The Bank of
Spain’s Circular 4/2011 significantly amends Circular 3/2008, primarily
on financial matters. It also focuses on the remuneration policies of
credit entities for officers and employees who are in a position to
affect the entity’s exposure to risk.
Court of Justice held that a worker suffering from a temporary
disability is not entitled to an unlimited accumulation of entitlement
to paid leave.
Court held that an employee is obliged to compensate his/her employer
for the voluntary breach of a minimum stay clause in order to repay the
company’s expenses related to the specialised training provided to the
Court held that a more favourable condition granted by an employer to a
group of employees cannot be withdrawn without cause or the agreement of
Court held that an employer may still be liable for a work-related
accident even if it has provided the appropriate safety measures to its
worker and he was not using them at the time of the accident.
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1. REMUNERATION POLICIES. CREDIT
Spain Circular 4/2011 of 30 November, amending Circular 3/2008 of 22 May
on the calculation and control of minimum own funds requirements
According to the
preamble to the Bank of Spain’s Circular 4/2011 (“2011 Circular”), the
main purpose of the measure is to complete the transposition into
Spanish law of Directive 2009/111/EC of the European Parliament and of
the Council of 16 September and Directive 2010/76/EU of the European
Parliament and of the Council of 24 November 2010 (referred to in
financial circles as CRD2 and CRD3, respectively). To achieve that goal,
many important amendments are made to the Bank of Spain’s Circular
3/2008 (“2008 Circular”) in multiple areas, although primarily financial.
Circular establishes many important provisions aimed at increasing the
transparency of credit entities’ remuneration policies for officers and
employees who are in a position to potentially affect the entity’s
exposure to risk. In addition to indicating the aggregate information
that credit entities must make public, the 2011 Circular indicates when
credit entities must appoint a remuneration committee and certain
obligations that entities with negative or moderate results must fulfil.
The 2011 Circular also lists the information that must be provided to
the Bank of Spain in order to be able to supervise compliance with the
core principles that remuneration policies must satisfy. The 2011
Circular sets out the criteria that the Bank of Spain must apply in
connection with variable remuneration in entities that have received
public funds. This is without prejudice to the fact that the Bank of
Spain could establish exceptional limitations to total remuneration,
taking into account credit entities’ solvency, in order that they adjust
their remuneration policies to ensure the appropriate management of risk.
is added to paragraph one of article 105 of the 2008 Circular which
states that credit entities must have internal processes that are
sufficient to guarantee that remuneration policies and practices are
consistent with the goal of promoting effective risk management.
must periodically provide the Bank of Spain with detailed information on
the remuneration of their employees. Credit entities must make their
remuneration practices and policies publicly available at least once a
year. The published information must include a detailed description of
wages and discretionary benefits such as pensions paid to directors and
other senior managers, employees whose activities involve elevated risk
and those who exercise control powers, as well as every employee who
receives an overall remuneration similar to directors, senior management
and employees whose positions have an impact on the entity’s risk
entities with total assets exceeding EUR 10 billion must appoint a
remuneration committee before 31 March 2012.
Circular is designed to make variable remuneration more flexible,
including the step of removing it, if necessary. New hires are the only
exception to the variable remuneration guarantee. The 2011 Circular
intends to sever the link between variable remuneration as a reward for
the individual actions of the employee and tie it to the entity’s
overall results. As such, more weight is given to the entity’s economic
cycle and other financial and nonfinancial aspects, subordinating the
importance of variable remuneration to the entity’s overall level of
amendment introduced by the 2011 Circular is the deferment of at least
40% of variable remuneration. The deferment will have a duration of at
least 3 years and take into account the risks taken by the entities and
their activities. The deferred amount will only be paid if the entity’s
results are not worse than forecasted.
In addition to
the above requirements, variable remuneration in entities that receive
financial support from the government to improve their stability or
facilitate their restructuring will be limited to a percentage of their
net income. Officers and directors will not receive variable
remuneration unless expressly approved by the Bank of Spain.
If an entity’s
results are moderate, variable remuneration may be reduced or even have
to be repaid. Among others, moderate results are considered to be those
poorer than that previously achieved by the entity in question or
similar entities, or lower than expected results. Institutions that have
not repaid government financial support may not pay variable
remuneration until the financial support has been repaid, unless the
Bank of Spain issues a special dispensation.
