What Are Acceptable Reasons For Collective Dismissals
The termination of contracts without government approval can lead to fines of up to 90,000 Euros
In Spain, the definition of collective redundancies is the termination of labour contracts due to financial, technical, organizational or production reasons, providing that these reasons have been duly justified and authorized.
To qualify as a collective redundancy, the following must be fulfilled: Within a period of 90 days, a company employing at least 100 workers must have at least 10 workers affected; in companies employing between 100 and 300 workers, 10% of the staff must be affected; and in companies with 300 workers or more, 30 workers must be affected.
It is also considered a collective redundancy when a company stops trading, provided that this involves the termination of entire staff’s labour contracts; six or more workers are affected; and the total termination of the business’ activity results from financial, technical, organizational or production reasons.
There is a difference between individual and collective redundancies, as both are based on the same causes but are distinguished by a difference in the amount of employees affected. Moreover, collective redundancies are subject to government approvals and they should be dealt with as an ERE (Expediente de Regulacion de Empleo).
Heavy Fines. Before a case is admitted to be processed as an ERE, there must be reasons for the redundancies. The financial reasons must be proved, showing that the redundancies have been carried out in order to overcome a financial loss for the company.
The technical, organizational or production related causes need to be proved by demonstrating that taking such measures is actually enhancing the functioning of the company and contributing to the streamlining of resources and feasibility.
Redundancy due to production reasons, although harder to identify, are often a respond to an imbalance between the level of production in a company and the actual demand for its goods or services. At times this may fit in with the financial reasons which can reflect the results of production.
If a contract is terminated because of financial, technical, organizational or production reasons, without government approval, it will be declared null by Court. Moreover, it is regarded as a very serious offense which can result in fines between 3,005.07€ and 90,151.82€.
Recap of Redundancies in 2008. Redundancy procedures are also implemented in cases when a company is closing, upon the sale of a business or part of its assets, or if bankruptcy has been declared or if an activity has been terminated by a court judgment.
Both the employer and employees may request that the ERE is carried out. In the case of the employees requesting an ERE, if the collective redundancy affects more than 10 workers, they should designate from one to five workers to act as legal representatives (the exact number depending on the amount of workers affected).
The employer should explain in a report, the reasons for the ERE. They need to prove that damages could have been incurred if action had not been taken. A consultation period is required with the employee’s representatives over a period of a minimum of 30 days unless the company has less than 50 employees affected, which would require only 15 days.
According to the Department of Employment and Immigration, there was a total of 67,567 workers affected by the ERE in 2008, which is an increase of 41.8% compared to 2007. The Employment Minister, Celestino Corbacho, has reported that 60% of all the proceedings filed are approved by the regional governments.
Companies such as ONO, Orange, TNT, Renault, Telefónica, Martinsa-Fadesa, ING, Sony España and Ericsson España are adding to the increasing amount of ERE procedures.
Rafaela García
Labour Advisor
De iure Laboral
