Law 11/2013 of 26 July on measures to support entrepreneurial activity and job creation has made significant amendments to the Entrepreneurship and Youth Employment Strategy, encouraging business financing, financing to pay suppliers of local authorities and the autonomous regions, and also to railway and hydrocarbon sectors.
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Article 3.5 of Law 16/2003 of 28 May on the cohesion and quality of the Spanish National Health Service enables those who are not covered or are not beneficiaries of the Spanish National Health Service to obtain health care by entering into an agreement of the type regulated by the new Royal Decree 576/2013.
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The Entrepreneurship and Youth Employment Strategy 2013-2016 aims to reduce youth unemployment.
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A dismissal claim filed with the conciliation, mediation and arbitration service is a complex procedure as it is of an administrative nature but which also has judicial principles and values. Therefore, the Supreme Court held that filing a dismissal claim with the conciliation, mediation and arbitration service before 15:00 on the twenty-first business day after the effective date of the dismissal is lawful, proportional, and complies with the pro actione principal in article 24.1 of the Spanish Constitution.
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The legal consequences of linking temporary contracts pursuant to article 15.5 of the Statute of Workers, as amended by Law 43/2006 of 29 December to enhance growth and employment in Spain, do not apply to contracts executed between employees and companies in the construction sector if not for the same post.
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An employee failed to attend work for five days following the notification date of the rejection of the employee’s request for total permanent incapacity benefit. The Supreme Court found that the absences from work constituted a serious and guilty breach of the employee’s duties, and held that the disciplinary dismissal was fair.
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Under the applicable collective bargaining agreement, a company had an obligation to provide a temporary disability payment and also a separate compensation payment. The company failed to pay any portion of the latter amount, leading the employee to file a claim. The Supreme Court held that the company’s failure to pay the separate compensation constituted a serious breach of its obligations, entitling the employee to terminate the employment contract and receive the severance payment corresponding to an unfair dismissal.
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The National Court has held that a collective bargaining agreement that expired in September 2010 will continue to apply until a new collective bargaining agreement enters into force. For this reason, and notwithstanding the current wording of article 86.3 of the Statute of Workers, the National Court ratified the parties’ agreement to extend the validity of the collective bargaining agreement until a new one enters into force.
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In this case a collective dismissal was challenged on the grounds that there were defects in the form and the negotiation process that rendered the collective dismissal void. It was also argued by the claimants that there were no economic, production or organisational reasons for the dismissal, so it should be declared unfair. For its part, the company argued that certain trade unions were not allowed to participate in the claim as interested parties. The National Court accepted the company’s arguments and found that some trade unions were not allowed to participate as claimants as they were interested parties. It also rejected the claimants’ arguments and held that the collective dismissal was fair.
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The National Court upheld a claim in which unions sought to have a reduction in variable remuneration declared null as the company had failed to follow the statutory procedure for substantial modifications of employment conditions.
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1. MEASURES TO SUPPORT JOB CREATION AND ENTREPRENEURIAL ACTIVITIES
Law 11/2013 of 26 July on measures to support entrepreneurs and stimulate growth and job creation
Law 11/2013 of 26 of July on measures to support entrepreneurs and stimulate growth and job creation (“Law 11/2013”) modifies several areas of the Spanish legal system in order to improve the competitiveness of the Spanish economy.
1.1. Entrepreneurship and Youth Employment Strategy
The most important changes to the Entrepreneurship and Youth Employment Strategy are set out below.
1.1.1. Supporting entrepreneurs and the self-employed
One of the most important modifications in this area is the introduction of reductions in social security contributions for common contingencies. The reduction is applicable to self-employed men who are under thirty years of age, self-employed women who are under thirty-five years of age and men who are under thirty-five years of age and have a degree of disability equal to or higher than 33%.
Law 11/2013 allows for the possibility of combining unemployment benefits with self-employment under the programs to encourage employment for groups which face greater difficulties in entering the employment market.
It will also be possible to receive unemployment benefits whilst being self-employed for up to two-hundred and seventy days. The applicant must be under thirty years old and the commencement of his or her self-employed activity must be notified within the first fifteen days.
Law 11/2013 has extended the possible circumstances under which unemployment benefits can be capitalised. Such benefits may now be used to pay the incorporation and running expenses of a company and the related taxes, provided that the entrepreneur is under thirty years of age.
