1. ROYAL DECREE-LAW 20/2012 ON MEASURES TO GUARANTEE
BUDGETARY STABILITY AND ENCOURAGE COMPETITIVENESS
Royal Decree-Law 20/2012 of 13 July on measures to guarantee
budgetary stability and encourage competitiveness (“RDL 20/2012”)
sets out a package of measures aimed at overcoming the financial crisis
RDL 20/2012 requires that public authorities adopt a package of
measures designed to reduce expenditure and increase efficiency. These
include: (i) increasing the working hours of public sector
employees, reducing their holiday entitlement and the number of working
hours they can dedicate to trade union activities; (ii) limiting
certain senior civil servants’ entitlement to claim various types of
pensions and benefits at the same time; (iii) cancelling the
extra salary payment that was to be paid in December 2012 to public
sector workers; (iv) making provision, in exceptional
circumstances, for collective bargaining agreements applicable to public
sector workers to be amended or revoked; (v) amending the
emoluments of public sector workers under the General Social Security
Scheme and the temporary disability benefit to which employees of public
authorities are entitled; and (vi) changing the way in which
public sector workers elect their representatives to reduce the number
of representative bodies.
RDL 20/2012 also creates a registry of public sector workers
In relation to social security, RDL 20/2012 modifies: (i) the
rules on surcharges for late payment to promote the deferred payment of
social security contributions; and (ii) the regulations on the
contribution base for employees and the amounts taken into account for
personal income tax purposes (of particular note is the exclusion of
"voluntary remuneration in kind" from the contribution base).
RDL 20/2012 also seeks to protect the unemployed, help them to return
to work and streamline the benefit system as a whole to make it more
coherent and fair. Measures to means test unemployment benefits are
introduced, the special allowance for unemployed people over 45 is
abolished and the allowance for those over 52 is rationalised.
Finally, RDL 20/2012 amends the procedure for claiming back pay from
the State in cases of unfair or null dismissals.
2. DOES AN ACTION FOR BREACH OF CONTRACT PREVAIL
OVER AN ACTION FOR DISMISSAL?
Judgment of the Labour Chamber of the Supreme Court dated 27
This ruling is the result of proceedings in which two actions were
consolidated, one for breach of contract at the request of an employee
and another for disciplinary dismissal. The purpose of this
consolidation was to avoid the employee from seeking to circumvent the
consequences of a dismissal that was clearly imminent by means of an
enforcement action but also the company from trying to render the
enforcement action ineffective by means of a quick dismissal decision.
If the reasons for both actions are independent, non-exclusive
substantive chronological criteria will be followed, that is, the action
that arises first will be tried first.
In this case, the Supreme Court upheld the decision ordering the
company to pay compensation for the contract termination requested by
the employee, because both claims were based on independent reasons and
the reasons that led to the employee’s request to render the contract
void were prior to those related to the dismissal. By the time the
reasons that justified the company’s dismissal took place, the company
had already breached its obligations that entitled the employee to
terminate the contract and request compensation.
3. AN EMPLOYEE REPRESENTATIVE USED CREDIT HOURS FOR
UNION ACTIVITIES TO CARRY OUT HIS OWN BUSINESS
Judgment of the Labour Chamber of the Supreme Court dated 13
An employee of a meat company who was an employee representative used
his credit hours for union activities as an excuse to be absent from
work and carry out his own business. The corporate purpose of the
employee’s own company was practically the same as that of the company
he worked for.
The company engaged the services of a private detective who
discovered that the employee carried out his own business by making use
of his credit hours. Based on this information, the company dismissed
The case was taken to the Supreme Court on appeal for unification of
doctrine. It was held that although employee representatives could not
be the subject of “particular monitoring”, in the case in question, the
detective’s proof was valid. Using a detective is not prohibited as long
as it is proportionate and is not in breach of any fundamental rights.
Consequently, the employee’s dismissal was considered fair.
4. A DELAY IN SALARY PAYMENTS TO EMPLOYEE
REPRESENTATIVES IS NOT TO BE CONSTRUED AS GROUNDS FOR TERMINATION
Judgment of the Labour Chamber of the Supreme Court dated 5 March
A fashion company that was experiencing serious economic problems due
to the financial recession reached an agreement with the employee
representatives to use delay in salary payments as a form of resolving
the economic problems without reducing the workforce.
The case was decided by the Supreme Court on appeal for the
unification of doctrine. It was found that the employee’s breach was
neither serious, nor had far-reaching consequences. Firstly, the delays
only consisted of one month’s salary, plus the proportionate amount of
the six-month extra salary payment. These delays were not considered
significant, given the current economic climate and the serious
restrictions on credit. Secondly, the employee representatives were
aware of the situation and accepted the delays in payment.
