1. EXTRAORDINARY AID FOR WORKERS AFFECTED BY CORPORATE RESTRUCTURING PROCESSES
Royal Decree 908/2013 of 22 November, establishing the special rules to grant extraordinary aid to workers affected by corporate restructuring processes
On 23 November 2013, Royal Decree 908/2013 of 22 November (“RDA”) was published in Spain’s Official State Gazette. The RDA sets out the special rules for the granting of extraordinary aid for workers affected by corporate restructuring processes. The following is a summary of the most significant aspects of the RDA.
1.1 Introduction
The RDA supplements the State Subsidies Law (“SSL”) and is intended to provide financial assistance to workers who undergo dismissal processes.
1.2 Procedure to grant aid
For reasons of urgency and public interest, the RDA provides that the aid will be granted directly (article 22.2.c SSL).
1.3 Beneficiaries
This aid is intended for workers who are dismissed for objective reasons based on economic, technical, organizational or production reasons, either individually [article 52.c of Royal Legislative Decree 1/1995 of 24 March approving the revised text of the Statute of Workers ("SW")] or collectively (article 51 SW) as well as workers undergoing a dismissal procedure due to insolvency of the employer (article 64 of the Insolvency Law), provided that they meet certain length of service requirements and are unemployed at the time they receive the aid, although the latter is not required in certain cases.
1.4 Types, content and amounts
There are three types of aid, the amount of which is determined by the budget law in each fiscal year.
- Type one: Complementary aid to the income established in an income plan agreed during the consultation period of a collective dismissal procedure. In this case, the Ministry of Employment and Social Security may make a contribution to the income plan. The contribution may consist of the payment of a subsidy, or the financing of a special agreement between the worker and the Social Security. The income plan must meet some requirements that are set out in the RDA. Limits to the public contribution to the income plan are also established, distinguishing between quantitative, individual and collective limits, time limits and exclusions.
- Type two: Direct aid for unpaid dismissal compensation in the event of total or partial insolvency. In these cases, public aid is granted directly to the dismissed employee. There are two sub-types of aid: (i) a lump sum, or (ii) granting aid to subsidize a special agreement of the worker with the Social Security. The latter is compatible with the aid provided by the Spanish wages guarantee fund (FOGASA).
- Type three: Aid can also be granted to workers directly, in a lump sum payment, in an amount equivalent to the unemployment benefits, used during the suspension periods of contracts, or of reduced working hours to which article 47 of the SW refers, provided they are not entitled to such benefits under any other rule.
back to
top
1.5 Application and granting
- Who should apply? The application must be submitted jointly by the company and the employee representatives.
- Who should the application be submitted to? The Directorate-General for Employment of the Ministry of Employment and Social Security.
- What are the deadlines to submit an application? The deadlines to submit an application are the following:
- In the case of type one aid mentioned above, applications may be submitted within three months from the termination of the contracts, provided it occurred within two years after the notification to the labour authority of the agreement on collective dismissals.
- For type two aid, the deadline is within two months from the termination of the employment contracts for the companies in a composition scheme with creditors, or from the declaration of insolvency, as the case may be.
- For type three aid, the deadline is within the month in which the unemployment benefits are finished, or within two months from unemployment.
- What should the application contain? The application must include a report setting out the reasons why the aid is requested, the number of employees, the coverage requested and its individual financial cost.
- What is the maximum term to decide and notify the decision? Three months from receipt of the application.
- Is there any limitation? The granting of the aid is conditional upon the availability of funds in the budget each year.
1.6 Compatibility rules
- No funds may be granted to employees who, at the time of receiving the aid, are the beneficiaries of a retirement, permanent total disability or severe disability pension.
- The granting of aid to workers who, as a result of the same restructuring process, are receiving aid that was approved before the standard retirement aid in the Social Security system.
- Extraordinary aid is compatible with unemployment benefits.
- The aid must be compatible with aid of a similar nature that the autonomous regions or other public entities have granted or intend to grant, unless the limits stated in the RDA are exceeded.
1.7 Termination and suspension
- Causes for termination:
- Expiry of the period for which they were granted.
- In case of death of the beneficiary.
- If the beneficiary becomes a retired pensioner or if he/she is declared to have a permanent disability.
- Due to a penalty imposed on the beneficiary.
- Causes for suspension: The start of a remunerated activity as a self-employed worker or as an employee after the aid was granted.
- Reimbursement: The amounts received by the insurance companies not paid to the beneficiary must be returned as a consequence of the termination or suspension of the aid.
- Obligations to provide information: If the recipient incurs a cause of termination or suspension of the aid, he/she or his/her heirs must communicate such circumstance to the competent authority within one month.
1.8 Penalties
The beneficiaries of aid are subject to the liability and penalty system on offences and administrative penalties concerning subsidies set out in Title IV of the SSL.