Self-employed individuals who are below thirty years of age and who have worked for less than sixty months will also be allowed to suspend and subsequently resume the receipt of unemployment benefits.
The last modification to support entrepreneurs and self-employment is the voluntary payment of social security contributions for common contingencies for self-employed individuals who are under thirty.
1.1.2. Personal income tax
Law 11/2013 introduces incentives for corporate income tax and personal income tax. Unemployment benefits paid in a single payment will be exempt from personal income tax provided that the self-employed individual continues his or her activity for five years.
The positive net return declared by taxpayers who commence an activity from January 2013 onwards can be reduced by 20% for personal income tax purposes. This reduction can be applied to a maximum amount of EUR 100,000.
1.1.3. Incentives for contracting arrangements
Companies and the self-employed who enter into part-time employment contracts that have a link to training activities with young unemployed individuals who are under thirty or under thirty-five if they have a degree of disability equal to or higher than 33%, will be able to reduce their social security contributions for common contingencies for a maximum period of twelve months and by up to a maximum amount of 100%
Companies with nine or fewer employees and the self-employed who enter into full-time or part-time employment contracts for an unspecified term with employees with the same characteristics as those described above, will also be able to benefit from an exemption on social security contributions for common contingencies during the first year of the employment contract.
The self-employed under thirty years of age will also have the right to a receive a reduction in their social security contributions, including on the contributions made for accidents at work and occupational diseases, if they enter into their first full or part-time employment contract after 24 February 2013 for an unspecified period with an unemployed person who is forty-five years of age or above. The reduction will apply throughout the first twelve months of the contract.
It will also be possible to enter into temporary employment contracts under article 15.1.b) of the Statute of Workers with unemployed people who are under thirty and who have less than three months’ professional experience or none at all, or who are under thirty-five and have a degree of disability equal to or higher than 33%. The purpose of these employment contracts is to provide young individuals with their first professional experience. These contracts will have a term of three to six months and can be extended for another six should the collective bargaining agreements provide for such possibility. Companies that convert these contracts into contracts for an indefinite period will be granted an annual EUR 500 discount on their social security contributions for three years. Temporary employment agencies will also have the authority to enter into employment contracts under the same terms and conditions as the user company.
Companies will now be able to enter into work experience contracts with employees who completed their studies five or more years ago. These contracts can be executed with employees who are younger than thirty years of age or thirty-five if they have a level of disability equal to or higher than 33%. In these cases, companies will have a 50% reduction in their social security contributions for common contingencies for these employees for the duration of the contract.
In addition, work experience contracts can now also be executed on the basis of a “certificate of professionalism” obtained in the same company as a consequence of a training contract.
The measures to encourage the contracting arrangements set out above will apply until the unemployment rate falls below 15% and as regulated by the Ministry of Employment and Social Security.
The last measure to encourage contracting arrangements is the application of discounts to company social security contributions for social economy entities which contract unemployed individuals under thirty years of age or thirty-five if they have a degree of disability equal to or higher than 33%.
Finally, Law 11/2013 declares that reductions in social security contributions will be governed by the law in force when the companies enter into the employment contacts or when the reductions start to apply.
1.1.4. Labour market intermediation
The last group of measures related to the Entrepreneurship and Youth Employment Strategy 2013-2016 is the modifications to improve intermediation in the labour market. The framework agreements between the Directorate-General of the Spanish Public Employment Service or the competent autonomous bodies and companies will establish the conditions that the award of service contracts sharing similar characteristics must adhere to.
Lastly, a database and a jobs portal will be created. They will not only include employment offers and employment and training opportunities in Spain but also those in the other countries of the European Economic Area.
1.1.5. Temporary employment agencies
Law 14/1994 of 1 June has been partially modified by Law 11/2013. The most significant amendments will allow temporary employments agencies to:
- enter into availability-based contracts under the same terms and conditions that the user company can enter into apprenticeship and training contracts; and
- enter into apprenticeship and training contracts with employees who will subsequently be made available to the user company by means of an availability-based contract.
