Comment on Spanish Labour Reform

The labour reform has finally been approved after reaching an agreement between the trade unions CCOO and UGT and the employers' associations CEOE and Cepyme. For the first time in more than 40 years, consensus has been reached among all the social agents.

Firstly, it is committed to limiting temporary contracts by reducing their usefulness. And establishing indefinite-term contracts as a matter of course.

Likewise, a work or service contract that could last up to four years has been replaced by one that will last a maximum of twelve months.

On the other hand, penalties for the fulfilment of temporary contracts are toughened and alternatives to dismissal are enabled by means of a new mechanism, which are cuts for periods of normality, moving towards a balance in collective bargaining.

The ultra-activity of collective agreements is restored, so that the collective agreement will remain in force even if no agreement is reached on its renewal.

It also restores the impossibility for a company agreement to reduce the wages of sectoral/industry collective agreements.

This reform seems discreet but it should also be considered together with other recent changes and developments in Spain in labour law such as remote working, equality plans, equal pay, or regulation of riders.

The main innovations can be grouped into the following points:

1. Temporary contracts: The contract for work or service disappears and the contract for circumstances of production and for substitution of the worker (former interim) are redefined. Penalties for fraudulent temporary contracts are toughened and will be imposed for each employee.

2. Training contracts: Training contracts are redesigned. This regulates the alternating training contract (to make work activity compatible with training processes) and the contract aimed at acquiring professional practice appropriate to the levels of studies (with a maximum duration of one year).

3. Discontinuous permanent contracts: This type of contract is promoted over temporary contracts. They can be concluded for the performance of seasonal work or work linked to seasonal activities, for the performance of work that is not seasonal in nature but which, being intermittent, has certain, determined or indeterminate periods of execution. They may be used for the execution of contracts which, being foreseeable, are part of the ordinary activity of the company.

4. ERTE and RED Mechanism: Inspired by the recent COVID-19 regulation, the regulation of ERTEs (especially those of force majeure) is modified and the so-called Red Mechanism for Employment Flexibility and Stabilisation is created with two modalities, cyclical and sectoral, which must be activated by the Council of Ministers to allow the reduction of working hours or suspension of contracts, including a fund for the financing of benefits and exemptions from Social Security contributions and training costs.

5. Collective bargaining and collective agreements: The priority of application of the company agreement over sectoral agreements is maintained, except with regard to the amount of the wage. The indefinite ultra-activity of the agreement is restored: once the duration of the agreement has been terminated and there is no agreement or solution for a new agreement, it will remain in force.

6. Subcontracting of services: The collective bargaining agreement applicable to contractors and subcontractors shall be that of the sector of the activity carried out in the contract or subcontract, regardless of its corporate purpose or legal form, unless there is another applicable sectoral agreement. The company agreement may only be applied by the contractor or subcontractor if it determines better wage conditions than the applicable sectoral agreement.