The Supreme Court reaffirms the criteria established in other
judgments confirming the supremacy of laws over collective bargaining
agreements. This judgment states that the Budget Law of an autonomous
region prevails over the salary provision of a collective bargaining
The Labour Chamber of the Supreme Court has unified criteria so as to
equalize the situation of those employees with reduced working hours for
legal guardianship as that situation of pregnant employees. It is
considered that these dismissals constitute an objective invalidity,
regardless evidence of discriminatory treatments is met or not.
The Supreme Court holds that salary settlement agreements have no
extinguishing effects if they do not incorporate the employee’s
unilateral will or the mutual consent of the parties regarding
termination or an agreement accepting the termination of the contract.
In order for salary settlement agreements to have extinguishing effects,
they must set out all the amounts and items of the final settlement.
The National Court rules that an employer’s decision to unilaterally
eliminate variable remuneration owed to employees who achieved pre-established
targets is illegal. This is true despite the fact that the decision was
based on the company’s negative results.
The High Court of Justice of Catalonia upheld a collective dismissal
procedure carried out in by a public sector company. The Court dismissed
the claim filed by the workers’ representatives, holding that: (i) the
2nd Additional Disposition of Royal Decree-Law 3/2012 was fully
constitutional; (ii) there were no procedural defects in the collective
dismissal procedure; (ii) and the alleged grounds which motivated the
collective dismissal were indeed present in this case.
The High Court of Justice of Valencia upheld the dismissal of various
football players, even though the club for whom they were playing
subsequently hired various other players to render the same or similar
services as the dismissed players. The court concluded that their
dismissal was not discriminatory and it was therefore possible to hire
new players at lower employment costs.
1. ROYAL DECREE-LAW 5/2013, on measures to extend the working life of
older workers and to promote active ageing (BOE 16-3-2013)
2. SUPREMACY of LAwS oVER collective bargaining agreements
Judgment of the Supreme Court dated 12 February 2013
In this case the Supreme Court (“SC”) considered
whether a collective bargaining agreement prevails over a law that
contradicts it. The issue arose following the entry into force of Law
3/2010 of 23 June, which modified the Budget Law of the Autonomous
Region of Galicia and prohibited, on budgetary grounds, the application
of salary increases established in the collective bargaining agreement
for public sector companies.
The appeal was principally based on an alleged infringement of
several articles of the Spanish Constitution. The claimants argued that
the failure to apply the salary increases stipulated in the collective
bargaining agreement was contrary to article 37 (collective bargaining),
article 28.1 (freedom of association) and article 9.3 (hierarchy of
norms) of the Constitution.
Citing several precedents of the Constitutional Court, the SC stated
that collective bargaining agreements are binding on their parties and
as such are considered a source of law with automatic legal effect.
However, this is limited and collective bargaining agreements must
comply with higher-ranking laws.
On this basis, and considering that the supremacy of Law 3/2010 was
unquestionable, the SC held that it was not possible to apply the salary
increases pursuant to a collective bargaining agreement if they
contravened Law 3/2010.
3. the dismissal of an employee with reduced working hours FOR legal
guardianship reasons is null
Judgment of the Supreme Court dated 25 January 2013
In this case, the Supreme Court (“SC”) examined the
nullity of the dismissal of an employee with reduced working hours for
legal guardianship reasons. The reduction of working hours was at the
employee’s request and the employer had granted it.
The High Court of Justice of Madrid (“HCJM”)
declared the dismissal to be unfair. The HCJM found that the dismissal
could not be considered null, since it was not in retaliation for the
reduction in working hours and neither was it due to the employee having
filed a previous claim against the company requesting that her
employment contract be recognised as permanent (the claimant was hired
through a contract for a specific job or service). On the contrary, the
HCJM considered that the measure had been taken within a general
framework of terminating employment contracts.
The SC held that the correct case law to follow is that proceeding
from the contradictory ruling. The SC adopts the same position as the
contradictory ruling with regard to the regulation on the nullity of
dismissals of pregnant employees. In the case of pregnant employees, the
SC refers to the protection granted by Law 39/1999 of 5 November (the “Law”)
on the work/family life balance. The Law provides greater protection
against discrimination as the pregnant employee has no need to evidence
the breach of any fundamental right or that the employer is aware of her
The SC held that the protection under the Law covers “nullity on
objective grounds” and applies to both pregnancy and to an employee with
reduced working hours for legal guardianship reasons, regardless of
whether there is any discriminatory treatment.
4. EXTINGUISHING EFFECTs OF SALARY SETTLEMENT AGREEMENTs
Judgment of the Supreme Court dated 22 January 2013
In the case at hand, the court analysed whether a salary settlement
agreement extinguished all matters related to the terminated employment
relationship when employees rendered their services through temporary
The appealed decision, subsequently upheld by the Supreme Court (“SC”),
rejected the assertion that the salary settlement agreement extinguished
all obligations and matters related to the employment relationship
because: (i) the document signed was a standard form; (ii) no employee
representative signed it, and there was nothing to support that the
employee relinquished his right to have a representative present at the
time; and (ii) it was not possible to conclude, from the terms of the
agreement, that the employee intended to extinguish all obligations and
rights, nor could it be construed that there was mutual consent or an
The SC stated that salary settlement agreements may express the will
of the parties to extinguish all obligations and rights. However, the SC
rejected the assertion that these documents have pre-established
objective effects. Therefore, their effects are limited, especially when
the company unilaterally decides to terminate employment contracts. As a
result, the SC held that a settlement and liquidation agreement has
extinguishing effects when it includes the employee’s acceptance of the
termination, reflects his/her unilateral will to do so, the mutual
consent of the parties or an agreement.
