COVID-19 Spain: "State of alarm" and temporary reduction of workforce

As per the regulations passed on 14 March (Royal Decree 463/2020), the "state of alarm" implies among other measures the following:

• General order to suspend and close retail commerce, with some exceptions such as food, pharmacies or communication stores.
• General ban on citizens' circulation rights all over the country. However, employees are entitled to circulate to work, as one of the exceptions to said general ban.

For further information, please consult our webpage with daily-updated information about the COVID-19 situation.

Temporary reduction of workforce

Spanish labour laws allow the temporary suspension of work contracts or the reduction of the working time. This should be implemented by carrying out a temporary employment regulation file ("ERTE") according to articles 47 and 51.7 of the Workers Statute ("WS"). Those business that are directly impacted by the order to close (i.e. those expressly mentioned in Royal-Decree 463/2020), will be able to carry out an expedite suspension process based on force majeure.

For those who are not impacted, it is necessary to carry out a prior consultation period and prove the existence of objective causes.

The main differences of both processes for the suspension of employment /reduction of working hours are:

It is expected that new measures on the procedures to carry out temporary adjustments of employment will be announced after the Government Council on 17 March 2020.

FAQ

1. Does the company have to bear any social costs during the suspension of the employment contract or working time reduction?

During the suspension/working time reduction period, the obligation to pay salaries disappears, as well as employees' obligation to render services. In case of a prior consultation period with the workers' representatives to approve the temporary measures, it is possible to agree that the company will pay some partial wages to mitigate the effects of the loss of salary during the suspension.

However, the company must pay social security contributions for the affected employees during the period of the suspension and/or working time reduction unless the government authorises an extraordinary exemption – it is probable that this measure is announced next 17 March.

2. Are the employees entitled to any benefit?

Yes, during the suspension period or working time reduction, the employees can access unemployment benefits (partial unemployment proportional to working time reduction, or total unemployment in case of suspension), as long as they meet the requirements to be entitled to said benefit.

In this sense, the employee must have worked and paid unemployment contributions for at least 360 days within the six years prior to access the unemployment benefit. In that case, the employee is entitled to unemployment for 120 days. If the employee has not contributed for period below 360 days, he/she may be entitled to an unemployment subsidy depending on the annual income.

As a general rule, in order to request the unemployment benefit, the company should provide the employee with: (i) a company's certificate detailing the temporary suspension or working time reduction and, (ii) the Labour Authority resolution. The employee should submit the unemployment benefit before the Spanish Public Employment Service telematically in the following official webpage. That said, some regional authorities (e.g. Madrid) have already approved expedited procedures to grant unemployment benefits which do not require the employees' intervention.

It is possible that the Government announces next on 17 March specific measures regarding the requirements to access and request unemployment benefits in case of ERTE due to the COVID-19 situation.

3. What is the maximum duration of the suspension of the contract or working time reduction?

The duration of the ERTE will be in principle the one agreed during the consultation period or the one determined by the Labour Authority.
The law does not establish a specific time limit and, in fact, it is possible to file and chain different ERTEs, as long as there is a justification and all the legal requirements are met.

4. Can the company somehow reduce the deadlines of the above mentioned procedures?

The company cannot reduce the timelines provided for ERTE due to force majeure, apart from to accelerate the preparation of the relevant documentation to be filed before the Labour Authority.

However, in case of ERTE due to objective causes, the company can negotiate with the employees' representatives in order to shorten the deadlines provided for the process because of the urgency of the COVID-19 situation (e.g. two days negotiation instead of 15 days).

5. Is the employee entitled to any severance?

No, the employee is not entitled to any severance since the employment contract is not terminated, but temporarily/partially suspended.
Notwithstanding the above, the employees can file collective or individual claims against the suspension or working time reduction measure. If the Court deems said measure unjustified the company will have to reinstate employees' previous conditions and pay damages.