1.9 Transition period: restructuring processes prior to its entry in force
The provisions of the RDA apply to the processes for granting aid requested prior to its entry into force, except for the length of services requirements and limitations.
back to
top
2. JUDGMENT OF THE EUROPEAN COURT OF JUSTICE dated 28 November 2013
Judgment of the European Court of Justice (Fifth Chamber) dated 28 November 2013
In this judgment, the European Court of Justice analyses, in a request for a preliminary ruling made by the Portuguese Tribunal Central Administrativo Norte, a dispute between (i) a group of workers who decided to terminate their employment contracts due to non-payment by their employer and (ii) the Fundo de Garantia Salarial (the Portuguese Wage Guarantee Fund, or “FGS”) in view of the scope of the public wage guarantee when an employer is insolvent. In particular, the preliminary ruling addresses the interpretation of Articles 4 and 10 of Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer, as amended by Directive 2002/74/EC of the European Parliament and of the Council of 23 September 2002 (“Directive 80/987”).
On the basis that their employer had ceased paying their salaries as from April 2003, the employees terminated their employment contracts pursuant to domestic law. The employees subsequently filed a claim with the Portuguese Labour Court seeking a judicial determination of the amount of their wage claims and an enforcement order to recover those sums. Their claim was upheld. As the employer’s assets were insufficient to cover the claims, the employees filed an action with the Portuguese Commercial Court seeking that the employer be declared insolvent. After the employer was declared insolvent, the court proceeded to register the wage claims. However, the FGS rejected the claims stating that the wages had fallen due more than six months before the action seeking a declaration that the employer be declared insolvent was filed, a date preceding the reference period established in article 319(1) of Law 35/2004 of 29 July 2004, transposing Directive 80/987 into Portuguese law.
The Portuguese Court essentially discussed whether Directive 80/987, as amended, must be interpreted as precluding domestic legislation that does not guarantee wage claims falling due more than six months prior to the commencement of the action seeking a declaration that the employer be declared insolvent even though the workers initiated legal proceedings before the commencement of the six-month period against their employer seeking a determination of the amount of those claims and an enforcement order to recover those sums.
The European Court of Justice stated that Directive 80/987 must be interpreted as not precluding domestic legislation that does not guarantee wage claims falling due more than six months before the commencement of an action seeking a declaration that the employer is insolvent, even where the workers initiated, prior to the start of that period, legal proceedings against their employer seeking a determination of the amount of those claims and an enforcement order to recover those sums.
back to
top
3. COLLECTIVE REDUNDANCIES OR EXTENDED COLLECTIVE REDUNDANCIES AND VIOLATION OF THE RIGHT TO STRIKE
Judgment of the Labour Chamber of the Supreme Court dated 20 September 2013
The Labour Chamber of the Supreme Court ("SC") hearing the ordinary cassation appeal lodged by Celsa Atlantic, S.L. (the "Company") against the judgment of the Labour Chamber of the High Court of Justice of the Basque Country declared null the collective redundancy implemented by the company in its Vitoria and Urbina workplaces. The appeal also challenged the Basque trade union (“ELA”) and the Company’s joint works council.
The facts of the case were the following: the Company is part of a group of companies and was facing serious economic difficulties in the first half of 2012 with negative results. After several restructuring processes in the Vitoria and Urbina workplaces, on 20 April 2012 the Company initiated a series of reorganisation measures, including the termination of contracts of 91 employees without their agreement. In response to this situation, the relevant workplace employee representatives went on strike. The day after the strike started, the Company agreed to open a new consultation period with the employee representatives to discuss and negotiate an extension of the collective redundancy to all the workers in both workplaces. That consultation period ended without an agreement after several meetings and the Company’s management body ultimately informed of the closure of both workplaces on 18 June 2012. Until the trial date the company dismissed 178 employees, of which 97 were members of the ELA.
The SC based its decision on the fact that the collective redundancies should be divided into two stages: 1) those starting on 20 April 2012 and ending without the agreement of the employees and 2) those continuing on 9 May 2012 which also ended without the agreement of the employees and in which the Company merely increased the number of employees affected by the collective redundancy process to include all the employees of the workplaces in the Basque Country.
The SC held that, as declared by the competent body, the second collective redundancy was void because it violated the fundamental right to strike. In this regard, the SC considered that the Company had failed to contest the reasonable evidence of violation provided by the claimants in the proceedings: the second redundancy begins immediately after the start of the strike, and affects all workers without the Company’s economic circumstances having changed.
However, the SC did not agree with the reasoning of the appealed judgment which stated that the initial collective redundancy was also void. Regarding the initial collective redundancy procedure, only the adequacy of the procedure and the validity of reasons for the redundancies need to be analysed. In this regard, the SC concluded that the collective redundancy proposal was lawful because it was based on economic reasons and because this kind of measure is considered appropriate to revert a company’s difficult economic situation.
