November 2006

NEWSLETTER


The information contained in this Newsletter is of a general nature and does not constitute legal advice



LABOUR LAW

 


Early retirement at the age of 64 years old preceded by part-time retirement with a hand-over contract. The right to retire. The contracting irregularities between a company and the substitute employee do not affect the employee taking part-time retirement

The judgment of the Labour Chamber of the Supreme Court dated 22 September 2006 upholds the employee’s right to early retirement at 64 years of age. The employee had previously taken partial retirement and as a consequence the company entered into a hand-over contract with another worker who later voluntarily resigned from the company so that she could become contracted under a work-experience contract in order to allow the claimant’s early retirement. (More information)

Overtime. Remuneration for overtime cannot be compensated or absorbed by any of the employee’s different payments. Overtime cannot be deemed compensated with the payment of a “supplement” and a “management bonus”

The judgment of the Labour Chamber of the Supreme Court of 24 July 2006 establishes that the payment of a “supplement” and “management bonus” do not compensate the overtime performed by the employee. The judgment states that the payment of overtime cannot be compensated or absorbed by any of the employee’s different payments, although this does not prevent individual or collective agreements being agreed for the payment of overtime. (More information)

Accident at work. Surcharge on Social Security benefits due to the absence of security measures. The expiration date of the administrative proceedings is not caused by the fact that the resolution is issued once the limitation period has passed

The judgment of the Labour Chamber of the Supreme Court of 9 May 2006, holds that the term to bring a claim established in Article 14 of the Ministerial Order of 18 January 1996, which applies and develops Royal Decree 1300/1995 of 21 July, which develops, as regards Social Security temporary disabilities, Law 42/1994 on tax, administrative and labour measures, is not infringed insofar as, once the express resolution is decided, even at a later stage, the interested party is entitled to bring proceedings before the courts. (More information)

Challenging a Collective Bargaining Agreement. The limitation period is not subject to Article 59 of the Statute of the Workers. The challenge can be carried out during the validity of the Collective Bargaining Agreement

The judgment of the Labour Chamber of the Supreme Court of 19 September 2006 holds that the limitation period established in Article 59 of the Statute of the Workers (one year) cannot be considered in order to challenge a Collective Bargaining Agreement, given that there are no identical reasons according to Article 4.1 of Spanish Civil Code to apply by analogy the mentioned provision, as the action does not directly derive from the employment contract. (More information)

Termination based on objective grounds. Insufficient indemnity provided to the employees as a result of omitting the period they were hired under a work-experience contract. There is no excusable error

The judgment of the Labour Chamber of the Supreme Court of 11 October 2006 holds that no excusable error exists to justify the insufficient indemnity for objective dismissal paid to several employees, due to the fact that such indemnity omitted the period during which the mentioned employees were hired under a work-experience contract. Thus, the termination of the contracts is declared null and void. (More information)

Unfair dismissal. Calculation of the indemnity. The recognized length of service must be understood as the period of rendered services during the performance of the employment contract, unless it is agreed that it must take place for all purposes, including the indemnity

The judgment of the Labour Chamber of the Supreme Court of 13 November 2006 holds that, in order to calculate the indemnity for dismissal, the length of service fixed for an employee in the employment contract must not be confused with the period during which the services have been rendered during the performance of the employment contract. The reason being that the latter will be relevant to calculate the indemnity for unfair dismissal, unless it has been agreed that the length of service shall be used for all purposes, including the indemnity calculation. Moreover the Supreme Court states that the deposit of the indemnity prevents the accrual of back pay awarded after dismissal appeals when an excusable error takes place on the employer’s side. (More information)

Contracting. Security sector. Succession of undertakings with transfer of employees

The judgment of the Labour Chamber of the Supreme Court of 20 September 2006, which considers the succession of contractors of security services, holds that the breach of the subrogation clause of the applicable Collective Bargaining Agreement does not oblige the new contractor to take on the employees assigned to the contracted services. The Supreme Court adds that this circumstance must not negatively affect the employees’ rights, who are entitled to chose between remaining with the outgoing undertaking or joining the workforce of the new contractor. The outgoing undertaking must compensate the damages that the omission has generated both for the selected undertaking and the employees. (More information)

Illegal transfer of employees. Fraudulent hiring through temporary employment agencies. Joint and several liability of two temporary employment agencies and the assignee company for unfair dismissal