The SC also stated that salary settlement agreements have
extinguishing effects when they provide a detailed breakdown of all the
amounts and items of the final settlement.
5. UNILATERAL ELIMINATION OF VARIABLE REMUNERATION
Judgment of the National Court dated 10 January 2013
The National Court (“NC”) analysed the legality of a
company (a credit institution) unilaterally eliminating variable
remuneration when it had suffered negative results.
The company argued that the elimination of the incentives was
permitted according to Directive 76/2010/EU of 24 November. The company’s
position cited article 76 of Royal Decree 771/3022 of 3 June (which
transposes the Directive into Spanish law), which established that
variable remuneration must be flexible to adapt to the corresponding
circumstances, including to the extent that it may be eliminated
The NC noted that the law is developed by Circular CBE/2011 issued by
the Bank of Spain. According to the Circular, credit institutions may
reduce variable remuneration when the institution yields mediocre or
negative results, subject to general principles of Spanish contract and
In view of the above, the NC stated that each financial institution
must adhere to the provisions of the variable retribution framework. As
the variable retribution framework did not condition the remuneration on
the circumstance that the company yield positive results, and the
workers fulfilled their objectives, the variable remuneration could not
be unilaterally eliminated (the NC also points out that the company only
had negative results given its early provision for losses associated
with real estate properties).
In view of the above, the NC held that a modification or decrease in
this type of remuneration (as accepted and quantified by the company)
must trigger the procedure established in article 41 of the Statute of
Workers regarding substantial changes in working conditions.
6. COLLECTIVE DISMISSAL IN the PUBLIC SECTOR
Judgment of the High Court of Justice of Catalonia dated 19
The High Court of Justice of Cataluña (“HCJC”)
analysed the legality of collective dismissal procedures in a public
The claimants had requested that the collective dismissal procedure
be declared void based on: (i) the alleged unconstitutionality of the
2nd Additional Disposition of Royal Decree-Law 3/2012 (“RDL
3/2012”); (ii) an alleged procedural defect regarding the
calling of the meeting of the Board of Directors, together with the fact
that the call was carried out by a body which was not authorised to do
so; and (iii) the alleged lack of organisational grounds for the
procedure as well as all the other legal grounds invoked in the written
The HCJC held that the collective dismissal procedure was legal and
valid, dismissing the claimants’ arguments.
Regarding the alleged unconstitutionality of the 2nd Additional
Disposition of RDL 3/2012, the HCJC found that the company was
responding to the need to cut expenses (which was one of the stated aims
of RDL 3/2012 according to its preamble). Additionally, the HCJC argued
that the collective dismissal procedure also had a legal basis pursuant
to article 51 of the Statute of Workers and not only on the Additional
Disposition. This was sufficient for the HCJC to find that collective
dismissal procedures could be carried out by public sector companies.
The HCJC did not find any formal defects in the meeting held by the
company’s board of directors, in which, according to the minutes, an
agreement was reached regarding the “new organisational structure and
the initiation of a collective dismissal procedure”.
With regard to the lack of organisational grounds (the collective
dismissal procedure having been based on economic, organisational and
productive grounds), the HCJC stated that one of the obligations of the
Public Administration was to manage taxpayers’ funds efficiently,
provided that this was in the public interest.
Additionally, the HCJC stated that the Basic Statute of Civil
Servants only provides that civil servants cannot be removed, but it did
not apply to publically employed workers. Consequently, public
administrations and public sector businesses are entitled to terminate
such contracts. In light of all these factors, together with the fact
that there were also economic and productive grounds present in the case
at hand, the use of a collective dismissal procedure was deemed to be
justified based on organisational grounds.
Finally, in relation to the other grounds invoked, the HCJC held that
economic grounds were applicable due to the fact the company had
suffered considerable on-going losses in the previous three financial
years. These losses were due to a freeze in demand for the products the
company provided, which also constituted productive grounds. The
situation affected the size of the workforce necessary to maintain the
company’s current levels of activity, which was oversized given the
In conclusion, the HCJC held that a collective dismissal procedure
was an appropriate measure considering the number of employees affected
by it and the obligation to manage taxpayers’ funds efficiently.
7. DISMISSAL OF “EXPENSIVE WORKERS” IN ORDER TO REPLACE THEM AT A
Judgment of the High Court of Justice of Valencia dated 16
The Labour Chamber of the High Court of Justice of Valencia (“HCJV”)
ruled on a case involving the dismissal of a group of players from the
Hércules Club de Fútbol. The players affected had the highest
wages in the club and were dismissed in order to hire other players at a
lower cost. The players were included in a collective dismissal
procedure (in the context of voluntary insolvency proceedings) that
affected other employees of the company.
The dismissed players supported their claim on the basis of the
impossibility of being substituted with others hired after their
termination. The HCJV found that, as opposed to an ordinary employment
relationship, employees hired for a special employment relationship such
as sports professionals are not hired for a job position in particular,
but to form part of a team which must achieve a certain level of success.
This permitted the employer to substitute the dismissed employees
with others at a lower cost, particularly in cases when the company had
already carried out similar measures with the same objective.
Additionally, the players argued they had been discriminated against
by having been included in the collective dismissal procedure. The HCJV
stated that the decision of whether or not to include certain workers in
such a procedure corresponds to the employer, thus validating the
employer’s decision to terminate the employment of those who represent a
higher cost for the company.