June 2008
LABOUR LAW
1. Road passenger transport. Sector agreement
The Central Authority and the Department of Road Passenger Transport
of the National Road Transport Commission have agreed on, among others,
a series of labour and social security measures. The measures are
intended to foster the recovery and stabilisation of the economic
activity of the road passenger transport sector. (More
information)
2. Unfair dismissal. Stock options.
Calculation of the profit obtained for the purposes of its inclusion in
the severance payment
The difference between the share price in the market at the moment of
acquisition and the price of exercising the stock option right must be
distributed proportionally for the period between the granting of the
stock option right and the moment of its exercise. Decision of the
Supreme Court dated 3 June 2008. (More information)
3. Director’s remuneration as agreed in a
senior executive employment contract
In its decision of 29 May 2008, the Civil Chamber of the Supreme
Court holds that, when a company’s articles of association do not
establish any provision as to whether the post of a director is
remunerated, the remuneration agreed in a senior executive employment
contract will only be valid if the duties and functions assigned to such
director exceed those pertaining to directors. (More
information)
4. Legal subcontracting versus
illegal assignment of employees
The judgment of the Supreme Court, dated 4 March 2008, holds that
contracting a third party to complement the productive activity of a
company is legal whether or not such activity is inherent to the
productive cycle, provided that the work carried out by the contracting
company can easily be distinguished from the work carried out by the
principal company. Furthermore, the third party must provide its own
human and material resources and organise and manage its employees and
the services rendered. (More information)
5. Involuntary early retirement.
Terminations arising from downsizing
The Supreme Court of 7 February 2008 holds that, insofar as
termination is not due to the free will of the employees, the 8%
reduction to the retirement pension of employees belonging to a mutual
benefit society since 1 January 1967 wishing to opt for early retirement
is inapplicable when the termination of the employment contract results
from downsizing. (More information)
6. Dismissal while on sick leave due to
temporary incapacity: unfair but not null
The Supreme Court of 18 December 2007 declares that dismissals while
on sick leave due to temporary incapacity are not null, but rather
unfair, reaffirming the doctrine established in previous judgments. This
is because illness, as opposed to an employee disability, does not fall
within a cause of discriminatory dismissal. (More
information)
7. Succession of temporary contracts.
Calculation of seniority for the purpose of severance payments
In the event of a succession of temporary contracts with the same
purposes, the calculation of seniority for severance payment purposes
must take into account the first contract executed, regardless of
whether there have been periods of inactivity between contracts
exceeding twenty days. The Supreme Court reaches its decision by
applying the “essential unity of the labour nexus” doctrine. Decision of
the Supreme Court dated 17 December 2007. (More
information)
8. Transfer of undertakings. Breaking the
causal link
The High Court of Canarias (Las Palmas) of 31 January 2008 refuses to
recognise the existence of the transfer of undertakings between two
companies which rendered cleaning services. This was due to the fact
that, as from the termination of the contract with the first contractor
until the actual provision of cleaning services by the new contractor, a
period of time had passed without maintaining the continuity of the
cleaning services activity. (More information)
9. Unfair dismissal. Internet surfing.
Information on computer use and its monitoring
It is unfair to dismiss an employee for the continuous use of a
computer for personal purposes if the employee has not been previously
informed of the rules of use and informed of the possibility that the
computer may be checked by the company. According to the High Court of
Madrid of 16 January 2008, since there was an infringement of the
employee’s right to privacy, the evidence obtained in this manner is
deemed to be illegal. (More information)
10. Labour harassment. Quantification of
the non-material damages
The Contentious-Administrative Chamber of the High Court of La Rioja
of 6 November 2007 quantifies non-material damage arising from a
situation of labour harassment suffered by an employee on the basis of
the following criteria: (i) the continued and reiterated nature of the
psychological harassment suffered; (ii) the total number of days absent
caused by the harassment; and (iii) the fact that the employee suffered
from depression, combined with sleeping problems, low self-esteem and
the need to take eight medicines daily. (More information)
11. Foreign relocation. Novation of
employment contract or substantial changes to employment conditions
Foreign relocation involving changes to the working timetable,
remuneration, the labour law applicable, rest periods, medical coverage,
or even a change to lifestyle such that it could affect the privacy of
the employee, constitutes a novation of the employment contract or, at
the very least, a substantial change to employment conditions. Decision
of the Labour Court number 33 of Madrid dated 24 March 2008.