The judgment of the Labour Chamber of the Supreme Court of 4 July 2006 examines the consequences of an unfair dismissal within the context of a fraudulent assignment contract, holding the two temporary employment agencies and the assignee company involved jointly and severally liable for the unfair dismissal of a worker. (More information)


Early retirement at the age of 64 years old preceded by part-time retirement with a hand-over contract. The right to retire. The contracting irregularities between a company and the substitute employee do not affect the employee taking part-time retirement

Judgment of the Labour Chamber of the Supreme Court of 22 September 2006

This judgment analyses the appropriateness of the claimant’s request for early retirement at 64 years of age. In this case, the employee took partial retirement in 2002, which is when the company entered into a hand-over contract with an unemployed worker to gradually reduce the claimant’s working hours by 35.2%. Subsequently, the temporary employee voluntarily resigned for personal reasons, registering herself as unemployed. Barely one week after the termination of this employee’s relationship with the company, she was again hired by means of a one year work-experience contract so that the claimant could take early retirement.

Initially, the National Institute of Social Security (NISS) denied the early retirement by alleging that the hiring of the termporary employee did not comply with the provisions of Article 3 of Royal Decree 1194/1985 of 17 July on special retirement rules at 64 years of age and new contracts.

The first instance decision fully upheld the claim by stating that the parties’ will was only to replace the claimant, although the Supreme Court of Justice agreed with the position of the NISS by holding that a new employee was not hired, but instead the same person, who had already substituted the partially retired employee.

The Supreme Court of Justice declares that, in so far as the requirements of Royal Decree 1194/1985 are fulfilled for early retirement at 64 years of age, that is, the hiring of any employee registered as unemployed in any employment office under any category established in Article 15.1.b) of the Statute of the Workers (SW), formalized in writing and with a duration of at least one year, the aim of creating employment will be understood as fulfilled. Therefore, the Supreme Court of Justice states the fact that the temporary employee has previously worked in the same or in another company is irrelevant, provided that the possible irregularities of the contracting between the company and such employee do not affect the early retirement of the replaced employee, unless it can be proved that the replaced employee has taken part in such irregularities.

Overtime. Remuneration for overtime cannot be compensated or absorbed by any of the employee’s different payments. Overtime cannot be deemed compensated with the payment of a “supplement” and a “management bonus”

Judgment of the Labour Chamber of the Supreme Court of 24 July 2006

This judgment analyses the appropriateness of compensating overtime with the payment of a personal supplement and a management bonus.

The claim was upheld at first instance and the company was ordered to pay all overtime performed between the period October 2002 to September 2003, as well as a night-shift payment. The High Court of Justice of Madrid revoked the first instance judgment, acquitted the company of the claim  overtime and rejected the part of the appeal relating to the night-shift payment.

On the grounds of Article 34 (1) & (3) and Article 35 (1) & (2) of the SW, the Supreme Court states that the payment of overtime cannot be compensated and absorbed by any other of the employee’s different payments, insofar as the payment of overtime constitutes a separate salary concept which is paid specifically for extra hours worked besides the ordinary working time, and thus it is not homogeneous with any other remuneration.

Without prejudice to the above, the judgment points out that it is possible to individually or collectively agree on a comprehensive or generic payment, for the same or similar monthly amount in compensation for the employee’s extra working time. In this regard, in order to consider that such agreements on compensation for overtime exist, it must be proven in a clear and obvious manner that such agreement establishes a particular or special way of compensating overtime. For such purpose, the Supreme Court holds that, from a logical perspective, such agreements should be formalized in writing, as they are an exception to the general remuneration system and because of the separate nature of overtime which is not likely to be absorbed or compensated.

Thus, the ruling concludes that as the purpose of the “supplement” and “management bonus” concepts had not been proved as being compensation for the employee’s overtime, but instead as a special requested feature of his post, and taking into consideration that overtime is not compensated or absorbed, the first instance judgment must be upheld, and the employee must be paid for the claimed overtime.

Accident at work. Surcharge on Social Security benefits due to the absence of security measures. The expiration date of the administrative proceedings is not caused by the fact that the resolution is issued once the limitation period has passed

Judgment of the Labour Chamber of the Supreme Court of 9 October 2006

As a consequence of the accident at work, the Labour Inspectorate imposed a fine of €3,000 on the company for a serious infringement, as well as proposing a surcharge on Social Security benefits.

Subsequently, the NISS declared the company’s liability due to a lack of security measures and imposed a 30% surcharge on Social Security benefits. The company’s claims were rejected at first instance and subsequently on appeal.