Finally, the SC considered that there was abuse of process with regard to the declaration of the violation of the fundamental freedom of association of employees that are members of the ELA who were, more than other workers, affected by the second collective redundancy.
There were also two important dissenting opinions in this case, which were based on other facts that, according to the dissenting judges, were not taken into account when reaching the final decision. Specifically, that the second collective redundancy, which is challenged, is not linked to the first measure because no agreement is reached. Moreover, the fact that it was not ultimately implemented reveals that the Company discarded the measure, thus any subsequent reasoning is flawed.
back to
top
4. COLLECTIVE REDUNDANCY FOR ECONOMIC REASONS, GROUP OF COMPANIES FOR LABOUR PURPOSES AND ARTIFICIAL BENEFITS
Judgment of the Labour Chamber of the National Court dated 18 November 2013
The CONFEDERACIÓN GENERAL DEL TRABAJO (“CGT”) (General Workers’ Confederation) filed a claim against ERICSSON ESPAÑA, S.A. (“EE”), Ericsson NETWORK SERVICES S.L.U. (“ENI”), OPTIMI SPAIN S.L.U. (“OS”), and the employees who signed the companies’ collective redundancy agreement before the Labour Chamber of the National Court (“NC”). The CGT claimed that the collective redundancies carried out by ENI and OS in some of their workplaces were void and illegal. All three companies were a party to the redundancy proceedings even though only two of them had carried out collective redundancies as all three companies formed a group of companies for labour purposes. The ERICSSON GROUP urged for only one consultation period, which was led and managed by the employee representatives of EE and ENI and the workers of the workplaces who did not have employee representatives. The consultation period ended on 17 June 2013 following a total of nine meetings. The final minutes of the meeting on 17 June set out the pre-agreement and it was signed by all the unions present during the negotiations, including CGT. The pre-agreement was submitted to the mass meetings of the affected workers, who mostly supported it. The final draft was put together a few days later, which essentially reproduced the pre-agreement, and was signed by most members of the negotiating committee, except CGT, which dissociated itself from it. The final agreement led to the termination of up to 213 employment contracts, 115 in EE, and 98 in ENI, and a severance payment of 45 days’ salary per year worked and up to a maximum of 42 months’ salary, and more for those who opted to take part in the redundancy process. Measures were also taken to mitigate the consequences of the redundancies.
The NC responded to CGT’s claim by holding that the negotiating committee was illegally formed as it excluded OS’ employee representatives. In this regard, the NC held that regardless of whether or not the collective redundancy affected all the companies of the group or just some of them, the negotiators in the collective redundancy should have been made up of all the representatives of the group as a whole, as EE, ENI, and OS were a group of companies for labour purposes. The NC held that this error could not entail the nullity of the redundancy in this case, as it was not reported at the start of the consultation period.
In response to the claim that there was no ground for a collective redundancy, given that the companies that carried out the redundancies did not suffer losses for three consecutive quarters or a continuous decline in their revenues or sales with respect to the same quarter of the previous year, the NC held that the correct interpretation of the economic ground described in Section 51.1 of the Statute of Workers is that which holds that the list of negative circumstances justifying a redundancy is not closed. In those cases not described in the rule as typically constituting a negative economic situation, the company must prove why it is in such situation and how the measure that has been undertaken is appropriate.
In this case, the co-respondents (the companies) succeeded in proving that the positive results obtained in 2011 and 2012 were contrived because the group's parent company offset the losses against compensation agreements which were determinant of a significant additional premium in both companies.
It was also proven that the group's sales had fallen by more than 40% despite the compensation agreements which revealed, along with the high salaries the company paid to senior staff, the existence of production and an organisational reasons for the redundancies.
As a result, given that there were grounds to justify the redundancy, the NC held that the measures adopted by the group were balanced and had their intended purpose; and that the purpose of the consultation period had been respected, which was to reduce dismissals and mitigate the consequences.
Finally, the NC highlighted that the CGT’s refusal to sign the agreement, resulting in a difficult period of consultations, which essentially contained the same proposals as those previously put together, was “a considerable sign of bad faith”.
back to
top
5. THE LIMITED application OF THE STATUTORY COLLECTIVE BARGAINING AGREEMENT AS AN OPERATIVE PROVISION: THE CONSOLIDATION OF CRITERIA
Judgment of the Labour Chamber of the National Court, dated 19 November 2013
The National Court (the “NC”) considered a claim for industrial action lodged by the trade unions FES-UGT and COMFIA-CC.OO. against a company that was engaged in occupational risk prevention and came under the scope of the national collective bargaining agreement for external prevention services. A complaint was filed against the company on 29 September 2011.
