1. SOCIAL SECURITY CONTRIBUTIONS EXEMPTION
Royal Decree-law 1/2015 of 27 February on the second chance mechanism, reduction of financial burden and other labour measures
With this law companies are now exempted from paying social security contributions for common contingencies for 24 months if they hire new employees through a permanent employment contract. For companies with less than 10 employees, the measure applies for a further 12 months.
Under the new regulations, companies are exempted from paying up to EUR 500 of the monthly base salary for common contingencies of full time workers. For part-time workers the benefit applies proportionally to the amount of time they work.
To benefit from this measure, companies must:
be up to date with their tax and social security obligations,
not have dismissed employees (for objective reasons, unfair dismissals or collective dismissals) within the previous 6 months,
hire more employees and increase the number of permanent employees within the previous 30 days and maintain this situation for 36 months, and
not be legally excluded from this benefit.
This exemption does not apply to (i) special labour relationships (relaciones laborales de carácter especial), (ii) employees under special social security regimes, (iii) new contracts for individuals related the employer (by blood or affinity) and (iv) individuals rendering services as executive directors or members of the board of directors.
It also amends the Self-Employed Workers Law (Estatuto del Trabajador Autónomo) by introducing social security benefits for self-employed workers who care for family obligations which affect their work.
2. THE CONSTITUTIONAL COURT DECLARES THE 2012 LABOUR REFORM CONSTITUTIONAL
Judgment of the Constitutional Court dated 22 January 2015
The parliamentary groups of the PSOE and Izquierda Plural lodged an appeal seeking that the 2012 labour reform be declared unconstitutional on the ground that it is invasive and disproportionate to the point of excluding social agents. The appeal challenged several provisions of the 2012 reform on the grounds that they violate the right to collective bargaining and trade union freedoms:
The labour reform empowers the National Advisory Committee on Collective Agreements (“NACCA”) or the competent regional bodies at the unilateral initiative of companies. This empowerment breaches the binding nature of collective bargaining agreements and violates the core content of the right to collective bargaining and trade union freedoms.
The labour reform devalues the binding nature of some collective bargaining agreements as it allows companies to unilaterally modify them to the point of infringing the pacta sunt servanda principle (i.e. agreements must be kept), which applies to all private contracts.
The absolute and unconditional priority of company collective bargaining agreements over other types of agreements prevents social agents from establishing rules on how collective agreements may overlap. As a consequence, the labour reform again infringes the fundamental right to collective bargaining and trade union freedoms.
The labour reform declares that the clauses of collective bargaining agreements permitting mandatory retirement are void. This rule (i) infringes the right to collective bargaining, which involves the freedom of the parties to decide the purpose of collective bargaining agreement provisions and (ii) violates the right to equal treatment by creating an unjustified difference in treatment compared to civil servants, who are subject to mandatory retirement.
The Constitutional Court declared each of the challenged provisions to be constitutional based on the following reasons:
The power granted to the NACCA is based on a lawful purpose. It is also a weighted and proportional measure as it is a subsidiary remedy that does not substitute trade union freedoms or collective bargaining in any way.
Regarding the flexibility of the grounds required to substantially modify the non-statutory working conditions unilaterally decided by a company, the Constitutional Court considered that the wording of the contested provision does not prevent full and effective judicial control over any modification.
In relation to the priority of a company’s collective bargaining agreement, the Constitutional Court concluded that the main objective of legislators is to decentralise collective bargaining.
The last measure stating that collective bargaining agreements that permit mandatory retirement are void was deemed lawful because (i) the legislature establishes the grounds for terminating an employment relationship and (ii) its purpose is for employees to retain their positions during the economic crisis, a time of extremely high unemployment rates.
This judgment includes a dissenting opinion of three judges, stating that the labour reform is unconstitutional as it infringes the rights to work, to equality and to collective bargaining.
3. THE EUROPEAN COURT OF JUSTICE LACKS JURISDICTION TO EVALUATE THE TRIAL PERIOD IN PERMANENT CONTRACTS TO SUPPORT ENTREPRENEURS
Judgment of the European Court of Justice dated 5 February 2015
A cook was hired under a permanent contract to support entrepreneurs. Before the end of the trial period (exceptionally lengthy for the specific type of contract, which is regulated by Law 3/2012 of 6 July on measures to reform the labour market) the employer terminated the employment contract, alleging that the employee had not passed the trial period.