The Supreme Court did not uphold the company’s claim that the administrative proceedings had expired because the 135 day period foreseen in Article 14 of the Ministerial Order of 18 January 1996 had passed. Such order applies and develops Royal Decree 1300/1995 of 21 July, which develops, as regards Social Security temporary disabilities, Law 42/1994 on tax, administrative and labour measures.

In this regard, Article 14(3) of Ministerial Order of 18 January 1996, establishes the effect of the expiration of the 135 day period without a resolution, which is the effect itself for the negative administrative silence by virtue of which, once the 135 day period has passed, the interested party’s request will be rejected, which allows the interested party to issue proceedings according to Article 71 of the Consolidated Text of the Labour Proceeding Rules.

The Supreme Court specifies that, bearing in mind that the proceedings were not started upon the request of the interested party but instead by the Labour Inspectorate ex-officio and that the proceedings may derive from the recognition or constitution of rights or other separate legal situations, the interested parties who have appeared in the proceedings and have had their claims disregarded by virtue of an administrative silence, will not necessarily see their actions prescribe as they will be entitled, even at a later stage, to bring proceedings before the courts, pursuant to Articles 44 and 92 of Law 30/92 on Public Administration Rules and Ordinary Administrative Proceedings.

Challenging a Collective Bargaining Agreement. The limitation period is not subject to Article 59 of the Statute of the Workers. The challenge can be carried out during the validity of the Collective Bargaining Agreement

Judgment of the Labour Chamber of the Supreme Court of 19 September 2006

The USO trade union requested that a paragraph and a section of the article regulating the personal supplement for length of service in a Collective Bargaining Agreement to be declared null and void.

The Central Court of Appeal upheld the limitation period motion alleged by the company’s trade union representatives, by declaring the claim challenging the collective bargaining agreement as having prescribed, pursuant to Article 59.1 SW, applicable by analogy (as more than one year had passed between the publication of the Collective Bargaining Agreement and the filing of the claim).

However, the Supreme Court does not agree with the decision of the Central Court of Appeal and upholds the appeal lodged by the trade union representative. The Supreme Court of Justice establishes that there is no identical reason (Article 4.1 of Spanish Civil Code) to apply by analogy Article 59 SW, due to the fact that the claim has nothing to do with the mentioned article of the SW. In this way, and regarding the principle of legal certainty invoked by the first instance judgment, the Supreme Court establishes that the collective bargaining agreement must adapt to the legal system during the entire period of its validity, bearing in mind that the rules arising from collective bargaining are foreseen for a limited time. For this reason, the principle of legal certainty will not be affected by the fact that a collective bargaining agreement can be challenged during its validity, instead, this results in a guarantee of its obligatory and permanent respect for the law and its adaptation to labour law.

Termination based on objective grounds. Insufficient indemnity provided to the employees as a result of omitting the period they were hired under a work-experience contract. There is no excusable error

Judgment of the Labour Chamber of the Supreme Court of 4 October 2006

This judgment analyses whether the termination of the contracts of several employees based on objective grounds can be deemed null and void due to the insufficient indemnity that was put at their disposal.

The judgment of the High Court of Justice of Catalonia rejected the appeal by the employees seeking the unification of case law before the Supreme Court.

The employees who were initially hired under a work-experience contract, were subsequently hired through several successive contracts for the performance of a work or service and, finally, were dismissed on objective grounds.

The judgment examines whether the indemnity put at the employees’ disposal is sufficient, bearing in mind that it omits the period they were hired under a work-experience contract. For this purpose, it analyses, in depth, the existence of an excusable error when such a period has been omitted for length of service purposes to calculate the amount of the indemnity.

The Supreme Court concludes that no excusable error exists, mainly due to the fact that the indemnity is considerably low and that there is no doubt regarding the period during which they were hired under a work-experience contract, as article 11.1 f) of the SW clearly sets out that if an employee continues in the company after his training contract has terminated, the duration of such contract will be considered for the purposes of calculating his length of service in the company. Therefore, the Supreme Court declares that the termination of the contracts is null and void and the company must immediately re-employ the affected employees.

Unfair dismissal. Calculation of the indemnity. The recognized length of service must be understood as the period of rendered services during the performance of the employment contract, unless it is agreed that it must take place for all purposes, including the indemnity

Judgment of the Labour Chamber of the Supreme Court of 13 November 2006

This judgment analyses two points. Firstly, and pursuant to the most unified judicial criterion, whether or not length of service taken into account in the employment contract is valid for the calculation of the indemnity for dismissal. Secondly, the Supreme Court addresses the correction of the amount allocated by the company as indemnity for unfair dismissal for the purposes of preventing the accrual of back pay awarded after the dismissal appeal hearing.

