The key elements of Spanish labour reform: Act 3/2012, of 6 July, of urgent measures to reform the employment market

Act 3/2012, of 6 July, of urgent measures to reform the employment market was published in the Official State Journal on 7 July, following the passing of Royal Decree-Law 3/2012 as an ordinary law by the Spanish parliament.

  1. Paid leave for professional training purposes

The individual right to training – paid leave of 20 hours per year – can be accumulated over five years rather than the three years established in the previous regulation. Training will be linked to the business of the company and not merely to the work post. Training that the employer is obliged to deliver by law does not count towards this training time.

  1. Irregular distribution of the working day

If there is no express or implied agreement to the contrary between the parties, the employer may now distribute 10% of the working day irregularly throughout the year as it so wishes, rather than 5%.

  1. Clarification of the definition of economic, technical, organisational or production-related causes

The definition of the economic grounds for:

  • justifying temporary lay-offs or short time (article 47 of the Spanish Workers' Statute),
  • the non-application of the terms of a collective bargaining agreement (article 82.3 of the Spanish Workers' Statute) and
  • dismissals on objective grounds (article 51 of the Spanish Workers' Statute)

has been qualified and clarified, establishing that the reference to income is to be understood as referring to ordinary income.

Equally, evidence of the persistent fall in ordinary income or sales (over the course of two quarters, in the case of temporary lay-offs or short time; or three quarters in the case of dismissal on objective grounds) must be provided against the results for the same quarters of the previous year.

Article 47 of Act 3/2012 includes an express reference in connection with temporary lay-offs or short time to the definition of economic causes in the above terms. That article reads as follows: "(…) when it can be deduced from the company's results that its economic position is negative, in cases such as the existence of current or forecast losses, or the persistent reduction of its ordinary income or sales. In any event, it shall be understood that the reduction is persistent if during two quarters the level of ordinary income or sales obtained in each quarter is lower than the ordinary income or sales recorded in those same quarters in the previous year".

The same express reference is made in relation to the technical, organisational or production-related reasons, the definition for which has not changed from the wording in Royal Decree-Law 3/2012.

  1. Successive chains of fixed-term contracts and transitional regime

In relation to the suspension, until 31 December 2012, of the conversion of fixed-term employment contracts into indefinite contracts where a successive chain of fixed-term contracts (whether interrupted or otherwise) has extended for 24 months or more in any period of 30 months, a clarification has been made that the period between 31 August 2011 and 31 December 2012 shall not count towards the calculation of the 24 or 30 months, whether or not the worker in question has rendered services during that time.

  1. Achieving stability in collective bargaining agreements

If one year elapses from the moment a collective bargaining agreement has been challenged without a new collective bargaining agreement having been agreed or an arbitral award having been rendered in this regard, the challenged collective bargaining agreement will no longer be effective, and the higher ranking collective bargaining agreement will apply until a new collective bargaining agreement is approved. Royal Decree-Law 3/2012 had previously set that period at two years.  

  1. Nullity of mandatory retirement clauses contained in collective bargaining agreements

Any clauses or covenants that enable employment contracts to be terminated when a worker reaches the ordinary retirement age established in social security regulations shall be null and void.

Mandatory retirement clauses contained in collective bargaining agreements agreed prior to the date Act 3/2012 entered into force will become null and void upon expiry of the initial term of the collective bargaining agreement. If the initial term of the collective bargaining agreement expired before the Act entered into force (8 July) it will be null and void from the date of the Act.

  1. Collective redundancies

Several changes have been made in this regard, all with the aim of improving legislation and to respond, as far as possible, to interpretational issues that have emerged since the entry into force of Royal Decree-Law 3/2012. In particular:

  • The Act establishes that a new regulation will be published (to be approved in the month following the publication of the Act) which will specify the information necessary for providing evidence of the grounds for dismissal.
  • The consultation period will be replaced with a company-level mediation or arbitration process, which will proceed in the same timeframes as the consultation process.
  • When the decision to lay off workers has not been challenged by the workers' representatives, it will be possible for the company to lodge a claim or request that its decision to impose redundancies be declared lawful. This "claim" must be lodged within 20 days following the end of the period in which the workers' representatives are able to challenge the measure. The judgment rendered will be declarative and final.
  • Spanish companies (or groups) with over a certain number of employees and which have earned profits in the last two financial years are obliged to pay the Spanish Treasury a contribution when they dismiss workers aged 50 years or more. The number of employees that the company (or group) must have for this to apply has been reduced from 500 to 100.
  • Clarification is given to the tax treatment of severance compensation received for dismissals on objective grounds (collective or individual). That severance compensation shall be tax exempt up to the mandatory amount established in the Spanish Workers' Statute.
  1. Individual dismissal on objective grounds

Article 52 (d) of the Spanish Workers' Statute relating to dismissals due to genuine intermittent sickness absence has been amended again. Now, to establish objective grounds, when an employee is absent for 20% of working days over a period of two consecutive months, the total working days of absence in the previous 12-month period must also reach 5% of the working days.