2. AGREEMENT ON HEALTH CARE FOR THOSE WHO ARE NOT CURRENTLY COVERED BY THE SPANISH NATIONAL HEALTH SERVICE
Royal Decree 576/2013 of 26 July, which establishes the requirements to enter into an agreement for health care for those who are not covered by or beneficiaries of the National Health Service and which modifies Royal Decree 1192/2012 of 3 August on the status of recipients and beneficiaries of the publicly-funded health care system in Spain
Royal Decree 576/2013 of 26 July, which establishes the requirements to enter into an agreement to receive health care for those who are not covered by or beneficiaries of the Spanish National Health Service and which modifies Royal Decree 1192/2012 of 3 August on the status of recipients and beneficiaries of the publicly-funded health care system in Spain (“Royal Decree 576/2013”), will enter into force on 1 September. Royal Decree 576/2013 has two objectives. Firstly, it regulates the agreement for the receipt of health care. Secondly, it extends access to the common services portfolio of the Spanish National Health Service to additional groups of people.
Pursuant to the first of its objectives, the agreement on health care will allow the individuals it covers to receive the common services portfolio of the National Health Service under the same conditions as those who are currently covered or are beneficiaries of the National Health Service. The autonomous regions will be able to incorporate other care services from their own portfolio into the agreement.
An individual wishing to adhere to such an agreement must meet the following requirements:
- Be able to evidence that he/she has resided in Spain for a continuous period of at least one year prior to making the application.
- Be registered in any of the municipalities for which the public authority with which the agreement is to be entered into is competent.
- Not have access to another public health service by other means.
The application to adhere to the agreement should be submitted to the competent public authority in the municipality where the applicant is registered.
If the applicant us under the age of 65, he/she must pay EUR 60 per month for the health care cover. The cost increases to EUR 157 per month if the applicant is 65 years old or over. However, the price may be increased by the autonomous regions if they offer additional services in their health portfolio.
The individual adhering to the agreement will have the right to receive the National Health Service’s common services portfolio even if he/she moves to another municipality for which a different public authority is responsible to that with which he/she entered into the original agreement.
The second objective of Royal Decree 576/2013 is to extend the common services portfolio of the National Health Service to applicants for international protection who are allowed to stay in Spain for this reason, to victims of human trafficking whose temporary stay in Spain has been authorised during the period of reintegration and recuperation, and to those foreigners under the age of 18 who are not registered or authorised as residents in Spain. Additionally, it extends coverage for pregnancy, birth and postpartum support to foreign women who are not registered or authorised under the same conditions as those women who are covered by the National Health Service.
3. PROCEDURE TO PARTICIPATE IN THE ENTREPRENEURSHIP AND YOUTH EMPLOYMENT STRATEGY 2013-2016
Order ESS/1299/2013 of 1 July, which regulates the procedure to become a participating entity in the Entrepreneurship and Youth Employment Strategy 2013-2016
Order ESS/1299/2013 of 1 July, which regulates the procedure to become a participating entity in the Entrepreneurship and Youth Employment Strategy 2013-2016 (“Order ESS/1299/2013”) has been recently approved pursuant to the Third Additional Provision of Royal Decree-law 4/2013 of 22 February on measures to support entrepreneurs and stimulate growth and job creation.
Among other issues, Order ESS/1299/2013 states that organisations, institutions, public and private entities and public authorities that commence activities in order to help young people access the labour market will be able to apply to participate in the Entrepreneurship and Youth Employment Strategy 2013-2016.
Applicants must render their services in Spain, must be up-to-date with their tax and social security obligations, must not have initiated any staff restructuring procedures in the last three months, and must file an action plan.
The action plan must be linked to the Entrepreneurship and Youth Employment Strategy 2013-2016, and must feature specific measures, indicate objectives, means and deadlines, as well as specifying resources and the number and profiles of potential beneficiaries of the plan.
Applications must be submitted with documentation, proving that the requirements of Order ESS/1299/2013 have been complied with, to the General Directorate for Self-Employment, Social Economy and Corporate Social Responsibility (Dirección General de Trabajo Autónomo, de la Economía Social y Responsabilidad Social de las Empresas) through its website (https://sede.empleoyseguridadsocial.gob.es/). Following this, applicants must file their action plan by the same means. A resolution must be issued within three months. If no resolution is issued during this period the application will be understood to have been tacitly approved.
