Spain: Two judgements on the labour reform of 2012

30 March 2015

Miguel Pastur

In the last few months both the Spanish Constitutional Court and the Supreme Court have issued two relevant judgements on the labour reform carried out in 2012.

With its ruling dated 22 January 2015, the Spanish Constitutional Court deemed several new articles of the Spanish Workers' Act compliant with the Spanish Constitution.

On one hand, the Court confirmed that:

  • The probationary period of 1 year provided for in contracts to support entrepreneurs is valid and enforceable, as this measure allows companies to keep hiring in the context of a  financial crisis; and
  • Procedural salaries (those accrued between the termination date and the date of the court ruling qualifying a termination as unfair or wrongful) will only apply in cases of reinstatement (be that reinstatement mandatory or chosen by the employer).

On the other hand, the Court ruled for the first time on the following topics:

  • The labour reform of 2012 authorized companies to unilaterally amend certain collective working conditions (excluding those agreed in a Collective Bargaining Agreement ("CBA")), provided that special financial and organizational circumstances were met. The Constitutional Court now confirms that these new regulations do not breach the limits set forth by the Spanish Constitution, as they are adequate and appropriate. It also specifies that the procedure to carry out such amendment of collective working conditions is different from that regulated for the amendment of working conditions agreed in a CBA.
  • After the approval of the labour reform, the appeal against it filed by some political parties stated that with these new regulations the required grounds for collective redundancies were so vague and generic that employees may be dismissed without due reason.

The Court points out that all collective redundancies still need to be formally based on financial, technical, production or organizational grounds as established by the Spanish Workers' Act, and in any case, they are subject to judicial control.

With its ruling dated 22 December 2014, the Spanish Supreme Court considered that despite the loss of enforceability of a CBA, working conditions regulated therein remain in force as they become integrated into the individual employment contracts.

The labour reform approved in 2012, set forth that CBAs would keep their validity for just one additional year after the expiry of their original term, as opposed to prior legislation where CBAs would keep their enforceability until a new one was agreed between the employer and the workers' representation.

In this specific case, the company denounced the elapse of the validity of the applicable CBA in order to negotiate a new CBA with the workers' representation.

A year elapsed and the CBA ceased to be enforceable as per the new laws. Hence, in July 2013 the company ceased to apply the prior CBA, and started to apply the general regulations of the Spanish Workers' Act, which were less favourable for the employees.

In a decision that surprised many, the Spanish Supreme Court ruled that:

  • Essential labour issues are provided for by CBAs, as the Statute of Workers regulates them insufficiently.
  • Working conditions are established in employment contracts and are gradually adjusting to labour law and CBAs' evolution.
  • In particular, CBA's working conditions are integrated into the employment contract from the beginning of the employment relationship. Therefore, the loss of validity of the applicable CBA does not alter such working conditions.