The information contained in this Newsletter is of a general nature and does not constitute legal advice


April 2009

LABOUR LAW

 

1. European companies. Employee involvement

Law 3/2009 of 3 April on corporate structure changes, introduces a new title to Law 31/2006 of 28 October, on employee involvement in European companies and cooperatives. (More information)

2. Economically dependent self-employed workers. Contract registration process

The National Employment Office Resolution of 18 March, establishes the procedure to register the employment contracts of economically dependent self-employed workers (“EDSW”) in line with Royal Decree 197/2009 of 23 February (“Royal Decree 197/2009”). (More information)

3. Extra payment for working unsociable hours during paid days off. Non-accruable

The Supreme Court decision of 18 March 2009 held that extra payments for working unsociable hours do not accrue during paid days off. As paid days off cannot be added to holiday periods, the rules established for rest days, bank holidays and time off must be applied.  (More information)

4. Consecutive temporary employment contracts. Need to prove the “essential employment link”

The Supreme Court decision of 18 February 2009 upheld its own doctrine on the “essential employment link”. The case involved the execution of several consecutive temporary employment contracts that had all been entered into within twenty days of each other, except for the penultimate and ultimate employment contract, where there was a thirty-day gap. In this case, the Supreme Court considered that the “essential employment link” remained, and as a consequence, for severance payment purposes, the length of service was calculated from the execution of the first temporary employment contract. (More information)

5. Work-experience contract. Duties different from those agreed

The Supreme Court decision of 16 February 2009 declared that a contract was not fraudulent because an employee had only carried out the functions stipulated in his work-experience contract for twenty-two months of its twenty-four month term. (More information)

6. Dismissal. Severance payment calculation: periods of less than one year must be calculated on a monthly basis as opposed to a daily basis

The Supreme Court decision of 11 February 2009 held that periods of less than one year must be calculated as complete months as opposed to individual days for severance payment purposes as set out in article 56.1 of the Statute of Workers. (More information)

7. Post-contractual non-compete agreement applicable even if contract has been terminated during trial period

The Supreme Court decision of 6 February 2009 held that a post-contractual non-compete agreement remains in force even if the employee has been dismissed during the trial period. (More information)

8. Trial period established in a subsequent contract

The Supreme Court decision of 23 October 2008 held that an employer has the right to establish a trial period in a second contract if the first contract is terminated by the employee during the trial period. (More information)

9. Working time: bringing forward the start and end of the daily working time by thirty minutes does not imply a substantial modification of working conditions.

The Supreme Court decision of 6 October 2008 related to a claim brought by employees against their employer on the grounds that a substantial modification of working conditions had taken place as a result of the employer bringing the start and end of the working day forward by thirty minutes. The Supreme Court held that this change was a different distribution of working time, which the employer has the authority to implement. In addition, the Supreme Court confirmed the case law which holds that overtime is not an acquired right. (More information)

10. Contract can be terminated during trial period even if the employee is on temporary sick leave

The Supreme Court decision of 30 October 2008 upheld an employer’s decision to terminate an employment contract during the trial period, even though the employee was on temporary sick leave. Both parties expressly agreed that the trial period would not be interrupted due to sick leave. (More information)

11. Right to use the employer’s premises for union purposes. Employer not obliged to equip premises with IT systems

The National Court decision of 25 March 2009 held that the employer has no legal obligation to equip premises for the use of workers’ committees with computers and internet access in order to ease the transfer of union information. (More information)


1. European companies. Employee involvement

Law 3/2009 of 3 April on corporate structure changes (Official Spanish Gazette of 4 April 2009)

Law 3/2009 of 3 April on corporate structural changes (“LSC”) unifies and widens the scope of the legal regulation of structural modifications to companies; in other words, changes that go beyond simple amendments to articles of association and that affect the company’s structure, including its assets and  legal status. Transformations, mergers, split-offs and global transfers of assets and liabilities are included in this definition.

The LSC covers three main areas of labour regulations:

(i) The first additional provision refers to employee information and consultation rights, within the context of structural company changes, that are not regulated in the LSC. It establishes a general reference to labour law regulations.

The provision also regulates situations in which structural changes imply a change in ownership of the company, a workplace or an autonomous production unit. In these circumstances, article 44 of the Statute of Workers (“SW”) will apply.

(ii) Article 67 LSC regulates the involvement of employees in a company in merger transactions. Employee involvement means any mechanism, including information, consultation and participation, through which employees’ representatives may exercise an influence on decisions to be taken within the company.

