Spanish employment labour reform

After several months of negotiation, the Royal Decree Law nº 32/2021 was published on 30 December. The Royal Decree Law has been  approved on 28 December by the Council of Ministers following the agreement reached between the government, trade unions (CCOO and UGT) and employers representative's (CEOE and CEPYME) to reform the Spanish current labour law. The most important new features of the reform are as follows:

Concerning temporary contracting alternatives:

1) Art. 15 is amended and now expressly refers to the fact that the employment contract is presumed to be concluded for an indefinite period of time.

2) The work or service contract disappears and a new permanent contract is created in the construction sector. The permanent contract in the construction sector provides that at the end of the construction, the company must make a relocation proposal, following a training process, if necessary. The contract is terminated if the employee rejects the proposal, if the qualifications of the person concerned are inadequate (even after training), or if there are no construction sites in the province. If this is the case, the employee will receive a compensation of 7% of the wages established in the applicable collective bargaining agreement for the entire duration of the contract or that established in the General Agreement for the Construction Sector, if higher.

3) Reduction of temporary contracts to two contracts: contract for circumstances of production and contract for substitution of the employee.

• The contract for circumstances of production shall be based on occasional unforeseeable increases in production or fluctuations in demand, for a maximum period of 6 months, which may be extended to 12 months by sectoral collective bargaining agreement. This contract may also be used in occasional, foreseeable situations of short duration (such as fruit picking or Christmas campaigns), with the limitation of a period of 90 non-consecutive days per year. The annual forecast must be known by the workers' representatives in the last quarter of the previous year.

• The contract for substitution of the employee shall be made to replace an employee with a job reservation, provided that the person being substituted is clearly specified. As a novelty, the substitution may begin up to 15 days prior to the substituted employee's sick leave in order to guarantee the adequate performance of the post. This contract may also be used to temporarily cover a post during the selection or promotion process, with a maximum duration of 3 months or a shorter period as provided for in the collective agreement.

4) The training contract is revised, which will have two modalities: training contract in alternation, labour and training, and contract for the acquisition of professional practice.

• The dual training contract, which aims to make paid employment compatible with training processes, can generally be signed with employees up to 30 years of age. There is an obligation to have a tutor, and it has a minimum duration of three months and a maximum of two years. The salary may never be less than the minimum wage proportional to the working day.

• The contract for obtaining professional practice appropriate to the level of studies shall be signed within three years (5 years in the case of persons with disabilities), with a minimum duration of 6 months and a maximum of 12 months. Likewise, it is transferred to the sector agreement for jobs, activities, levels or professional groups that can be performed by this type of contract.

5) Encouragement of the discontinuous fixed-term contract. Its scope of application is extended to include seasonal work or work linked to seasonal production activities, as well as intermittent work with certain periods of performance, whether determined or undetermined. Work on administrative or mercantile contracts which, being foreseeable, form part of the company's ordinary activity, may be covered by this type of contract. It is also a novelty that this type of contracting can be used by temporary employment agencies. The regulation stipulates that permanent discontinuous employees will have their seniority recognised for the entire period of the employment relationship, not only for the periods actually worked.

6) Reduction of the chaining of contracts, in order to consider a person as permanent, the maximum period of concatenation becomes 18 months in a period of 24 months.

7) Reinforcement of the staff and resources of the Labour Inspectorate. Increase of the penalties provided for in the Law for the fraudulent use of temporary contracts (among others). Penalties will be per fraudulent situation (i.e. per employee) and not per company. The amount for fraudulent use of temporary hiring will range between € 1,000 and €10,000 per infringement.

Concerning collective bargaining agreements:

1) Restoration of full ultra-activity of collective agreements.
After the expiry of their initial period of validity without being replaced by another one, collective agreements remain applicable, unless otherwise agreed (the 1-year limitation on the duration of ultra-activity is repealed).

2) Prevalence of sectorial agreements over company agreements.
The prevalence of the company-level wage agreement is abolished, with the aim of guaranteeing at least the wages established at sectorial level.

The company agreement may continue to regulate on a preferential basis other aspects such as the choice between payment or compensation of overtime, the schedule and distribution of effective working time, the adaptation of the professional classification, the adaptation of the aspects of hiring modalities that are attributed to company agreements and family reconciliation measures.