(More information)
1. Road passenger transport.
Sector agreement
Ministerial Order PRE/1773/200 of 20 June 2008, publishing the
Agreement of the Central Authority with the Department of Passenger
Transport of the National Road Transport Commission entered into on 19
June 2008. (Official Spanish Gazette of 21 June 2008)
The Central Authority and the Department of Passenger Transport of
the National Road Transport Commission agreed on certain measures
in order to foster the recovery and stabilisation of the economic
activity of the road passenger transport sector. The social security and
labour measures agreed on include (i) a one year deferral, without
interest, of the social security contributions of companies providing
discretionary service to passengers of public transport, also applicable
to the contributions of self-employed workers in the same sector; (ii)
the direct invoicing of company social security contributions by means
of the RED Direct System; and (iii) the application of a 3% discount to
the contributions of companies providing discretionary service to
passengers of public transport collaborating in the management of the
Social Security.
2. Unfair dismissal. Stock
options. Calculation of the profit obtained for the purposes of its
inclusion in the severance payment
Decision of the Labour Chamber of the Supreme Court dated 3 June
2008
In this judgment, the Supreme Court analysed how to calculate the
profit obtained through the exercise of stock options in order to
include such amount in the severance payment for an unfair dismissal.
The Supreme Court declared that the difference between the share
price in the market at the moment of acquisition and the price of
exercising the stock option right must be distributed proportionally for
the period between the granting of the stock option right and the moment
of its exercise. The underlying rationale is that this is the period
within which the profit was obtained and thus counts for the labour
period being remunerated. In contrast, the Supreme Court rules that
profit obtained as a consequence of the sale of the shares to a third
party does not constitute salary given that it represents a commercial
transaction.
The judgment is of significant importance as it is the first time the
Supreme Court has ever ruled on this matter.
3. Director’s remuneration
as agreed in a senior executive employment contract
Decision of the Civil Chamber of the Supreme Court dated 29 May
2008
In this decision, the Supreme Court examined the validity of
remunerating a director by virtue of a senior executive contract when
the articles of association of a company did not establish whether or
not a director should be remunerated. The Supreme Court declared that,
when the company’s articles of association do not establish any
provision as to whether the post of managing director is remunerated,
the remuneration agreed in a senior executive employment contract is
only valid if the duties and functions assigned to such director exceed
those pertaining to directors.
However, in the present case, the Supreme Court upheld the appeal by
applying the principle of estoppel. The Supreme Court upheld the sole
director’s claim (who was also a partner) and rejected the other
partner’s claim which requested that the senior executive agreement that
set out a remuneration for the duties carried out by the sole director
and that had been executed with himself be deemed null. In this regard,
the Supreme Court held that since the company was solely composed of two
partners and that the annual accounts had been approved at the General
Meeting for consecutive years, the remuneration of the sole director had
tacitly been accepted as normal. It would consequently be contrary to
good faith for the shareholder bringing the claim to demand the nullity
of the senior executive employment contract and the reimbursement of the
amounts paid as salary.
4. Legal subcontracting
versus illegal assignment of employees
Decision of the Labour Chamber of the Supreme Court dated 4 March
2008
Pursuant to the Supreme Court’s decision in this judgment, it is
legal to contract out in order to complement the productive activity of
a company, whether or not the activity is inherent to the productive
cycle, provided that the work carried out by the contracting company can
easily be distinguished from the work carried out by the principal
company. Furthermore, the third party must provide its own human and
material resources and organise and manage its employees and the
services rendered.
In the matter at hand, the Supreme Court ruled that there was no
illegal assignment of employees. It applied several criteria such as the
justification of the contracting out, the autonomy of its purpose, the
contracting company’s provision of its own means of production, the
exercise of management powers and the reality of the contracting
company’s business. The Supreme Court also ruled that the doctrine of
the effective employer (according to which, subcontracting is legal when
a contracting company assumes the position of employer with respect to
its employees, exercising the powers and facing the responsibilities
corresponding to such a position), is a valid criteria in order to
determine whether a formal contract conceals an illegal assignment of
employees.
5. Involuntary early
retirement. Terminations arising from downsizing
Decision of the Labour Chamber of the Supreme Court dated 7
February 2008
Spanish law establishes a reduction of 8% in the retirement pension
of employees requesting early retirement. However, this is not the case
where early retirement is requested as a result of the termination of
the employment contract for reasons other than the employee’s free will.
In this case, lower percentages of reduction to the pension are provided.
In this decision, the Supreme Court held that the reduction of 8%
applicable to the retirement pension of those employees of a mutual
benefit society since 1 January 1967 wishing to opt for early retirement,
was not applicable when the termination of the employment contract was
caused by downsizing, given that such termination was not due to the
employee’s free will.
6. Dismissal while on sick
leave due to temporary incapacity: unfair but not null
Decision of the Labour Chamber of the Supreme Court dated 18
December 2007
At second instance, the High Court of Cataluña considered null the
dismissal of 40 employees, 23 of which were on sick leave for temporary
incapacity, on the basis that there was an element of segregation in
selecting a group of employees to be dismissed simply for suffering from
illness.
