European Committee of Social Rights condemns Spain for limiting compensation for unfair dismissal

The European Committee of Social Rights (ECSR), a body under the Council of Europe, in a recent decision has stated that the Spanish rules on severance pay do not comply with the requirements of Article 24(b) of the European Social Charter.

The committee considers that the compensation ceilings established for unfair dismissal infringe the requirements of article 24(b) of the European Social Charter, which requires that compensation for dismissal without cause must be adequate to compensate for the damage suffered by the dismissed person.

Compensation for unfair dismissal

In Spain, compensation for unfair dismissal is 33 days' salary per year of service, with a maximum limit of 24 monthly payments.

However, if the worker has more seniority than 2012, the corresponding compensation for the time worked up to 12 February 2012 will be calculated at the rate of 45 days per year worked with a maximum of 42 monthly payments.

European Social Charter guarantee

Article 24(b) of the European Social Charter guarantees the right of workers dismissed without valid reason to adequate compensation or other appropriate redress. In other words, it requires employers to ensure that the compensation paid to dismissed workers is adequate, but makes no reference either to the elements for assessing this adequacy or to the purposes for which it should be provided. 

ECSR resolution

The committee's ruling, which analyses article 24(b) of the European Social Charter, highlights the need for a new compensation system that takes into account the individual characteristics of each case, ensuring that compensation is both dissuasive for employers and compensatory for workers. 

Furthermore, the committee states that compensation schemes will be in conformity with the charter when they meet the following conditions: they provide for the reimbursement of financial losses suffered between the date of dismissal and the decision of the body declaring the dismissal unjustified; and they provide for compensation of a sufficiently high level to deter the employer and repair the damage suffered by the employee. 

The committee considers that the compensation ceilings applicable in Spain could lead employers to make a pragmatic estimation of the financial burden of an unfair dismissal on the basis of a cost-benefit analysis. In some situations, this could encourage unfair dismissals.

Furthermore, the judgment highlights that the Spanish system does not take due account of the actual damage suffered by the worker concerned in relation to the characteristics of the case, inter alia because the possibility of additional compensation is limited.

This decision comes in response to a complaint filed by the General Union of Workers (UGT), highlighting that the current legislation does not adequately protect unjustifiably dismissed workers.

Once the full ruling of the body was known, UGT in a statement urged the government, trade unions and employers to sit down and analyse an adaptation to Spanish law of this resolution that allows compliance with it, as it is binding.

Osborne Clarke comment

This ruling highlights the need for a change in the current rules, emphasising that each termination must be assessed on an individual basis. This individual assessment implies that it will not be possible to calculate the total compensation in advance, but that each situation must be considered individually.