Employment Update, Spain - May 2008

06 May 2008

Maria Eugenia De La Cera, Daniel Cifuentes

Individual termination by the employee alleging the employer’s breach of its contractual obligations. Right to claim an additional compensation for moral damages. Judgmentof the Labour Chamber of the Supreme Court of 20 September 2007.

The person in charge (and only worker) of a local library was a victim of sexual aggressions at her workplace which caused her to take sick leave for stress, lasting six days. Although the council initially decided to employ a safety officer as a security measure, it withdrew it after a few months. Days later the librarian suffered another physical aggression which causes her another sick leave for stress.

The employee sought the termination of her employment as a result of the council’s infringement of its contractual obligation to diligently protect her safety and security at work. Moreover, she claimed compensation for the moral damages suffered.

In view of this situation, the Supreme Court ruled that the local council omitted the required risk assessment and the corresponding measures to protect the employee, which go beyond the obligations expressly contained in the applicable legislation, resulting in a breach of the librarian’s constitutional rights to her physical integrity and health.

Consequently, the Chamber ratifies its most recent jurisprudence and declares the employee’s right to obtain the statutory compensation for her employment termination (which for these cases is equivalent to that of unfair dismissal, i.e. 45 days of salary per year worked with a maximum limit of 42 monthly payments) as well as an additional amount for the psychological consequences effectively suffered, even if these two damages are from only one infringement.

What this means for you

A company’s obligation to protect their employees’ health and safety at work includes the mere duty to observe the formal requirements legally established and also the responsibility to actively prevent those risks inherent to each specific workplace. Furthermore, if the damages arising as a result of an infringement are adequately evidenced, the employees will be entitled to an additional compensation to that of the termination of the employment.

Managing director’s remuneration. Validity of remuneration agreed between the company and the managing director if the company only has one shareholder. Judgment of the Civil Chamber of the Supreme Court of 31 October 2007.

Pursuant to Spanish legislation, the managing director’s relationship with their companies –(as members of the governing board) is of commercial nature and, hence, is ruled by the Commercial Code, which does not provide any protection in case of termination. As a result, if a general meeting of the company removes a managing director, he/she would not be entitled to receive any indemnity, unless this is expressly contained in the company by-laws. In fact, one of the basic principles of the relationship between the company and its directors is that such relationship may be freely terminated by either party.

In light of the above, the Supreme Court had previously declared null and void any compensation for termination of the relationship between the managing director and the board of directors which were not provided in the company’s by-laws.

However, in the case at hand, given that the company has a sole shareholder, the Civil Chamber rules that since the general meeting and the board of directors represent exactly the same sole interest, the fact that this second body agreed such compensation for the managing director cannot be considered a “surprise” to the shareholder.

What this means for you

Traditional case law has now been shaded and, hence, ad hoc agreements on compensation in case of termination of a managing director relationship may be declared valid if they do not infringe shareholder’s legitimate interests.

Annual leave. Compatibility with sick leave. Judgment of the Labour Chamber of the Supreme Court of 20 September 2007.

Several employees are on sick leave during the period agreed at the beginning of the calendar year for their annual leave.

When asked about the possibility for employees to enjoy their annual leave after their sick leave but within the same calendar year, the Supreme Court rules against it alleging that: (i) the Statute of Workers does not expressly provide so; (ii) during sick leave employees can also have the opportunity to develop their personal interests, disconnect from work and enjoy their hobbies; (iii) sick leave also allows employees to recuperate from the fatigue accumulated; and (iv) the European Court of Justice’s case law does not apply to the case at hand since that was ruled for maternity leaves and, hence, inspired by the special protection women need to level their position with respect to men in our society.

What this means for you

Companies that fix holiday turns at the beginning of the calendar year will not need to reorganise such turns since employees who are on sick leave during the holiday period they had initially agreed will not be entitled to enjoy the days that both situations overlap at a later date.