Regarding the first point, (the dismissed employee had a recognized length of service starting from 12 March 1997 although she began rendering services for the company on 6 May 2002). Following the joint theory in this regard, the Supreme Court establishes that when calculating the indemnity for unfair dismissal, the length of service recognized in the employment contract when the services are first rendered, which is derived from respecting the length of service obtained by virtue of previous employment contracts, must not be confused with the period during which the services have been rendered during the performance of the employment contract. The reason being that the latter will be relevant to calculate the indemnity for unfair dismissal, unless it has been agreed that the length of service shall be used for all purposes, including the indemnity calculation.

On the other hand, the Supreme Court points out that an insufficient deposit due to an excusable error must be distinguished between an insufficient deposit due to negligence or due to an inexcusable error. The first case results in the interruption in the accrual of back pay awarded after dismissal appeal hearings, resulting in the second case having the opposite effect.

Therefore, and as in this case there was a difficulty in calculating the indemnity as its determination was not clear at first or at second instance, it can be concluded that there are indications of an excusable error, without the company being held negligent when depositing the indemnity.

Contracting. Security sector. Succession of undertakings with transfer of employees

Judgment of the Labour Chamber of the Supreme Court of 20 September 2006

This judgment considers the consequences of the failure by an outgoing security services contractor to provide the new contractor with information concerning the former’s employees affected by the contract transfer.

The outgoing company dismissed its employees who were affected by its loss of the contract to provide services related to the deposit and removal of cash from a bank’s cash machines. The court of first instance held that this dismissal was unfair. Subsequently, the High Court of Justice of the Canary Islands partially upheld the appeal filed against this decision by the company.

On appeal, the Supreme Court holds that, given that the outgoing undertaking did not fulfil its obligation to provide the incoming undertaking with information (pursuant to the National Collective Bargaining Agreement on Security), the affected employees are entitled to maintain their employment relationship with the outgoing undertaking or request their inclusion in the workforce of the new contractor. In the opinion of the Supreme Court, the breach by the outgoing undertaking of its obligation to provide information should not affect the employees’ rights to the extent that they lose a right as a consequence of a breach that was not attributable to them or that affected the existence of the reason for the transfer of undertakings.

Consequently, the outgoing undertaking may not terminate the employment contracts of its employees and must compensate both them and the new contractor for the damage caused.

Illegal transfer of employees. Fraudulent hiring through temporary employment agencies. Joint and several liability of two temporary employment agencies and the assignee company for unfair dismissal

Judgment of the Labour Chamber of the Supreme Court of 4 July 2006

The employee in question was initially hired by a temporary employment agency, which in turn hired her to an assignee company. After several assignment contracts with the same assignee company, the employee entered into another employment contract with a different temporary employment agency in order to render her services to the same assignee company.

The latter temporary employment agency dismissed the employee. The dismissal was declared unfair at first instance and the assignee company and the two temporary employment agencies were held jointly and severally liable. On appeal, the High Court of Justice held that only the second temporary employment agency that hired the employee and subsequently dismissed her was liable.

This decision was then appealed to the Supreme Court, which, having considered the regulations on the illegal transfer of employees set out in article 43 of the SW and in Law 14/1994 of 1 June that regulates Temporary Employment Agencies, holds that section 2 of article 16 of the said Law (which attributes joint and several liability to the assignee company when there is a breach of articles 6 and 8 of the Law) constitutes an exception to the first section of Article 16, which establishes that the assignee company is secondarily liable for the salaries and Social Security obligations of the Temporary Employment Agency, and not an exception to article 43 of the Statute of Workers. In doing so, the Court confirms the wide nature of the reference to “obligations owed to employees” in article 43 of the Statute of Workers as opposed to the reference to “salary obligations” in article 16 of Law 14/1994.

Thus, the Supreme Court rejects the conclusion that the joint and several liability is limited to the salary and Social Security obligations, holding that it also extends to the consequences of the dismissal. The Supreme Court confirms the first instance judgment and holds the two temporary employment agencies and the assignee company jointly and severally liable for the consequences of the dismissal.


The information contained in this Newsletter is of a general nature and does not constitute legal advice