When the company resulting from a merger has its registered office in Spain, the employee involvement rights in the company shall be defined in accordance with Spanish labour law. This regulation also protects the information and consultation rights of employees who work in a Spanish workplace of a company that is the product of a merger, irrespective of where it has its registered office.

If at least one of the companies involved in the merger applies employee participation rules and the company resulting from the cross-border merger is governed by the same rules, the latter must be a type of company that allows the employees to exercise their participation rights.

(iii) Final provision three adds a new title to Law 31/2006 of 18 October 2006 on the involvement of employees in European companies and cooperatives (“Law 31/2006”), and is regarded as the most important change introduced by the LSC.

This new title regulates the provisions applicable to cross-border intra-Community mergers of limited liability companies and differentiates between the provisions applicable to companies resulting from cross-border intra-Community mergers that have registered offices in Spain, and those applicable to the Spanish workplaces of companies resulting from cross-border intra-Community mergers.

In the case of companies resulting from cross-border intra-Community mergers with registered offices in Spain, article 39 of Law 31/2006 states that the LSC is applicable when any of the following requirements is met: (a) during the first six months after the publication of the draft merger plan, at least one of the companies involved in the merger has, on average, more than 500 employees and is managed according to employee participation rules; (b) if the employees participate in the company resulting from the cross-border merger, the level of participation is not (at least) the same as that in the companies involved in the merger; or (c) the workers in the company workplaces located in other Member States have fewer participation rights than the workers employed in Spain.

Chapter I of Title I of Law 31/2006 is applicable to the negotiation of employee participation rights, with the following specialties:

- The competent bodies of the companies involved in the merger can opt to apply article 20 of Law 31/2006 immediately, or to only do so as from the registration date of the company resulting from the merger.

- The negotiating body will not have the functions granted in article 8(2) and (3) of Law 31/2006.

- Article 9(2) of Law 31/2006 will not apply. Nonetheless, in the event that any of the companies involved in the merger allows its employees to participate in its management bodies and its employees represent at least 25% of the total number of employees involved in the merger, if the result of the negotiations leads to a reduction of participation rights in the companies, the majority required to take such a decision shall be, as a general rule, two-thirds of the members of the negotiating body.

- The subsidiary provisions set out in article 20 of Law 31/2006 in relation to employee participation apply to the company resulting from the cross-border intra-Community merger, as from the date of its creation, in the following cases: a) when the parties decide so, b) when no agreement is reached within six months, or any extension of that term, pursuant to the terms provided in article 10 of Law 31/2006, provided that the three conditions of Law 31/2006 for such events are met.

Chapter III of Title II of the LSC will also apply to companies resulting from cross-border intra-Community mergers with registered offices in Spain, except in relation to management bodies and employee representatives who exercise their functions within the framework of an information and consultation procedure.

In the event that a company resulting from a cross-border intra-Community merger is managed with the participation of employees, the company must ensure that the employees’ rights are protected in the event of subsequent national mergers during the three years after the cross-border intra-Community merger has taken effect.

Various titles of Law 31/2006 apply to Spanish workplaces of companies resulting from cross-border intra-Community mergers. Specifically: (a) Title II, except in relation to representative bodies; (b) Title III provisions concerning judicial proceedings; and (c) the new Title IV regulations, but only when there must be employee participation in the company resulting from the merger.

The LSC will enter into force three months after its publication in the Official Spanish Gazette, that is to say, on 4 July 2009, except for those provisions relating to cross-border intra-Community mergers, which entered into force on 5 April 2009.

2. Economically dependent self-employed workers. Contract registration process

Resolution of 18 March of the National Employment Office, which establishes the procedure to register the employment contracts of economically dependent self-employed workers (Official Spanish Gazette of 4 April 2009)

The National Employment Office Resolution of 18 March 2009 (the “Resolution”), which entered into force on 5 April 2009, establishes the procedure to register the employment contracts of economically dependent self-employed workers (“EDSW”) in line with Royal Decree 197/2009 of 23 February (“Royal Decree 197/2009”).

The Resolution states that EDSW or their client must register their contracts, their amendments, and their terminations with the National Employment Office (“NEO”). The following information must be included in the registration: the identity of the parties to the contract, its start and end date, statement to the effect that the self-employed worker is economically dependent on the client; purpose of the contract, distribution of working hours, weekly rest days and annual rest period; the professional interest agreement, if one exists; professional activity; the type of services rendered by the EDSW and the consideration paid by the client.

The EDSW, their clients or their representatives can carry out the registration process in person at the NEO or by internet.

