February 2012

SUMMARY OF THE LABOUR MARKET REFORM OF FEBRUARY 2012

ROYAL DECREE-LAW OF 10 FEBRUARY, ON URGENT MEASURES TO REFORM THE LABOUR MARKET

 1. Implementation and scope of the reform

The labour market reform, which entered into force on 12 February 2012, introduces some very important changes in the regulations governing the Spanish labour market.

Royal Decree-law 3/2012 of 10 February, on urgent measures to reform the labour market (“RDL 3/2012”), significantly modifies the institutional framework of Spanish labour relations. Some of the main changes introduced include removing the need to obtain administrative authorisations in collective dismissals, reducing the compensation for unfair dismissal from 45 to 33 days per year of service, and eliminating back pay and the so called “express dismissal”.

 2. Main aspects of the reform

Below is a summary of the main changes introduced by the reform:

  • Temporary employment agencies will now also be able to operate as placement agencies.
     
  • A “training account” linked to the Social Security registration number has been created. The account will keep a record of the training received by each worker during his or her professional career. The right to training is expressly acknowledged, as well as the right of workers to receive the necessary training in order to adapt to the changing circumstances of their post.
     
  • Vocational training contracts have been amended for the third time in less than two years, to reduce social security contributions paid by companies.
     
  • A new type of contract has been created: the “indefinite employment contract to support entrepreneurs”. Companies with less than 50 employees can benefit from this type of contract which has a one-year trial period.
     
  • Part-time contracts have been amended to allow the inclusion of extra hours.
     
  • Telecommuting or home working is regulated for the first time.
     
  • The transformation of certain contracts (e.g., training, hand-over) into indefinite contracts is now subsidised.
     
  • The professional classification system now only applies to professional groups, not to professional categories.
     
  • In the absence of an agreement, a company may distribute 5% of the working day during the year as required.
     
  • Amendments in the following areas have been approved to promote internal flexibility in companies as an alternative to terminating employment contracts: (i) geographic and functional mobility; (ii) substantial changes to employment conditions; (iii) suspension of contracts or reduction of working hours due to economic, technical, organisational or production reasons, removing the need to obtain an administrative authorisation and extending unemployment benefits; (iv) the non-application of certain employment conditions set out in the applicable collective bargaining agreements is no longer limited to salary conditions, and in the event of a disagreement, either party may submit the discrepancy to arbitration by the National Consultation Committee for Collective Bargaining Agreements, or similar bodies in the autonomous regions; (v) the primacy of the company collective bargaining agreement in certain areas, which cannot be counteracted with inter-professional agreements, or state or regional sector-specific collective agreements; and (vi) the so called “ultra-activity” of the collective agreement is limited to two years from the termination of the agreement.
     
  • The end of the suspension period of the rule on linking temporary contracts is brought forward to 31 December 2012.
     
  • An administrative authorisation is no longer required for collective dismissals and new reasons are established to carry out these dismissals: forecasts, which are so difficult to prove, are removed with a view to limiting the courts’ control over business decisions.
     
  • The compensation for unfair dismissal is reduced from 45 to 33 days per year of service. This eliminates the “contract for the promotion of permanent contracts”.
     
  • “Express dismissals” and back pay are eliminated, except in reinstatement cases, or when dealing with employee representatives.
     
  • The payment by the Spanish Salary Guarantee Fund of eight days’ compensation in the event of objective or collective dismissal is now limited to companies with less than 25 employees, and excludes unfair dismissal cases.
     
  • Dismissals for financial, technical, organisational and production reasons in the public sector are clarified and certain specificities are established in commercial and senior executive contracts in the public sector.
     
  • Rules are established for credit institutions on compensation and suspension and termination of contracts.
     

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