Under the preliminary ruling, the main question brought before the European Court of Justice (the “ECJ”) was whether the one-year trial period was contrary to EU law. In particular, this request for a preliminary ruling concerns the interpretation of Article 30 of the Charter of Fundamental Rights of the European Union (the “Charter”) and Council Directive 1990/70/EC (the “Directive”) on the framework agreement of fixed-term work executed by ETUC, UNICE and CEEP. The issue at stake was whether the one-year trial period could be excluded from the scope of collective bargaining agreements.
The ECJ held that the situation did not fall within the scope of EU law. First, the Directive only applies to fixed-term employment contracts, and the cook’s contract was a permanent contract. Second, and as a consequence of the first point, the Charter only applies to circumstances covered by EU law. As that is not the case at hand, the Charter cannot be applied.
Therefore, the ECJ lacks jurisdiction to answer the preliminary ruling.
4. INTERPRETATION OF DIRECTIVE 2001/23/EC ON SAFEGUARDING EMPLOYEES’ RIGHTS IN TRANSFERS OF UNDERTAKINGS
Judgment of the Court of Justice of the European Union dated 28 March 2015
A recent judgment of the Court of Justice of the European Union has interpreted Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.
The judgment held that, in the context of a transfer of undertaking, if the transferor company is insolvent and being administered by a competent body, and the laws of its Member State so permit, Directive 2001/23/EC does not preclude the possibility that the transferor’s debts at the time of the transfer are not passed on to the transferee (including social security debts), provided that the employees are guaranteed a minimum level of protection equivalent to that established in Directive 80/987. Nor is there anything to prevent the laws of a Member State from establishing that an insolvent transferor’s debts are passed on to a transferee.
The judgment also held that Directive 2001/23/EC does not establish any obligation to pass on debts related to contracts or labour relations that ended prior to the transfer, but again, this does not mean that national laws cannot provide for these debts to be passed on to a transferee.
5. STANDING AND MINIMUM WAGE OF EMPLOYEES OF A MEMBER STATE ASSIGNED TO ANOTHER MEMBER STATE
Judgment of the Court of Justice of the European Union dated 12 February 2015
The preliminary questions posed by the first instance court of Satakunta related to the interpretation of Articles 56 and 57 of the Treaty on the Functioning of the European Union (the “TFEU”) in connection with Directive 96/71/EC and the Charter of Fundamental Rights of the European Union (the “Charter”). The six questions addressed two main issues: (i) the standing of the trade union representing the employees assigned to Finland and (ii) whether the salary items established in the Finnish collective bargaining agreement were to be taken account to calculate the minimum wage regulated under Article 3 of Directive 96/71/EC.
The first question posed by the first instance court related to the discrepancy between Finnish and Polish procedure law on standing. Under Finnish law, the trade union’s standing is based on the assignment of the employees’ wage credits. Polish law does not permit that assignment.
The ECJ stated that, pursuant to Directive 96/71/EC, standing is determined by domestic laws (lex fori), therefore the trade union had standing to claim the wage credits of the employees assigned to Finland.
The second question addressed the interpretation of Article 3 of Directive 96/71/EC establishing the obligation of the host Member State to guarantee the minimum working conditions, including the minimum wage, which is calculated pursuant to the domestic law of the host Member State.
The trade union sought the application of the Finnish collective bargaining agreement, which included specific salary items that were not paid to the employees. The first instance court requested that the ECJ rule on whether or not the salary items must be taken into account to calculate the minimum wage of the employees assigned to Finland pursuant to Directive 96/71/EC and Articles 56 and 57 of the TFEU.
The ECJ analysed each salary item, ruling as follows:
The minimum wage must be calculated pursuant to the laws of the host Member State, provided they are binding and transparent. In this case, the Finnish first instance court will decide whether or not the calculation of the minimum hourly wage or wage by piecework based on the classification of the employees category established by the collective bargaining agreement are binding and transparent and, therefore, applicable.
The daily compensation for being on assignment established in the collective bargaining agreement must be taken into account to calculate the minimum wage as it is a fixed daily amount and not a reimbursement for maintenance or travel expenses.