However, in this decision the Supreme Court reaffirmed the doctrine
established in decisions dated 22 November 2007 and 11 December 2007 in
which it declared that dismissal while on sick leave due to temporary
incapacity was not null, but rather unfair. This is because illness, as
opposed to an employee’s disability, does not fall within a cause of
discriminatory dismissal.
7. Succession of temporary
contracts. Calculation of seniority for the purpose of severance
payments
Decision of the Labour Chamber of the Supreme Court dated 17
December 2007
Certain employees who had been working for a company for at least 11
years by means of temporary contracts (345 contracts corresponded to the
employee with the least number of contracts) were dismissed by their
employer (a television company) and their dismissals were classified as
unfair. All the temporary contracts specified the work or service
purpose of the contract, although the real purpose of these contracts
was to perform the TV programmes and to carry out the normal
broadcasting of the TV channel.
The employees requested the Supreme Court that, for the purposes of
calculating the severance payment, the length of services be considered
as from the commencement of services of the employee as per the first
employment contract executed with the company. In applying the
“essential unity of the labour nexus” doctrine, the Supreme Court held
that, in the event of a succession of temporary contracts which real
purpose is always the same, the calculation of seniority for severance
payment purposes must take into account the first contract executed,
regardless of whether or not the periods of inactivity between contracts
exceeded twenty days.
8. Transfer of undertakings.
Breaking the causal link
Decision of the Labour Chamber of the High Court of Canarias (Las
Palmas) dated 31 January 2008
The High Court of Canarias (Las Palmas) refused to recognise the
existence of a transfer of undertakings between two companies that
rendered cleaning services. This was due to the fact that, as from the
termination of the contract with the first contractor until the actual
provision of cleaning services by the new contractor, a period of time
had passed in which there was no continuity of activity. In particular,
there was a lack of continuity as some of the apartments to which the
cleaning contract referred were run by a tourist resort and these
reverted to their real owners for a time.
In addition, the High Court pointed out that the termination of a
service contract with a contractor in the interest of a competitor does
not automatically involve a transfer within the terms of Directive
2001723/EC given that what is relevant for these purposes is having an
autonomous economic entity organised in a stable way.
9. Unfair dismissal.
Internet surfing. Information on computer use and its monitoring
Decision of the Labour Chamber of the High Court of Madrid dated
16 January 2008
According to this decision it is unfair to dismiss an employee for
the continuous use of the computer for personal purposes (the employee
stored and sent pornographic and humorous files) if the employee had not
been previously informed of the rules of use and informed that the
computer may be subject to monitoring by the company. According to the
High Court of Madrid, the evidence provided by the company in this case
was unlawful because as the company failed to inform the employee of its
monitoring, by doing so it infringed the employee’s right to privacy.
The High Court considered that, as opposed to that established in
article 18 of the Statute of Workers in relation to searching an
employee, his/her locker and personal effects, the monitoring of
computer use falls within the ordinary power of the employer (article
20) since the computer is a means of production owned by the employer
and, as such, it is he/she who has authority over its use.
10. Labour harassment.
Quantification of the non-material damages
Decision of the Contentious-Administrative Chamber of the High
Court of La Rioja dated 6 November 2007
The High Court of La Rioja quantified the damages corresponding to an
employee of the Department of Housing, Public Works and Transport of La
Rioja who endured harassment and mobbing and consequently suffered from
depression, sleeping problems, low self-esteem and a heart attack that
forced him to lead a quiet life and take eight types of medicines daily.
The High Court of La Rioja quantified non-material damages based on
the following criteria: (i) the continued and reiterated nature of the
psychological harassment suffered; (ii) the total number of days absent
caused by the harassment; and (iii) the fact that the employee suffered
from depression, combined with sleeping problems, low self-esteem and
the need to take eight types of medicines daily.
11. Foreign relocation.
Novation of employment contract or substantial changes to employment
conditions
Decision of Labour Court number 33 of Madrid dated 24 March 2008
In a decision of 24 March 2008, Labour Court of Madrid held that
foreign relocation involving changes to the working timetable,
remuneration, the labour law applicable, rest periods, medical coverage
or even a change to lifestyle which could affect the privacy of the
employee constituted a novation of the employment contract or, at the
very least, a substantial change to employment conditions. The Labour
Court of Madrid qualified the dismissal of an employee who refused to be
temporarily relocated to Saudi Arabia as unfair, finding that this
decision was contrary to the provisions of article 40 of the Statute of
Workers (geographical mobility) and that it involved such changes as to
cause the novation of the employment contract.
In particular, the foreign relocation implied changes regarding the
working timetable, remuneration, the labour law applicable, rest periods,
medical coverage and a change to lifestyle that could affect the
employee’s privacy (obligation to share an apartment). According to the
Labour Court, all these changes constituted a novation of the employment
contract or, otherwise, a substantial change to the labour conditions.
