What terminations count toward collective dismissal thresholds? The Supreme Court of September 19, 2023 includes terminations by mutual agreement. Article 51.1 of the Spanish Labour Relations Act determines the numeric thresholds when considering whether or not contractual terminations taking place within a term of 90 consecutive days before or after must be considered included in collective dismissal. 

Specifically, the aforementioned provision stipulates that the collective dismissal procedure, (Redundancy Plan (ERE)), must be applied when the terminations affect at least the following: 

  1. Ten workers in companies employing fewer than one hundred workers.
  2. Ten per cent of the number of workers in companies employing between one hundred and three hundred workers.
  3. Thirty workers in companies employing more than three hundred workers.

However, even though it is clear the number of terminations to be considered related to whether or not a Redundancy Plan (ERE) must be implemented, the terminations that are or are not countable have been disputed. 

Although the labour regulations specify that when the number of workers involved in objective dismissals by means of a Temporary Redundancy Plan (ERTE) for Economic, Technical or Production Reasons (ETOP) exceeds the thresholds stipulated in Article 51 of the Spanish Labour Relations Act, companies must subsequently implement a Redundancy Plan (ERE) in a mandatory manner, stipulating that, for the purpose of the calculation, all other dismissal must be taken into account if they take place at the employer’s initiative for other reasons not related to the worker of those included in Article 49.1.c).

It is obvious that the terminations of legal temporary contracts in Article 49.1.c) of the Spanish Labour Relations Act are not counted for the purpose of collective dismissal but the term “not related to the worker” has needed to be defined and interpreted by case law that is still being updated and modified, as explained below. 

Which terminations are counted for the purpose of collective dismissal?

The Labour Chamber of the Supreme Court has ruled on several occasions which terminations must be taken into account for the purpose of calculating the numeric thresholds of collective dismissal, concluding that, in order to comply with the thresholds referred to in Article 51.1 of the Spanish Labour Relations Act, the following must be included in the calculation:

  • Court judgements on contracts, according to Article 50 of the Spanish Labour Relations Act, because even if it is at the worker’s request, a corporate breach of contract would be implied. 
  • Objective dismissals by means of a Temporary Redundancy Plan (ERTE) for Economic, Technical or Production Reasons (ETOP), whatever their legal categorisation may be. 
  • Disciplinary and objective dismissals ruled or acknowledged as unfair.
  • Terminations of temporary contracts entered into by infringing the law and considered unfair as well as "ante tempus" terminations of temporary contracts.
  • Contractual terminations with severance pay, within the scope of the provisions in Articles 40 and 41 of the Spanish Labour Relations Act, due to geographic relocation measures being adopted or a significant change in the employee’s working conditions (“MSCT”). 
  • Failure to call up discontinuous permanent workers at the normal time. 
  • Not passing the trial period when the planned term has been exceeded.
  • Simultaneous terminations of contracts in a trial period carried out by infringing the law and that are unreasonable and disproportionate, (judgement of the Supreme Court of 23 September 2021). 

On the other hand, the following must be excluded from the calculation for the purpose of the thresholds: 

  • Disciplinary dismissal not challenged or that are considered fair. 
  • The objective dismissals referred to in Article 52 of the Spanish Labour Relations Act due to subsequent incompetence or failure to adapt, not challenged or that are considered fair.
  • Legal terminations of temporary contracts. 
  • Terminations in a trial period. 
  • Resignations and retirements. 
  • Mutual agreements on termination. 

As we have already mentioned, up to now case law has deemed that the term “not related to the worker” excludes cases when the worker’s free consent has been granted for an agreement on termination, in the same way as when a worker freely resigns or retires. 

However, the previous situation has changed since the recent judgement ruled by the Supreme Court of 19 September 2023, which has reversed the doctrine of the Spanish Supreme Court by specifying that contractual terminations by mutual agreement taking place in the reference period of 90 days must also be counted for the purpose of collective dismissal. 

What change has taken place due to the judgement of the Supreme Court of 19 September 2023? 

It is obvious that the Supreme Court has been making a broader and broader interpretation of the terminations that must be counted for the purpose of the corporate obligation to implement a Redundancy Plan (ERE), the most recent one up to now being the new one stipulated that the workers who do not pass the trial period must be counted when these “imply a clear infringement of the law due to being absolutely unreasonable and disproportionate that such a high number of contracts are terminated at the same time for this reason”.

However, the Labour Chamber of the Supreme Court ruled a judgement on 19 September 2023 in which it concluded that, even if the worker freely consents to termination by reaching a mutual agreement, in the case in suit, these must be counted for the purpose of thresholds since they would have taken place “at the employer’s initiative by being encompassed in the context of an overall reduction of staff in which the workers were offered the possibility to voluntarily terminate their employment contracts under certain conditions”. 

Specifically, the Supreme Court considered that the 7 terminations by mutual agreement did not occur in an isolated manner but were encompassed in a period of 90 days in which the company had carried out a reorganisation process in which it had little by little unilaterally dismissed another 8 workers. 

The Chamber pointed out that, in these cases, as is obvious, it is true that the worker’s consent was granted and that there should not be any reasons to consider that there were defects in such consent. However, due to the context of the corporate reorganisation in which it took place, it was concluded it was the result of the employer’s initiative that, among other ways of reducing the staff, offered workers the possibility to reach this kind of agreement that, in any other situation, would have been an isolated occurrence and not linked to the staff reduction process and they would continue being excluded from the thresholds for the purpose of a Redundancy Plan (ERE). 

It is obvious we must wait to find out how this doctrine will be developed that, as we have already mentioned, implies a clear change in the Supreme Court’s criteria but it is also important to recall that companies must control and be perfectly-well advised every time they carry out a contractual termination because, as we have seen, there are more and more terminations that must be counted for the purpose of thresholds and if they are not controlled the legal thresholds could be exceeded, which is sufficient per se to consider we are facing a de facto collective dismissal with the consequences resulting from such decision.
 

Author: Yolanda Tejera, Labour lawyer at RSM