Labour Flash - July 2025

1. Royal Decree-Law 9/2025, of 29 July, extending paternity and childcare leave.

Royal Decree-Law 9/2025, of 29 July, introduces significant changes to the system of paternity leave, completing the transposition of Directive (EU) 2019/1158 on the work-life balance of parents and carers.

With effect from 31 July 2025, the duration of the paternity leave is extended to a total of nineteen weeks per parent (thirty-two weeks in the case of single-parent families). The first six weeks must be taken on a mandatory, uninterrupted and full-time basis immediately after the birth. The remaining eleven weeks (twenty-two in the case of single parents) may be taken cumulatively or intermittently, on a full-time or part-time basis, until the child reaches the age of twelve months.

In addition, a new paid leave, individual and non-transferable, of two weeks for childcare (four weeks for single-parent families) is recognised, which may be taken until the child reaches the age of eight. This new right will apply retroactively from 2 August 2024 (inclusive), although applications will not be admitted until 1 January 2026. These two weeks (or four in the case of single parents) are recognised separately from the eight weeks of parental leave regulated in Article 48 bis of the Workers' Statute, which has not been amended.

In order to take the eleven weeks (twenty-two in the case of single parents) up to twelve months and the two additional weeks (four in the case of single parents) up to eight years, the regulation requires at least fifteen days' notice from the employee. Likewise, as has been the case until now, companies may limit the simultaneous enjoyment of these types of leave when both parents work for the same entity, provided that there are justified organisational reasons in writing.

The new regime also covers specific situations:

• In the event of the hospitalisation of the newborn after birth, the leave may begin after discharge from hospital.
• If hospitalisation exceeds seven days due to prematurity or other clinical causes, the leave shall be extended to a maximum of thirteen weeks.
• The death of the child shall not reduce the period of suspension, unless expressly waived after the mandatory six weeks.
• In the event of the death of one of the parents, the other may take the remaining leave.

Finally, amendments are made to the General Social Security Law to ensure that, during the extended leave, financial assistance equivalent to 100% of the regulatory contribution base is received. The financial assistance will be covered by Social Security, as established by the RDL. This coverage extends to both the seventeen weeks (twenty-eight in single-parent families) of suspension for birth and the two weeks (four in single-parent families) for childcare, without prejudice to companies being able to supplement the benefit up to the amount of gross remuneration.

2. Law 2/2025, of 29 April, on the termination of employment contracts due to permanent incapacity of employees.

On 30 April 2025, Law 2/2025 of 29 April was published, introducing substantial amendments to the Workers' Statute and the General Social Security Law in relation to the termination of employment contracts due to permanent incapacity. The regulation came into force on 1 May 2025 and aims to strengthen the rights of persons with disabilities in the workplace, in line with the principles of accessibility, reasonable accommodation and non-discrimination.

Firstly, Article 48.2 of the Workers' Statute is amended to introduce a period of suspension of the contract with right of reservation employment in cases of permanent incapacity, while possible measures for the adaptation or redeployment of the employee are assessed.

Likewise, Article 49.1 is amended, eliminating the automatic termination of the contract due to a declaration of total permanent incapacity, absolute incapacity or severe incapacity. From now on, the company may only terminate the contract if:

• It is not possible to make reasonable adjustments because they would constitute an excessive burden.
• There is no vacant and available position suitable for the employee's profile.
• The employee rejects the new position offered.

In such cases, the employee has 10 calendar days from the notification of the disability decision to express their intention to maintain the employment relationship. The company will have a maximum period of three months to take the necessary measures or, where appropriate, terminate the contract. The regulation details the criteria for assessing excessive burden, taking into account the size, economic resources and activity of the company. In companies with fewer than 25 employees, this burden is presumed to exist when the cost of adaptation exceeds certain thresholds.

At the same time, adjustments are being made to the General Social Security Law. The extension of the economic effects of temporary incapacity is guaranteed while the procedure for assessing permanent incapacity is being resolved. In addition, compatibility between work and permanent incapacity benefits is provided for in cases where the employee performs an adapted or alternative job, with the benefit being suspended during that period of activity.

3.Ruling 736/2025, of 16 July, of the Supreme Court: limits on Compensation for Unfair Dismissal and Compliance with International Standards

The Supreme Court, in its ruling of 16 July 2025, has confirmed that courts cannot increase compensation for unfair dismissal beyond the provisions of Article 56 of the Workers' Statute. Furthermore, by upholding a previous ruling from last January, this ruling establishes clear and binding case law on this matter.

The ruling considers that such legal compensation complies with international standards, in particular ILO Convention 158 and Article 24 of the European Social Charter, which only require that compensation be ‘adequate’. The Court clarifies that these international standards do not have direct effect in the Spanish legal system and therefore do not allow judges to modify the legal amount. It also points out that the decisions of the European Committee of Social Rights are not binding on the courts, and that their application is a matter for the legislator or collective bargaining agreements.

The ruling has two dissenting opinions, which consider that higher compensation should be allowed in exceptional cases, when justified by the actual damage suffered by the employee.