We mentioned the recent Law 3/2012 on Urgent Measures to Reform the Labour Market (Labour Reform) in our July newsletter.  The intention was to make it easier for employers facing times of crisis to implement employment terminations based on objective causes (economical, organisational and technical causes and reasons relating to productivity).

As a result, the new regulation is less restrictive when defining the objective grounds that need to apply to implement redundancies and it has removed further requirements such as the provision of evidence of the reasonableness of the terminations.

In addition, the Labour Reform eliminated the need for authorisation from the Labour Authorities that was previously required to implement collective dismissal procedures.  Currently, if the company and the employee representatives do not reach an agreement on the terms and conditions of the terminations during the consultation period, the employer could go ahead with the employment terminations.

However, in practice, employers continue to have problems making collective redundancies even when they are facing negative situations in the Spanish market.  Athough the Labour Reform widened the definition of objective grounds, it maintained the ability to have the collective redundancy declared as null and void (which involves the reinstatement of the employees in the company) if the statutory requirements and legal procedure are not observed.

In line with this approach, in several judgments this year in Catalonia and Madrid, Spanish Labour Courts have been paying special attention to the formal aspects of collective redundancy procedures and have declared some collective dismissal procedures to be null and void.

The treatment of company groups for employment law purposes has also become a problematic issue.  Under Spanish law, when the companies included in a group of companies act as a sole employer, the affected companies are considered a sole entity and are jointly liable for the employment related obligations.  In such a case, the documentation to be provided during the redundancy procedure should be related not only to the formal employer but to the whole group of companies.  Redundancies can be declared null and void for infringement of the formal requirements.

However, a judgment from the Spanish National Court last month has clarified that the infringement of formal aspects cannot itself involve the declaration of the procedure as null and void unless it entails a detriment to the employees' rights and warranties.  This judgment enables companies in difficulties to implement restructurings involving collective dismissal procedures with greater legal certainty.  Nevertheless, until a judgment from the Spanish Supreme Court on unified criteria is issued, it seems that it is still crucial to try to reach an agreement with the employee representatives during the consultation period, which will minimise the risk of claims and the potential declaration of the redundancies as null and void.