In light of these circumstances, the Supreme Court held that where an
agreement had been reached such that the company was permitted to pay
the salaries at a later date, or was not required to pay the salaries
with the same degree of punctuality as previously, it could not be
argued that the company had defaulted on its payments as the salaries
were not yet due and payable.
5. REASONS BEHIND THE INTERNAL FLEXIBILITY MEASURES
PROPOSED IN VIEW OF SPAIN’S LABOUR REFORM PACKAGE
Judgment of the National Court dated 28 May 2012
A company made substantial changes to its employees’ working
conditions reducing their working time and benefits. The employees filed
a claim against the company challenging the modifications.
In hearing the claim, the National Court (“NC”) interprets the
new wording introduced by Royal Decree 3/2012 of 10 February on urgent
measures to reform the labour market (“RDL 3/2012”) to article
41.1 of Royal Decree 1/1995 of 24 March approving the amended text of
the Statute of Workers (“SW”).
The NC concludes that the new wording of article 41.1 of the SW has
further limited the grounds on which working conditions may be
substantially modified. The NC states that the current drafting requires
the existence of economic, technical, organisational or production
reasons, which are considered to be those relating to the company’s
competitiveness, productivity or technical organisation.
The NC states that this requirement under article 41.1 implies that a
company does not have discretion to make substantial modifications to
working conditions. However, in the case at hand, it holds that the
company had sufficiently evidenced the occurrence of the alleged reasons
for the modifications, and considers that they would ultimately improve
competitiveness, productivity and organisation.
6. CONTRACT SUBROGATION FOR AN EMPLOYEE WHOSE
WORKING HOURS EXCEED THE LEGALLY ESTABLISHED LIMITS
Judgment of the Labour Chamber of the Supreme Court dated 1 June
An employee provided services for one company on a part-time basis
and for another on a full-time basis. Due to an award to provide public
services, one of the companies for which the employee worked assumed the
labour rights of the other company, for which she also worked.
Following this subrogation, the employee became employed by the same
employer under both a full-time and a part-time employment relationship,
thus exceeding the legally established number of working hours.
The Supreme Court stated that the purpose of subrogation is to
provide employment stability. It held that the protective nature of the
rule should prevail, and therefore that the subrogation should apply and
that the employee could continue to work two different work schedules.
7. THE NATIONAL COURT DEEMS A COLLECTIVE REDUNDANCY
VOID DUE TO FRAUD
Judgment of the National Court dated 25 June 2012
The National Court (the “NC”) considered that a company had
acted fraudulently in an attempt to benefit from the labour market
reform. The company initiated a collective redundancy before Royal
Decree-Law 3/2012 (the “RDL”) was enacted, and therefore it was
carried out under the provisions of the previous legislation.
However, in order for the collective redundancy to be subject to the
procedure set forth in the RDL, the company stopped the collective
redundancy so that it could initiate another after the approval of the
labour market reform.
The NC recalled that fraud becomes apparent in two ways: when the act
in question seeks a result that is prohibited by law or the act in
question breaches law.
The Tenth Transitional Provision of the RDL provides that collective
redundancies that were already underway when the RDL entered into force
will be governed by the regulations that were in force when they began.
Given that it was proven that the company stopped the collective
redundancy when the RDL entered into force in order to initiate another
collective redundancy for the same employees, based on the same reasons
as the initial procedure, the NC concluded that such act breached the
Tenth Transitional Provision and that the company intended to avoid the
administrative procedure that it was obliged to follow.
The NC held the company’s acts to be fraudulent because it showed a
clear willingness to evade the legal procedure in order to benefit from
a more flexible one, and therefore declared the collective dismissal
8. A COLLECTIVE REDUNDANCY BASED ON FORECASTED
LOSSES IS DECLARED VOID
Judgment of the High Court of Justice of Madrid, dated 11 July
A company alleged the existence of economic, production and
organisation reasons to carry out a collective redundancy.
The company alleged as economic reasons the 2012 forecast, which
revealed losses in line with those of January 2012. It also alleged
organisation and production reasons as a result of various customers
requesting the termination or reduction of services, forcing the company
to reduce team numbers.
The court first considered that the alleged losses were not proven,
could not be forecasted, and that there was no sustained decline in the
company’s ordinary income. The company did however prove that it had
increased its turnover, decreased its short-term accounts receivable and
that its customers were solvent.
The existence of an economic reason was therefore rejected, as the
business intention to increase profits cannot lead to job-destruction if
there are no current or future losses.
The applicable regulation establishes that there must be a specific
and objective reason justifying the reduction of work posts, and that it
must be duly proven. Business suitability is not accepted as a valid
The other reasons were also rejected by the court, as they were not
based on objective and verifiable data.
The court concluded that there were no legal or factual reasons for
the collective redundancy, but instead only the intention to dismiss
some current workers in order to hire new workers at a lower cost. The
court therefore held the collective redundancy void.