7.       The outcome of negotiations must be communicated to the Labour Authority. If an agreement is not reached, the employer will make a decision on the terminations and notify the employees' representatives and the Labour Authority.

8.       The dismissals must be communicated individually and in writing to each employee.

9.       Other aspects to take into account are:
a.       If the collective dismissals affect more than 50 employees, the company must offer an outplacement plan through an authorized outplacement agency.

b.       Under certain circumstances, if the redundancies affect employees aged 50 or over, the company will have to make a special contribution to the Treasury.

c.       Under certain circumstances, a special agreement with the Social Security will need to be signed in order to continue contributing for those employees aged 55 or over and are made redundant.

Conclusions

This new collective dismissal regulation has eliminated the previously required prior authorization of the Labour Authority, so that companies may now implement collective dismissals in a more effective manner.

However, this new process does allow employees to challenge the collective termination decision before the Courts of Justice. During the court process the dismissal reasons will be discussed. Because of that, the Labour Inspection report will play an important role in deciding whether the dismissal reasons were fair or unfair. Therefore, it will be extremely important for employers to prepare accurately, in the early stages of the collective dismissal proceedings, the reasons for the collective dismissals.

Employers should also keep in mind that, Royal Decree 3/2012 was approved as an emergency measure and Parliament has begun legislative proceedings to issue regulations which could substitute Royal Decree 3/2012. That in turn could affect the regulation on collective dismissals, so watch this space for further developments.

Source: Baker & McKenzie - GAI

For more information or to contact Baker & McKenzie, please click here.

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