The Entrepreneurship and Youth Employment Strategy will expire on 31 December 2016, but the level of compliance with the objectives of the action plan will be reviewed before 31 March of each year. Once the application has been approved, the entities can state that they are participating in the Entrepreneurship and Youth Employment Strategy in their communication and advertising activities. In addition, the Ministry of Employment and Social Security undertakes to include these entities on its website. It will also prepare a report on the Entrepreneurship and Youth Employment Strategy every six months and will provide recognition for those action plans which create a more significant impact on youth employment.
4. FILING A DISMISSAL CLAIM WITH THE CONCILIATION, MEDIATION AND ARBITRATION SERVICE ON THE TWENTY-FIRST BUSINESS DAY IS LAWFUL
Judgment of the Labour Chamber of the Supreme Court dated 3 June 2013
The legal issue concerning the appeal for the unification of doctrine consisted of analysing whether filing a dismissal claim with the conciliation, mediation and arbitration service before 15:00 on the twenty-first business day after the effective date of the dismissal was lawful or not.
An employee filed a claim against his dismissal with the conciliation, mediation and arbitration service before 15:00 on the twenty-first business day after his dismissal. He filed the dismissal claim before the labour courts on the same day, also before 15:00. The labour court and the Labour Chamber of the High Court of Justice held that dismissal claims can only be filed on the twenty-first business day after a dismissal in judicial proceedings, and that therefore filing a dismissal claim with the conciliation, mediation and arbitration service on the twenty-first business day before 15:00 was beyond the deadline.
The Supreme Court (“SC”) analysed the nature of the period in which to file a dismissal claim. Before filing a dismissal claim with the labour court, the claimant must file a dismissal claim with the conciliation, mediation and arbitration service. Consequently, the period in which to file a dismissal claim with the labour court is suspended as from the date on which the dismissal claim is filed with the conciliation, mediation and arbitration service until the date on which the conciliation hearing takes place. The SC considered that a dismissal claim with the conciliation, mediation and arbitration service is not only an administrative procedure but one which also has a complex nature given that it is a process influenced by procedural principles and values and which is mandatory in order to subsequently file a dismissal claim with the labour courts.
The SC stated that the extension of the term established in article 135.1 of the Spanish Civil Procedure Law also applied to the dismissal claim with the administrative body. Therefore, the SC held that filing a dismissal claim with the conciliation, mediation and arbitration service and labour courts before 15:00 on the twenty-first business day after the dismissal was lawful. Consequently, the SC upheld the appeal for the unification of doctrine made by the employee.
5. CONCATENATION OF TEMPORARY EMPLOYMENT CONTRACTS DOES NOT APPLY TO DISTINCT POSTS
Judgment of the Labour Chamber of the Supreme Court dated 30 April 2013
A company in the construction sector appealed a judgment of the Labour Chamber of the High Court of Justice of Navarra (“HCJ”) applying the concatenation of temporary contracts pursuant to article 15.5 of the Statute of Workers, as amended by Law 43/2006 of 29 December to enhance growth and employment in Spain.
Both employment contracts related to masonry positions; however, they involved distinct construction projects carried out in different municipalities. The HCJ determined that the post was not located in a single place, basing its finding on a functional notion of work posts, as opposed to one based solely on location. As the temporary contracts referred to the employment category of masonry, the HCJ determined that they related to the same work post, therefore holding that the affected employees could link the contracts.
On appeal, the Supreme Court (“SC”) analysed article 18 of the IV General Collective Bargaining Agreement of the Building Industry (“CBA”) to determine the concept of identical work posts. Pursuant to the CBA, a work post is defined in view of its tasks, functions, professional category and workplace. In this case, the employment contracts referred to different construction projects and, consequently, to different workplaces. Thus, pursuant to the conception provided under article 18 of the CBA, the employment contracts did not refer to the same work post.
As a result, the SC upheld the appeal for the unification of doctrine, declaring that article 15.5 of the Statute of Workers as amended by Law 43/2006 of 29 December to enhance growth and employment in Spain did not apply.
6. ABSENCE FROM WORK DURING THE FIVE DAYS FOLLOWING THE REJECTION OF A DECISION ON TOTAL PERMANENT INCAPACITY CONSTITUTES A VALID CAUSE FOR DISCIPLINARY DISMISSAL
Judgment of the Labour Chamber of the Supreme Court dated 27 March 2013
The Supreme Court (the “SC”) rejected an appeal for the unification of doctrine lodged by an employee against the judgment of High Court of Justice of the Basque Country (“HCJ”), which had held a disciplinary dismissal to be fair.