The daily travel supplement established in the collective bargaining agreement (for trips between the place of residence and the workplace exceeding one hour) are not a reimbursement for travel expenses and, therefore, must be taken into account to calculate the minimum wage.
Accommodation payments and luncheon vouchers are reimbursements for maintenance and travel expenses and therefore, pursuant to Article 3 (7) of Directive 97/71/EC, they must be excluded from calculations of the minimum wage.
Holiday payments must be taken into account in the calculations as they are compensation for services rendered by employees. Holidays must comply with the minimum period established in Directive 2003/88, i.e. four weeks.
6. TERMINATION OF AN EMPLOYMENT CONTRACT FOR A SPECIFIC PROJECT OR SERVICE DUE TO THE MODIFICATION OR REDUCTION OF A CONTRACTOR’S AGREEMENT DOES NOT FALL UNDER THE SCOPE OF ARTICLE 49 (1)(C) OF THE STATUTE OF WORKERS
Judgment of the Supreme Court dated 17 September 2014
In an appeal for unification of doctrine, the Supreme Court (“SC”) held that the dismissal of a temporary employee hired specifically to provide air conditioning maintenance services in a building of the administration was unlawful.
The company dismissed the employee as a result of the termination of the air conditioning maintenance service pursuant to article 49(1)(c) of the Statute of Workers (“SW”).
The company’s decision was based on the reduction of its activities due to the modification of the contractor agreement. Specifically, the air conditioning maintenance services carried out by the employee were awarded to a temporary business association (UTE in Spanish) rather than to the employer company.
The SC ratified its previous decisions on the extinction of employment contracts for specific projects or services within the framework of intercompany contractor relationships. In this regard, an employer is not entitled to terminate employment contracts for specific projects or services due to a reduction or modification of the contractor agreement as the company continues to be a contractor. The SC considered that article 49(1)(c) of the SW should not have been applied as the agreed reduction of services did not imply the termination of the project or service to which the temporary employment relationship of the employee is linked.
However, as a result of the reduction in services, the company could have dismissed the employee for objective reasons based on production needs set out in article 52(c) of the SW, which establishes further guarantees and a higher severance payment for workers.
7. THE SUPREME COURT ACCEPTS THE PRESUMPTION OF THE EXISTENCE OF OBJECTIVE REASONS IN SUSPENSION OF WORKING HOURS PROCEEDINGS WHEN CONSULTATION PERIOD ENDS IN AGREEMENT
Judgment of the Labour Chamber of the Supreme Court dated 15 September 2014
The Trade Union of Information Technology and Consulting ("STIC") issued a collective dispute claim against the suspension of the working hours proceedings that were based on production and organisational grounds. The National Court: (i) rejected the plea asserting the lack of standing of the trade union (Confederación General del Trabajo, (“CGT”) because it was sufficiently established in the area relating to the dispute, despite the fact that it only had representatives in two workplaces; (ii) rejected the time limit, as the date of commencement must begin when the company communicates the decision to the employee representatives; (iii) rejected the argument that the negotiating committee was invalidly constituted because it did not hinder the final agreement being reached; (iv) considered that the CGT had no claim; and (v) concluded that the existence of the reasons stated by the company were presumed because the consultation period had ended in agreement.
The Supreme Court dismissed the appeal and upheld the findings of the National Court.
8. A NULL COLLECTIVE REDUNDANCY OWING TO A LACK OF DOCUMENTATION AND GOOD FAITH NEGOTIATIONS
Judgment of High Court of Justice of Aragon dated 26 January 2015
The judgment followed a request by a works council that a collective redundancy carried out by three companies be declared null or, subsidiarily, unfair. The consultation period for the collective redundancy ended without agreement.
The works council claimed that the three companies formed part of a group of companies for labour purposes and should therefore be severally liable. The High Court of Justice (“HCJ”) concluded that there was no proof that one of the three companies was severally liable given that it did not operate with the other two as a single unit, their assets were not mixed, there was no fraudulent use of the legal entity or an unlawful use of a single management body between that company and the other two. In addition, the company had no employees and the fact that it gave a participation loan to one of the other companies did not give rise to any mixed assets. The HCJ highlighted that corporate control is not sufficient to declare that a dominant entity is severally liable for labour purposes. As a result the HCJ held that the company was not liable.