The Resolution repeals the previous one dated 21 February 2008. EDSW or their clients must therefore adapt the contracts that were registered pursuant to the previous resolution and were still in force on 5 March 2009, to the new Resolution. Such amendments must be made within 3 months following 5 March 2009.

3. Extra payment for working unsociable hours during paid days off. Non-accruable

Decision of the Labour Chamber of the Supreme Court dated 18 March 2009

The Supreme Court (“SC”) upheld a National Court (“NC”) decision on whether or not an extra payment for working unsociable hours should be paid for two paid days off. The SC compared paid days off to other similar situations such as rest days, bank holidays and time off.

The SC held the extra payment for working unsociable hours to be a supplement payable depending on the position carried by the employee. Doctrine states that the extra payment for working unsociable hours does not accrue during rest days, bank holidays, time off or paid leave. Nevertheless, the SC pointed out that during holiday periods, “the average value of the extra payments for working unsociable hours must be paid”, by virtue of convention 132 of the International Labour Organization (“ILO”).

Neither the SW nor the applicable collective bargaining agreement allow for paid days off to be added to holiday periods, and as such the ILO’s convention 132 does not apply to them.

As a consequence, days off cannot accrue extra payments for working unsociable hours.

4. Consecutive temporary employment contracts. Need to prove the “essential employment link”

Decision of the Labour Chamber of the Supreme Court dated 18 February 2009

In this decision the SC upheld its own doctrine on the need to prove an “essential employment link”, and determines whether an interruption of more than twenty working days between two different employment contracts breaks the initial contractual link and means that a new length of service period starts for severance payment purposes or, alternatively, that such interruption is irrelevant when the essential employment link is not broken.

In the case at hand, the parties entered into several temporary employment contracts, and left thirty days between the penultimate and ultimate contract signed when the legal limit for a contract not to be fraudulent is twenty working days (term within which an action against the termination decision must be brought).

The SC looked at all the contracts as a whole without taking into consideration the duration of the breaks between them. As a result, it held that the length of service dated from the beginning of the first contract, and that the severance payment should be increased accordingly.

5. Work experience contract. Duties different from those agreed

Decision of the Labour Chamber of the Supreme Court dated 16 February 2009

In this decision the SC overruled the decision of the High Court of Justice of the Basque Country by holding that a work experience contract under which the worker performed functions according to his academic training for the majority, but not all, of the contract period could not be deemed fraudulent.

The case involved a person on work experience who undertook duties for which he was trained for a twenty-two month period. However, during the last two months, the employee carried out duties that did not relate to the purpose of his contract.

The SC held that an extremely formalistic interpretation of the main elements of the contract could be contrary to employees’ interests. According to the SC, “(...) the employee’s theoretical training was complemented during the majority of the contract, therefore a slight deviation in his duties is insufficient to deem the contract fraudulent”.

The SC therefore held that the termination of the contract by the employer was valid under Spanish law.

6. Dismissal. Severance payment calculation: periods of less than one year must be calculated on a monthly basis as opposed to a daily basis

Decision of the Labour Chamber of the Supreme Court dated 11 February 2009

In this decision the SC deliberated on the interpretation of article 56.1 of the SW. It upheld the First Chamber of the SC’s approach (decisions dated 23 May 2006 and 13 July 2006), which gives priority to the literal interpretation.

The SC held that “article 56.1 applies to services rendered for less than one year, however these periods must be pro-rated by months [as opposed to days]”. Moreover, the SC stipulated that this pro-rata division must be carried out “as if the employee had worked the complete month”.

7. Post-contractual non-compete agreement applicable even if contract has been terminated during trial period

Decision of the Labour Chamber of the Supreme Court dated 6 February 2009

The SC rejected an appeal by holding that a post-contractual non-compete agreement remains in force even if the employee has been dismissed during his trial period.

The SC held that, even though the employer showed no interest in enforcing the post-contractual non-compete agreement due to the fact that the employee had been at the company for only a short period of time, as post-contractual non-compete agreements are bilateral contracts, they entail rights and obligations for the parties who have agreed them. Furthermore, the SC upheld its decisions of 24 September 1990 and 5 April 2004 to the effect that there are two interests at stake: the employer does not want the employee to use his acquired knowledge in competing companies, whilst the employee is guaranteed financial stability for a period of time.

As a consequence, the termination of the employment contract due to the employer because the employee did not pass the trial period does not affect  agreements which enter in force once the contract is terminated, such as the post-contractual non-compete agreement.