In this case, the Social Security General Treasury notified an employee of a resolution denying a request for recognition of total permanent disability benefit. The employee did not return to work until 25 August. However, the company did not permit the employee to return and delivered a dismissal letter for disciplinary reasons on 26 August.
The employee argued that the absences were justified. The SC examined whether or not the absences were justified on the basis of any impediment or ignorance regarding the duty of the employee to return to work.
In similar cases, the SC has held that employees must be proactive in informing the employer of the existence of any temporary disability which prevents them from working. Therefore, the SC held that the employee should have been diligent in communicating or proving the temporary disability. However, the employee failed to prove temporary disability or any other impediment to work. The employee did not provide evidence of having received any medical assistance, nor did she provide any official document justifying the absence from work for the period. The SC declared the absence to be unjustified.
Finally, the SC also rejected the assertion that ignorance of the legal consequences resulting from the rejection of an employee’s request for total permanent incapacity excuses compliance with the law, holding that ignorance of the law is not a valid defence. In conclusion, the SC rejected the appeal for the unification of doctrine and upheld the judgment of the HCJ, declaring the disciplinary dismissal to be fair.
7. FAILURE TO PAY TEMPORARY DISABILITY COMPENSATION ESTABLISHED IN A COLLECTIVE BARGAINING AGREEMENT ENTITLES THE EMPLOYEE TO TERMINATE THE CONTRACT
Judgment of the Labour Chamber of the Supreme Court dated 18 February 2013
An employee was declared to have permanent total disability, but with the potential to improve his condition. The employee was required to undergo periodical medical checks given the possibility of returning to work within two years. The employee was also required to submit official medical documents in order for the company to pay the temporary disability benefit and the temporary disability compensation established in the collective bargaining agreement.
The employee received the temporary disability benefit with a delay of two months and never received the separate compensation established in the collective bargaining agreement. The employee filed a claim to terminate the employment contract, seeking a ruling by the Supreme Court (“SC”) characterising the company’s default as serious which would entitle the employee to terminate the contract and receive the corresponding severance payment for unfair dismissal.
The SC analysed whether the breaches were valid causes to terminate the employment contract with the right to receive the corresponding severance payment for unfair dismissal. The SC declared that the company’s delay in making the payment was not sufficient to entitle the employee to terminate the contract given that the employee also delayed in submitting the official medical documents to the company.
Nevertheless, the SC found that the failure to make payment of the supplementary temporary disability amount which was due pursuant to the collective bargaining agreement constituted a serious breach of the company’s duties. The SC therefore upheld the appeal for the unification of doctrine lodged by the employee and held that he was entitled to terminate the employment relationship and receive the corresponding severance payment for unfair dismissal.
8. EXPIRED COLLECTIVE BARGAINING AGREEMENTS MAY CONTINUE TO APPLY FOR MORE THAN ONE YEAR
Judgment of the National Court (Labour Chamber) dated 23 July 2013
The National Court (“NC”) ruled on a collective dismissal claim in which the claimants alleged that a collective bargaining agreement that had expired in September 2010 was still enforceable.
The collective bargaining agreement expired in 2006 but it was then renewed until 2010. The collective bargaining agreement should have expired in September 2010, but both parties agreed that it would continue in force until such time as a new collective bargaining agreement entered into force.
Article 86.3 of the Statute of Workers restricts the period for which expired collective bargaining agreements may continue to apply to one year, unless the parties agree otherwise. The claimants argued that as the parties had agreed that the collective bargaining agreement should apply until another entered into force, the general rule did not apply and the expired collective bargaining agreement should be enforceable for more than one additional year.
However, the company claimed that the parties’ agreement to extend the enforceability of the collective bargaining agreement until a new collective bargaining agreement entered into force was based on the previous wording of the law. For this reason, the company argued that the agreement could not serve as an exception to the general rule that would allow the expired collective bargaining agreement to be enforceable for more than one year.
The company claimed that the expired collective bargaining agreement had been applicable for a maximum period of one year after 8 July 2012, the date on which the limitation on the extended duration of expired collective bargaining agreements established by Law 3/2012 entered into force.
