Until recently, industry-level collective bargaining agreements (CBAs) applied to virtually all companies in Spain automatically, simply by virtue of the industry in which the company operates.   Industry-level CBAs establish certain basic terms of employment such as minimum salary, salary increases, overtime, working hours, etc. Many industry-level CBAs are negotiated regionally in Spain and result in various regional CBAs applying to a single company in a given industry.

Aside from the evident administrative costs, from a compensation and benefits perspective, this system of industry-level CBAs has given rise to a number of typical problems, including that it: introduces an added layer of complexity in relation to the employer´s compensation and benefits policies; makes it difficult for an employer to implement its own company incentive system; leads to a lack of consistency in compensation and benefits across different countries or regions within the same company; and leads to difficulties in establishing company level working time and compensation due to the strict industry-level CBAs rules.

In response to these difficulties, companies in Spain may now be able to avoid the application of the industry-level CBA in the following three ways:

  • By negotiating their own company-level CBA. The Law provides that local company-level CBAs will prevail over industry-level agreements in a long list of matters (salary and benefits, overtime and work-shift compensation, working hours, distribution of working time, work shifts and annual vacation planning, job categories and classification, specific contract terms; work and family rights measures).
  • By opting out of certain CBA provisions. In the past, companies could only opt out of salary obligations if the company was in severe financial difficulties. Now, companies may be able to opt out of any of the following aspects: maximum working hours, work schedules and distribution of working time, rules on work shifts, compensation system and salary levels; work system and productivity. To opt out, the company must have financial, technical, productive or organizational grounds, being the same redefined as for redundancies, although sufficient cause will exist where the company has seen a drop in income or sales for two consecutive quarters.
  • By terminating the CBA if a year has elapsed since it expired and no new CBA has been reached. In the past, CBAs that were being renegotiated continued for the most part to be binding on the parties until a new agreement was reached, which gave unions substantial negotiating leverage. The new one-year limit, however, makes it easier for employers to renegotiate CBAs with more favorable terms to employers.