Employment contracts in Spain

What constitutes an employment contract?

An employment contract is defined as an agreement between an employee and employer under which the employee agrees to carry out a task or provide a service to the employer in return for remuneration. In addition, an employee will be subject to the employer’s organisational, governing and disciplinary control.

Formal requirements

Oral or written contracts

An employment contract may be oral or written, with the exception of a number of contracts which must be executed in writing.

In practice most contracts are in writing, as it is easier to avoid future disputes about the terms of a contract if there is contemporaneous written evidence of the parties’ agreement.

If a contract does not comply with determined rules, it will be declared null and void.

Fixed term contracts

A fixed term contract of more than four weeks or a contract relating to a specific project must be in writing.

Fixed term contracts can only be entered into in specific situations, save for senior executives’ contracts or other special labour contracts (sportsmen, artists, etc). Labour law imposes different conditions on the various types of contract.

Where an employer and employee are entering into a fixed term contract, the written statement which the employer must provide must state the anticipated length of employment.

There are a number of circumstances where a fixed term contract will be converted into a contract of indefinite duration.

Part time contracts

Part time contracts must be in writing and the employer must set out the number of daily, weekly, monthly or annual working hours agreed as well as the way in which these hours are distributed. Failure to comply with this formality will mean that the contract is held to be a full time contract.

Implied terms

There are many terms which are implied into the contract which are for the protection of the employee. It is often not possible to derogate from such statutory rights by using express terms. Any express contractual term which operates to reduce statutory rights will be void.

The sources of implied terms are the laws (including the Spanish Constitution, the Workers’ Statute and any other developing legislation), the applicable collective bargaining agreement (CBA) and case law. Some of these rights and obligations may be expressly set out in the contract and further detail may be included.

Mandatory information

An employer must provide an employee with a written statement of the terms and conditions of employment within two months of the start of employment. Failure to do so is punishable by a fine of between €60 and €625. Information relating to salary, timetable, holidays or notice periods can be defined by reference to the relevant legislation or CBA as long as the references are sufficiently clear to allow the employee to access the information.

Trial periods

Trial periods can be agreed during which both parties may terminate the contract without the need to demonstrate just cause, without notice and without compensation. Trial periods are quite common.

Confidentiality clause

It is common for contracts of employment (particularly for more senior employees) to contain a confidentiality clause.

Post termination restrictions

Non-compete

Post termination restrictive covenants can be agreed at any time during the course of the contract or at the time of termination, as long as they are limited to protection of a legitimate interest and are reasonable. Restrictive covenants cannot be for a period of more than two years for more qualified employees, and six months for any other employee.

In addition, adequate financial compensation must be payable by the employer to the employee in return for the employee complying with the restrictive covenant.

Non solicitation / Non Dealing and Non Poaching

The law does not make specific provision for these covenants and they are deemed to be covered by the general provisions relating to non-compete covenants.

Garden leave

The law does not make any specific provision for garden leave clauses and such clauses may, in fact, be seen to be in conflict with an employee’s basic right to have effective employment (ie to be provided with work, being the opposite one of the grounds for constructive dismissal). Garden leave is, however, becoming quite common in some industry sectors and in practice are unlikely to give rise to issues from the employer’s side.

Intellectual property

The transfer to the company of the right to exploit intellectual property created by virtue of the employment relationship is governed by any relevant provision in the contract of employment, with certain restrictions.