On 23 July 2013, the defendant company in the proceedings communicated to its employees that the extended application of the collective bargaining agreement had ended on 7 July 2013. In accordance with article 86.3 of the Statute of Workers, following the implementation of Law 3/2012 the extension or renewal has a one-year duration unless a new agreement on its extension or renewal is reached. At that time, the company announced that it had unilaterally decided to extend the agreement.
Firstly, the NC dismissed the argument of one of the defendant companies, which was an objection on the grounds of failure to act, understanding that the appellant unions had so acted on the basis of a substantial change in working conditions, though these did not actually take place. According to the NC, the claim is one of industrial action and its purpose is to determine whether the collective bargaining agreement actually expired on 7 July 2013 or whether it should be understood to have been extended by agreement. The NC also dismissed the argument based on lack of legal standing, and supported by other companies in the sector. No legal action had been taken against them as the mere signing of the agreement should not imply that the other companies must be called each time a dispute arises as to interpretation.
With regard to the fundamental conflict, the NC reiterates its rationale for the judgment of 23 July 2013, referred to previously (Newsletter 93 - July 2013). As in this case, 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 of entry into force of the limitation on the extended duration of expired collective bargaining agreements established under Law 3/2012. The NC held that while the parties could have agreed an additional term of just one year for the expired collective bargaining agreement, the expired collective bargaining agreement would be enforceable until a new collective bargaining agreement was implemented. Since no new collective bargaining agreement existed, the NC upheld the claim and ruled that the expired collective bargaining agreement remained enforceable.
back to
top
6. EXTENSION OF THE CONCEPT OF SENIOR EXECUTIVE
Judgment of the Labour Chamber of the High Court of Justice of Madrid dated 8 March 2013
The Labour Chamber of the High Court of Justice of Madrid ("HCJM") heard the appeal lodged by the state public company SEPI DESARROLLO EMPRESARIAL, S.A. ("SEPIDES") and one of its workers against the judgment of Employment Court no. 30 of Madrid on redundancy.
The core of the dispute was to determine whether, as SEPIDES alleged and as disputed by the State Attorney, the relationship between the employee and the State company is a special employment senior management one and, therefore, the company had validly terminated the employment contracts, or whether, as alleged by affected party, the relationship was an standard employment one, both because the original contract was of an ordinary nature, and because the role in the company was not that of a senior executive. Consequently, SEPIDE’s contract termination as if they were senior executives is unfair.
SEPIDES alleged that, despite having formally entered into an ordinary employment contract with the workers, they should actually be considered senior executives pursuant to article 1.2 of Royal Decree 1382/1985, because the concept of senior executive in the public sector must not follow a strict and literal interpretation of such provision. For this purpose, SEPIDES argued that the appellant was in fact a professional management worker of the Public Administration, further to a delegation in the Eighth Additional Provision of Royal Decree-Law 3/2012 of 10 February on urgent measures to reform the labor market ("Royal Decree-Law 3/2012") with the result that Royal Decree 451/2012 of 5 March approving remuneration of senior executives in the public sector and other entities ("Royal Decree 451/2012") extends the concept of special employment relationship of senior executives to management workers.
The HCJM rejected this argument for the following reasons:
- Firstly, the name given to a particular legal and labour relationship is not important since its reality will depend on the professional responsibilities actually carried out and on the faculties conferred on the workers. From the combination of both elements, the HCJM concluded that the parties were bound by a standard ordinary employment relationship.
- The appellant could not be considered a professional management worker of the Public Administrations under article 2.1 of Law 7/2007 of April 12 of the Statute of Public Workers, as SEPIDES is not strictly a public authority in accordance with article 3.2 of the Public Sector Contracts Law approved by Royal Legislative Decree 3/2011 of 14 November.
- The Eighth Additional Provision of Royal Decree-Law 3/2012 does not constitute sufficient basis to conclude that since its entry into force, employment contracts of an ordinary nature have been modified from a legal perspective, since that rule does not alter their legal nature or the assumptions from which one or another form of contract can be agreed.
- Finally, the argument that Royal Decree 451/2012 has validly extended the concept of the employment relationship of senior management in this sector was not accepted. Among other reasons, because this would overstep the boundaries of the subject-matter which the Decree regulates.
In conclusion, the HCJM held that "Royal Decree 3-2012 has not altered the Statute of Workers in relation to the scope of management relationships (not senior management) which following this legislation remain within the scope of the Statute of Workers and that of ordinary employment relationships. Without such legal modification management workers cannot be excluded by government regulations from the general labour legislation, without the necessary note concerning the qualification of the senior management workers, whether working in the public sector or not". Thus it upheld the judgment under appeal, dismissing the appeal submitted by the State Attorney.
back to
top
1. EXTRAORDINARY AID FOR WORKERS AFFECTED BY CORPORATE RESTRUCTURING PROCESSES