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Termination of employment contracts4

4.1 Dismissals

An employment contract may be terminated for a number of reasons which normally do not give rise to any dispute, such as mutual agreement, expiration of the contractual term, death or retirement of the employee or of the employer, and so on.

In the event of termination by the employer, there are three main grounds for dismissal of an employee:

  • Collective layoff
  • Objective grounds
  • Disciplinary action

The following Table 4 summarizes the grounds and main features of the various types of dismissal.

Table 4

VARIOUS TYPES OF DISMISSAL

DISMISSAL LEGAL GROUNDS  OBSERVATIONS
Collective layoff Grounds:

Economic, technical, organizational or production-related grounds, whenever these affect, in a 90-day period, at least:

  • The entire payroll, if more than 5 workers are affected and the activity of the company ceases entirely;
  • 10 workers at companies with less than 100 employees;
  • 10% of the employees at companies with between 100 and 300 workers;
  • More than 30 workers, at companies with 300 or more employees.

According to the interpretation made by the Supreme Court, following the doctrine of the Court of Justice of the Europe Union, the above thresholds refer to the company as a whole and to each work center with more than 20 employees.

Definition of legal grounds:

  • Economic: where a negative economic situation transpires from the results of the company, in cases such as current or expected losses, or a persistent decline in ordinary revenues or sales. In all cases, the decline will be deemed persistent if for three consecutive quarters the level of ordinary revenues or sales in each quarter is lower than the figure recorded in the same quarter of the preceding year.
  • Technical: where there are changes in the methods or instruments of production, among others.
  • Organizational: where there are changes in the personnel working methods and systems or in the manner of organizing production, among others.
  • Production-related: where there are changes in the demand for the products or services that the company intends to place on the market, among others.
  • Collective layoffs must follow the legal procedure established under article 51 of the Workers’ Statute. This procedure involves a period of negotiation with the workers’ representatives of no more than 30 calendar days, or 15 days at companies with less than fifty employees, and the outcome and final decision must be notified to the labor authorities.
  • The employer must give 7 or 15 days’ prior notice of its intention to start a collective layoff procedure, depending if the communication is issued to the workers’ representatives or the own employees (in case there are no workers’ representatives).
  • After notifying the decision to the workers’ representatives, the employer would be entitled to individually notify the workers concerned of the layoffs. At least 30 days must elapse between the date on which the commencement of the consultation period is notified to the authorities and the effective date of dismissal.
  • If the collective layoff affects more than 50 workers (except at companies subject to insolvency proceedings), the company must offer the workers concerned an outplacement plan through an authorized outplacement company, of at least six months’ duration, which must include professional guidance and training measures, personalized assistance and an active job search.
  • The statutory severance consists of 20 days’ salary per year worked, up to a maximum of 12 months’ salary, or more if so agreed.
  • In general (except at companies subject to insolvency proceedings), when workers aged 55 or over are affected, special agreements must be signed with the social security authorities.
  • In some cases, if workers affected in the collective layoff are aged 50 or over, an economic contribution must be made to the Public Treasury.

Objective grounds

  • Ineptitude of the worker coming to light or not foreseen until after being hired by the company.
  • Inability of the worker to adapt to changes made to his job. Before dismissing the worker, employers must offer the worker a training course to facilitate adaptation to such changes. Workers cannot be dismissed until a minimum period of two months has elapsed since the changes were made or the training was completed.
  • In case of economic, technical, organizational or production-related reasons (see definition of the reasons under collective layoff).
  • Intermittent absences from work, even where justified, accounting for 20% of the working hours in 2 consecutive months, provided that the total absences in the preceding 12 months accounted for 5% of working hours or 25% in any 4 months out of a 12-month period.
  • The employer must serve at least 15 days’ advance notice in writing on the worker (or pay the corresponding salary).
  • Severance (20 days’ salary per year worked, up to a maximum of 12 months’ salary) must be made available to the worker at the same time the written notice of dismissal is served.

Disciplinary action

Serious and culpable breach by the worker:

  • Repeated and unjustified absenteeism.
  • Insubordination or disobedience.
  • Physical or verbal abuse towards the employer.
  • Breach of contractual good faith or abuse of trust.
  • Willful reduction in job performance.
  • Habitual drug or alcohol abuse which adversely affects job performance.
  • Harassment by reason of race or ethnic origin, religion or beliefs, disability, age or sexual orientation, and sexual or gender harassment towards the employer or persons working at the company.
  • The employer must serve written notice of disciplinary dismissal, stating the grounds and the effective date of dismissal.
  • If a workers’ representative or labor union delegate is dismissed, a disciplinary procedure in which all parties are heard (expediente contradictorio) must be followed. If the worker is a labor union member, the union delegates should be granted a hearing. These safeguards may be increased by collective agreement.
  • If these formalities are not met, a further dismissal may be made in a period of twenty days by paying the employee the salary accrued in the meantime, with effect as of the date of the new notice.

4.2 Classification of the dismissal

A worker dismissed on any objective or disciplinary ground may appeal the decision made by the employer before the labor courts, although a conciliation hearing must first be held between the worker and the employer to attempt to reach an agreement. This conciliation hearing is held before an administrative mediation, arbitration and conciliation body.

The dismissal will be classified in one of the three following categories: justified, unjustified or null (Table 5).

Table 5

CLASSIFICATION EVENTS EFFECTS

Justified

Conforming to law.

Disciplinary dismissal: validation of the dismissal, meaning the worker is not entitled to severance pay.
Objective dismissal: payment of 20 days’ salary per year worked, up to a limit of 12 months’ salary.

Unjustified

No legal ground exists for the dismissal or the procedure
followed is incorrect.

The employer may choose between:

  • reinstating the worker, in which case the worker will be entitled to back pay accrued from the date of dismissal until the notification of the decision or until the worker found a new job, if this occurred prior to the decision; or
  • terminating the contract, by paying severance of 33 days’ salary per year worked, up to a maximum of 24 months’ salary (for contracts formalized before February 12, 2012, severance will be calculated at 45 days’ salary per year of service for the time worked up to such date and at 33 days’ salary per year of service for time worked thereafter, case in which the severance can be no more than 720 days of salary, unless the severance corresponding to the period prior to February 12, 2012 results in an amount of days above, case in which this shall be the maximum severance, notwithstanding the 42 monthly installments cap.

If the dismissed worker is a workers’ representative or a union delegate, the choice will rest with the worker and back pay will accrue in all cases.

Null
  • The alleged ground is a form of discrimination.
  • It implies a violation of fundamental rights.
  • It affects pregnant workers, during the period of holding in abeyance of the contract due to maternity or paternity, risk during pregnancy, adoption, custody for adoption or fostering, reduction in working hours to care for children or relatives or for breastfeeding, and, in certain circumstances, female workers who have been the victims of gender violence. It also affects workers who have gone back to work after the period of holding in abeyance of the contract due to maternity, adoption or custody for adoption or fostering, or paternity has ended, provided that no more than nine months have elapsed since the date of birth, adoption, custody for adoption or fostering of the child.
  • Immediate reinstatement of the worker.
  • Payment of salaries not received.

4    http://www.empleo.gob.es/index.htm