The NC held that while the parties could have agreed an additional term of just one year for the expired collective bargaining agreement, they agreed that the expired collective bargaining agreement would be enforceable until a new collective bargaining agreement entered into force. Since a new collective bargaining agreement had yet to enter into force, the NC upheld the claim and ruled that the expired collective bargaining agreement was still enforceable.
9. FAIR COLLECTIVE DISMISSAL
Judgment of the National Court (Labour Chamber) dated 8 July 2013
In this case the National Court (“NC”) analysed a claim in which the claimants sought to have their collective dismissal declared void or unfair.
The company sought a preliminary ruling on its claim that certain trade unions were not allowed to participate in the proceedings as they were interested parties. The NC upheld the company’s claim on the grounds that the law does not allow trade unions to participate in collective dismissal claims as interested parties.
The collective dismissal was challenged on a number of grounds. In relation to the claims made concerning defects in the collective dismissal documentation, the NC held that the trade unions had agreed with and accepted the documents setting out the number and professional categories (grouped according to autonomous region, province and workplace) of the employees who were to be made redundant. The NC agreed that the documents were not ordered by workplace, but as the trade unions had not sought clarification on this point during the negotiation process, they had effectively accepted and agreed with the documentation. The company’s position was also strengthened by the fact that it was willing to accept voluntary redundancies.
In response to the claimants’ argument that the dismissal was void because detailed accounts had not been provided for each workplace, the NC considered that the fact that the employee representatives had not questioned the company’s finance director about this during the negotiation process meant that they had agreed with the documents provided. The employee representatives had also failed to request provisional accounts, which added weight to the validity of the documents provided.
Regarding the absence of consolidated annual accounts for 2012, the NC held that since the law requires that they must be audited, it was reasonable to not submit them at the beginning of the negotiation process if they did not yet exist. Nor did the NC consider that the submission of the parent company’s annual accounts in English was a problem as the company offered sufficient means to interpret them during the negotiation process.
Finally, the claimants argued that there were irregularities in the negotiation process. They argued that the company’s unilateral decision to end the negotiation process on the twenty-ninth day was sufficient to declare the collective dismissal void. In the NC’s opinion, the differences between the company and the employee representatives were so great at that time that finalising the negotiation process a day before the maximum period of thirty days had not rendered the collective dismissal void.
In relation to the claim of unfairness, the claimants argued that there were no economic, production or organisational reasons for the collective dismissal. However, the NC held that the company’s results showed that it was in a negative economic situation (2011: EUR 18,600,000; 2012: EUR -68,200,000), as did those of its group (2011: EUR 40,000,000; 2012: -47,200,000). Furthermore, the company submitted a technical report that forecast losses from 2012 to 2016 and a significant drop in sales over the same period. The NC also found that the company had proved it had a much greater production capacity than required to meet current levels of demand for its products, as well as a mismatch between levels of production staff and managerial staff. For this reason, the NC found that there were production and organisational reasons for the dismissal and declared it to be fair.
Finally, the NC considered it reasonable that the collective dismissal affected one workplace in particular, which closed as a consequence of the collective dismissal. The NC found that there was a large gap between the workplace’s work load and its production capacity and noted that it would be unable to take on the functions of other workplaces.
10. NULLITY OF REDUCTION IN VARIABLE REMUNERATION
Judgment of the National Court (Labour Chamber) dated 20 May 2013
Trade unions filed a collective dismissal claim in which they sought to have a company’s decision to reduce the amount it paid in variable remuneration declared void. The measure affected employees who worked for another company before it merged with the defendant company.
The National Court (“NC”) first analysed the requirements to be met by a claim regarding a collective dispute: that it should relate to a generic group of employees (subjective requirement) who have a shared interest (objective requirement). Finding that both requirements were met in this case, the NC rejected the company’s challenge on these grounds.
In response to the trade unions’ claim that the reduction was “accidental”, the NC found that it affected 10% of quarterly remuneration and represented a change to the remuneration system, such that it affected matters regulated in article 41 of the Statute of Workers. For this reason, the NC held that the variable remuneration reduction was a substantial modification of employment conditions.
Due to the fact that the company did not follow the correct procedure to reduce the variable remuneration, the NC upheld the claim and declared the decrease to be void.