Spain is taking measures against undeclared, or irregular, work. On May 6, 2011, Royal Decree Law 5/2011 of April 29 (“RDL 5/2011”), relating to measures for the regularization and control of undeclared work (and the promotion of housing renovation), was published in the Official State Bulletin.
The objective of this law is to curb undeclared work in Spain by facilitating the voluntary regularization of workers who are presently providing services with no employment contract and without having been registered with the Social Security authorities. The law grants amnesty to employers that regularize the situation of their employees by July 31, 2011. These employers will not be subject to labor sanctions from the labor inspection authorities, but they will have to fulfill past Social Security obligations (up to four years of Social Security contributions plus a 20 percent surcharge). RDL 5/2011 also increases sanctions for those companies that persist in engaging employees in an irregular manner. These sanctions will be applicable as of August 1, 2011.
RDL 5/2011 does not cover some practical issues. For example, it is not clear what happens if an irregular employee does not want to sign the employment contract. This is a common situation with irregular self-employed workers, because if they become regular employees, their net monthly salaries (not their net annual salaries) decrease. It may be the case that an employee’s refusal to sign the employment agreement may be cause for termination of the employment relationship.