8. Trial period established in a subsequent contract

Decision of the Labour Chamber of the Supreme Court dated 23 October 2008

In this decision the SC held that the employer had the right to establish a trial period in a second contract with the same employee if the first employment contract was terminated during the trial period by the employee. The SC deemed that, in these cases, facts such as the type of contract signed or the proportion of the trial period worked are irrelevant.

The SC examined the purpose of the trial period, i.e., a period of time that allows the employer to confirm that the employee is capable of undertaking the assigned duties. In the case at hand, the employee terminated the previous employment contract during his trial period. As such, the SC held that upon entering into another employment contract, the employer would be entitled to set a new trial period to determine the employee’s aptitude, which the employer was unable to determine during the first contract.

9. Working time: bringing forward the start and end of the daily working time by thirty minutes does not imply a substantial modification of working conditions.

Decision of the Labour Chamber of the Supreme Court dated 6 October 2008

This decision draws up the boundaries of working time. In this case the employees rejected a measure proposed by the employer during the consultation period, which consisted of bringing forward both the start and end of the working day by thirty minutes. They brought an action against the employer claiming the infringement of articles 34 and 41 of the SW. The employees claimed that the employer’s measure amounted to a substantial modification of their working conditions, and that changing their daily working time prevented them from working on a series of “scheduled projects”, and therefore, resulted in a decrease in their remuneration.

The employees’ post involved collecting a company vehicle from the workplace, visiting clients, and returning the vehicle to the workplace at the end of the working day. The new company measure meant that the employer assigned a vehicle to each employee, so that it would no longer be necessary for each employee to collect their vehicle from the workplace at the start of each day. This would mean that at the end of the working day, the employees would be able to return straight to their homes after completing their last client visit.

The SC based its decision on the definition of working time as set out in Directive 93/104/EC of 23 November: “any period during which the worker is working, at the employer’s disposal and carrying out his activities and duties”. The SC held that the decrease in travel and unproductive activities was an alternative distribution of working time but not a substantial modification of working conditions.

As regards the salary decrease due to the new working timetable, the SC stated that the “scheduled projects” were carried out by the employees outside their working time, and therefore should be considered overtime. According to the SC, the performance of overtime is not an acquired right, as it depends on supply and demand.

10. Contract can be terminated during trial period even if employee is on temporary sick leave

Decision of the Labour Chamber of the Supreme Court dated 3 October 2008

This case relates to whether an employer’s decision to terminate an employment contract, which included a 15-day trial period, was valid given the fact that the employee suffered a retina detachment and consequently went on sick leave only two hours after being hired.

In the case at hand, the employment contract resembled a clause which established a 15-day trial period, which would not be interrupted due to sick leave. The SC therefore held that “denying the employer the possibility of terminating the employment contract (...) during the trial period, whilst the employee is on temporary sick leave, would give rise to the contract becoming permanent, as the employer would not be able to exercise its right to terminate the contract outside of the trial period, which is in breach of the law”.

Thus, the SC upheld the first instance decision, and declared the termination of the contract by the employer to be valid.

11. Right to use the employer’s premises for union purposes. Employer not obliged to equip premises with IT systems

Decision of the Labour Chamber of the National Court dated 25 March 2009

In this decision, the NC held that workplaces that have more than 250 employees must provide workers’ committees with premises to hold meetings. However, the NC held that there is no legal obligation for employers to facilitate the transfer of union information through IT systems (e.g. e-mail).

In 2002, the workers’ committee and the employer entered into an agreement by means of which the employer would provide the workers’ committee with premises, furniture and basic tools so that the latter could carry out its activities. Pursuant to this agreement, one of the representative trade unions brought an action against the employer claiming they were entitled to be provided with a computer and internet access. Their main argument was that circumstances had changed significantly since the agreement was signed (2002) and that internet is now a basic working tool.

The NC examined the legal doctrine on “rebus sic stantibus”, which allows the conditions of a contract to be modified in the event that the circumstances under which it was drafted have fundamentally changed. However, in labour matters, the NC considers that this doctrine is “only applicable - relatively - when dealing with obligations arising from employment contracts, but not those arising from collective bargaining agreements, since they are considered to be legislation and the doctrine does not apply to legislation”.

The NC therefore held that the employer was not obliged to provide the claimant with the requested computers for the following reasons: (i) circumstances have not changed sufficiently since the company agreement was drafted in 2002; and (ii) terms of contracts must be literally interpreted pursuant to article 1283 of the Civil Code.

 

The information contained in this Newsletter is of a general nature and does not constitute legal advice