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2. ENTITLEMENT TO ACCUMULATE PAID
LEAVE IS LIMITED
the European Court of Justice (Grand Chamber) dated 22 November 2011
Court of Justice (“ECJ”) was asked to issue a
preliminary ruling involving proceedings between a German company and an
ex-worker. The worker claimed he had a right to compensation for paid
annual leave he could not take between 2006 and 2008 because he was on
sick leave, and to which he was entitled according to his employment
therefore centred around the interpretation of article 7 of Directive
2003/88/EC regarding paid annual leave. The article states that “Member
States shall take the measures necessary to ensure that every worker is
entitled to paid annual leave of at least four weeks in accordance with
the conditions for entitlement to, and granting of, such leave laid down
by national legislation and/or practice”.
legislation establishes a carry-over period of 15 months upon the expiry
of the right to paid annual leave, which could be considered contrary to
stated that EU legislation does not prevent national legislations from
imposing a carry-over period of more than 15 months upon the expiry of
which the right to paid annual leave lapses. In principle, this rule
would apply only when a worker does not exercise his/her right to paid
leave even though he/she is able to. Therefore if a worker is unable to
exercise his/her right, the carry-over period would not apply. However,
the ECJ has clarified this interpretation by highlighting that this must
be looked at on a case-by-case basis, otherwise workers would be able to
accumulate all the paid annual leave acquired during their sick leave
for consecutive reference periods.
the ECJ judgment confirmed the validity of the German law which limits,
by a carry-over period of 15 months upon the expiry of which the right
to paid annual leave lapses, the accumulation of entitlement to such
leave of a worker who is unfit for work for several consecutive
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3. COMPENSATION FOR BREACH OF
MINIMUM STAY COMMITMENT
the Labour Chamber of the Supreme Court dated 19 September 2011
company filed a claim for compensation against a former employee for the
breach of a minimum stay clause. The company provided the employee with
specialised training in accordance with industry regulations in order
for him to obtain the necessary licences to work as a train driver.
contract provided that the employee was to be given training,
preparation and specialisation to obtain the licences. Under the
contract, once the licences had been obtained, a two-year minimum stay
clause entered into force which established that a breach by the
employee had to be compensated by the proportional amount of the
training cost corresponding to the unfulfilled minimum stay period. The
company claimed that the training had cost EUR 67,900.
Court held that ordinary training expenses were not to be included when
calculating the amount of compensation due for specialised training
since, under the Statute of Workers, employees are entitled to ordinary
vocational training. Therefore, the total amount for compensation
purposes can only include the expenses incurred for the employee’s
Court upheld the decision of the Court of Appeal, which set the
compensation to be paid by the employee at EUR 27,032.72; this being the
amount spent on specialised training as evidenced by the company and
accepted by the Court of Appeal.
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4. A MORE FAVOURABLE CONDITION
ENJOYED BY A GROUP OF WORKERS CANNOT BE WITHDRAWN BY A UNILATERAL
DECISION OF THE EMPLOYER
the Labour Chamber of the Supreme Court dated 14 October 2011
claimed an additional “availability” payment from her company. The
payment was a more favourable condition granted by the employer to the
group of employees to which the employee had belonged since 2007.
In 1999, the
employer began offering the more favourable condition to employees who
worked a fixed shift and reduced hours for child care reasons. The
purpose of the payment was to help this group of employees reconcile
their work and family life, but in 2003 the employer stopped paying this
claimed she was entitled to the availability payment as it was a more
favourable condition offered to the group, even though she only joined
the group in 2007.
Court held that an employer may not unilaterally withdraw a more
favourable condition of this type as it forms part of the “contractual
nexus”, and that it may be enjoyed by a worker who joins the group after
the favourable condition has been granted to its members.
more favourable condition will continue to apply until the employer can
prove the existence of economic, organisational, production or technical
reasons that justify its withdrawal pursuant to article 41 of the
Statute of Workers.
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5. AN EMPLOYER’S DUTY OF CARE GOES
BEYOND PROVIDING THE CORRECT SAFETY MEASURES
the Civil Chamber of the Supreme Court dated 20 October 2011
resolves a civil claim brought by a worker against his company for
breach of his employment contract.
suffered serious injuries when the scaffolding on which he was working
collapsed. It was considered sufficiently proven that despite having
ample experience in the construction sector, the worker did not use the
safety measures that the company had provided.
gave significant weight to the fact that, although the company had
provided the worker with the necessary safety measures, it had not
supervised their use by the latter.
established case law, an employer’s duty of care goes beyond what is
established in laws and regulations when its employees perform
especially dangerous activities. Safety at work is a worker’s right and
an obligation for his/her employer, although both sides are responsible
In this case,
the Supreme Court held that although most of the liability lay with the
worker for not making use of the necessary and available safety measures,
the causal link between the employer’s deficient compliance with its
duty of care and the accident was not broken. The reason for this is
that the employer was responsible for supervising compliance with the
mandatory safety measures.
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