On the other hand, the works council claimed that the collective redundancy was null as there was no consultation period and no mandatory documentation had been submitted. The works council alleged a breach of the obligation to negotiate in good faith as the company took an inflexible stance by requiring the outsourcing of certain services such as gardening and laundry services, thus casting aside the possibility of employees being relocated to contractor companies. The works council also alleged that the company had failed to submit mandatory documentation at the same time as communicating the opening of the consultation period.
The company did not provide financial documentation on all companies of the group or the documentation proving the economic causes that quantified the costs saved by outsourcing, the costs of outsourcing or the improvements that it would give rise to from a management point of view. Moreover, the company did not provide the technical report justifying the organisational cause. The HCJ held that the collective redundancy was null due to the failure to provide the mandatory documentation, particularly the technical report.
9. DISMISSAL OF EMPLOYEE CAUGHT CELEBRATING DURING FOOTBALL TOURNAMENT WHILE ON SICK LEAVE HELD TO BE FAIR
Judgment of the High Court of Justice of Murcia dated 18 December 2014
The High Court of Justice of Murcia has confirmed a first instance judgment that considered fair the dismissal of an employee who, while on sick leave for an anxiety-depressive disorder, was caught celebrating the Spanish national team’s participation in the UEFA European Championship.
The employee went on sick leave on 27 June 2012 and on 1 July visited a food fair in Cartagena, where he drank alcohol. While there he watched one of Spain’s games wearing the Spanish team shirt and with his face painted with the team’s colours. Two days later, he decorated his car with the team’s colours, loaded it with a portable fridge, chairs and an umbrella and went to the Manga del Mar Menor to spend the day. He was fired on 1 August 2012 on disciplinary grounds. The employee had already been sanctioned with a suspension of employment and salary in March and received a written warning in June.
Based on a medical report, the High Court held that consuming alcohol was incompatible with the treatment he should have been receiving and that his behaviour over the period in question indicated that he was no longer suffering the symptoms of his condition and, as such, he had breached his obligation to return to work.
Having found that there was a breach of contractual good faith and that the company had lost faith in the employee, the High Court concluded that the infringement was serious, irrespective of whether or not the company suffered damage or the employee profited from his actions. Furthermore, the sanction did not require adjustment according to the circumstances of the infringement (doctrina gradualista) because the employee’s actions were blameworthy.
10. DISCIPLINARY DISMISSAL PERMISSIBLE DURING COLLECTIVE DISMISSAL PROCEEDINGS
Judgment of the High Court of Justice of Madrid dated 7 November 2014
The High Court of Justice of Madrid (the “HCJ”) considered the case of an employee who was dismissed on disciplinary grounds during a collective dismissal proceeding. The trial judge considered that the disciplinary dismissal was based on fraud on the law, and therefore declared it void and ordered the company to pay a fine of EUR 6,000 for acting in bad faith.
The HCJ, despite ruling that the disciplinary dismissal was unlawful in this case, concluded that the corresponding legal consequence is an unfair dismissal as opposed to a null dismissal, as both the Statute of Workers and Labour Procedure Law provide definitive lists of nullity causes for dismissals.
The HCJ considered that the reasoning of the trial judge in reaching the conclusion that the dismissal should be voided based on the company’s unlawful actions was flawed. This was because the fact that the company was simultaneously carrying out a collective dismissal did not prevent it from imposing disciplinary measures in its capacity as the employer.
Accordingly, the HCJ lifted the fine imposed on the company, as it had not been demonstrated that the company had acted in bad faith or recklessly, but had not followed the correct legal procedure to impose the fine.
11. ABSENCE OF INTENTION OF WRONGDOING OF EMPLOYEE WITH PERSONALITY DISORDER
Decision of the High Court of Justice of Madrid dated 5 November 2014
An employee of a lottery retailer sold lottery tickets that he himself had previously marked as void. Some of the marked tickets were winning tickets, and the ticketholders who were not entitled to claim a prize for the voided tickets claimed against the employer (the lottery retailer). As a consequence, the employee was dismissed.
The fact that the employee was suffering from a Cluster B personality disorder (antisocial personality disorder), which impacts sufferers’ ability to act of their own free will, was particularly relevant. The court ruled that the dismissal was unfair as the employee had no intention of wrongdoing, which is a necessary element to attribute responsibility to an employee pursuant to article 54.1 of the Statute of Workers.