In a recent judgment by the Labour Division of the Supreme Court,(1) the Court found that if an employment contract was suspended due to a temporary collective redundancy (ERTE) during the covid-19 pandemic, overtime cannot be estimated based on the average overtime worked for the full year.
In other words, the periods during which the contract was suspended due to the ERTE must not be used to estimate the annual average values when calculating overtime and an employee's severance package.
The case concerns an employee who, after having their contract suspended on 16 April 2020 for a period of three months, was dismissed on 1 July 2020.
The employee challenged the termination, as they considered it to be unjustified. The dismissal was declared unfair by the first-instance court, and the Labour Court accepted the complainant's request to consider overtime in the employee's severance package for the time between 16 May 2019 and 16 April 2020. In other words, the timeframe to estimate overtime was claimed to be 12 months prior to when the contract was suspended, not starting when the employee was dismissed.
The company appealed the decision, and the High Court of Justice of Galicia upheld the unfairness of the dismissal, but only took into account the hours of overtime worked between 1 July 2019 and 1 July 2020.
Disagreeing with the reasoning of the High Court of Justice of Galicia, the employee filed an extraordinary appeal for the unification of doctrine before the Supreme Court.
The Supreme Court, after recalling the Labour Division's case law regarding intermittent and/or other salary components included in the calculation of severance packages, concluded that such items must be considered for the full year, taking the year prior to the date of the dismissal as a reference.
However, the Court pointed out that the periods during which the contract was suspended without pay could not be considered when calculating the aggregate wage.
Therefore, the Supreme Court argued that the correct way to determine the overtime due would have been to:
- take into account the year immediately prior to the date of the dismissal (from 1 July 2019 to 1 July 2020);
- calculate the months or days in which the contract was in force from the year in question (in this case, nine-and-a-half months or 229 days);
- estimate the average daily wage based on the days of active employment (through the annual salary – that is, by multiplying 229 by 365 days); and
- add to the result the amounts due in overtime for those 229 days.
In light of the above, the Supreme Court upheld the appeal put forward by the employee and annulled the judgement delivered by the High Court of Justice of Galicia, thus upholding the ruling handed down by the Labour Court of Vigo (No.1).
For further information on this topic please contact Elena Esparza or Cristina Ridruejo at CMS Albiñana & Suarez de Lezo by telephone (+34 91 451 9300) or email ([email protected] and [email protected]). The CMS Albiñana & Suarez de Lezo website can be accessed at www.cms.law.
Endnotes
(1) No. 638/2022 of 7 July (Rec 2604/2021) [ECLI: ES:TS:2022:3104].