3) Subcontracting: Application of the sectorial agreement corresponding to the activity carried out by contractors and subcontractors.
The collective bargaining agreement applicable to contractors and subcontractors that provide services related to the activity of the main company shall be the sectorial agreement corresponding to the activity carried out by them, regardless of contractors corporate purpose and legal form (exception: special employment centres). 

When the contractor or subcontractor company has its own agreement, this will be applied but respecting the rules of concurrence between agreements foreseen in art. 84 Workers' Statute (salary/working day must be that of the sectorial agreement).

Concerning measures relating to temporary flexibility in the event of objective causes or force majeure:

1) Strengthening of the figure of "ERTEs" as opposed to collective dismissals: Article 47 is amended to regulate various figures:

• ERTE ETOP: the deadlines for processing traditional ERTE ETOP are reduced: 5 days for setting up the negotiating committee, 10 days if there are no representatives in the company, and 7 days for negotiation if the company employs fewer than 50 workers (15 days if the workforce is 50 or more). A more flexible procedure is also introduced for its extension in case of need.

• ERTE due to limitation or impediment: it is incorporated into the ordinary legislation of the ERTE due to limitation or impediment that have been used during the COVID period.

During periods of ERTE (whether ETOP or due to force majeure), no overtime work may be carried out, no new outsourcing may be established and no new employment contracts may be arranged. Benefits are regulated in terms of contributions linked to the implementation of training and job maintenance actions, as well as protection for workers in terms of unemployment.  

2) Regulation of RED mechanisms for employment flexibility and stabilisation. These mechanisms, once activated by the Council of Ministers, will allow companies to request measures to reduce working hours and suspend work. It consists of two modalities;

• a cyclical one, when there is a macroeconomic situation that makes it advisable to adopt stabilisation instruments, with a duration of no more than one year;

• another sectoral one, when in a given sector there are permanent changes that generate requalification and professional transition needs. This measure will have a duration of one year with the possibility of two extensions of 6 months each (total of 24 months).

Companies will be eligible by applying to the labour authority after consultation and negotiation with the legal representation of the workers.

During periods of suspension of contracts or reduction of working hours, companies may voluntarily apply partial exemptions in their social security contributions (of between 20% and 90%) linked to training and job maintenance activities and the workers affected will receive 70% of the regulatory base for the entire period, without a qualifying period and without consuming contributions.

3) A single procedure will be established for notifying the Spanish social security and unemployment authorities ("SEPE" and the "TGSS") of the start and end of the periods of suspension and temporary reduction of working hours due to ERTE.

Other provisions:

1) Entry into force: tomorrow, 31 December 2021, although a period of 3 months is established for the entry into force of different matters such as: the new regulation of training contracts, temporary contracts, discontinuous fixed-term contracts; the social protection mechanisms of the RED mechanism; the new contribution regime for alternating training contracts; and paragraphs 2 and 3 of the sole derogatory provision.

2) Transitional regime: the main issues to be highlighted are the following:

• Temporary contracts (temporary, work and service contracts, interim contracts, fixed-term contracts, internships and training contracts) signed in accordance with the previous regulatory wording and in force before 31 December 2021, will be applicable up to their maximum duration under the terms of the regulatory wording in force on the date they were signed.

• During a maximum period of 3 months (between 31/12/2021 and 30/03/2022), temporary contracts and contracts for works and services may be concluded in accordance with the pre-reform regulations, the maximum duration of which may not exceed 6 months in any case.

• With regard to the new limits for the concatenation of temporary contracts (18/24 months), for the purposes of calculating the number of contracts and periods with respect to the period prior to the entry into force of the reform, only the contract in force on the date of entry into force of the reform will be calculated.

• Infringements committed before the entry into force of the reform will be sanctioned in accordance with the previous criteria and amounts.

3) The sixteenth additional provision of the workers' statute, which allowed the possibility of objective and collective dismissals in the field of public administrations, is repealed. 

4) Short length agreements (i.e. les 30 days) are penalized by imposing an additional contribution obligation (26 euros) upon termination of the employee's contract. Exception: replacement contracts, agricultural, coal mining or domestic employees.