Main measures of the labour reform

Negotiations between the Ministry of Labour, labour unions and employers' organisations continue to make progress and are decisive in reaching an agreement to allow a new labour reform to be approved. Despite the numerous meetings that are being held, no consensus has been reached, as there are many (and very important) aspects under negotiation.  As a result, although it is not possible to know the exact terms of the final agreement, we can get an idea of the main content of the text. 

First of all, it seems that one of the most relevant changes will be the amendment of Article 15 of Royal Legislative Decree 2/2015, of 23 October, which approves the revised text of the Workers' Statute Law (hereinafter "Workers' Statute" or "WS"), which regulates fixed-term employment contracts, understood as those whose purpose is to establish a relationship between employer and employee for a specific period of time. In Spain, temporary contracts are of a "causal nature", which means that in order to enter into temporary contracts, certain objective conditions must be met to justify the temporary nature of the contract, namely:

      i.        the performance of a specific work or service, with its own autonomy and substantive nature within the company's activity. This circumstance justifies the conclusion of a temporary contract for work or service.

     ii.        an increase in production activity, provided that this situation is not habitual or permanent. This circumstance justifies the conclusion of a temporary contract due to production circumstances.

    iii.        to cover the absence of an employee whose position is reserved, or to cover a vacant position while a selection procedure is being carried out. This circumstance justifies the conclusion of a temporary interim contract.

According to the reform proposed by the government, fixed-term contracts can only be concluded for productive and organisational reasons. Thus, on the one hand, temporary contracts may be concluded for productive reasons, when there is an occasional and unforeseeable increase in business activity that cannot be covered by the company's regular workforce, as is the case with temporary contracts due to production circumstances. On the other hand, temporary contracts will be concluded for organisational reasons to cover the absence of a worker (in this sense, it seems that temporary contracts cannot be used to replace the holidays of permanent staff). This contract will be similar to the current interim contract. Therefore, it seems that this change will mean the elimination of the temporary contract for a specific job or service.

Another key point of this reform is related to the fixed-discontinuous contract set out in Article 16 of the WS. This is an open-ended contract with the particularity that the work is carried out intermittently over time, i.e., it is concluded to perform work that is fixed but discontinuous over time, for example during the sales or Christmas periods. The CEOE has put on the negotiating table the possibility of channeling this type of contract through temporary employment agencies (hereinafter "TEA"), so that the hiring of a worker in the permanent-discontinuous format through a TEA is pending the new regulation.

On the other hand, there are issues, such as compensation for unfair dismissal, which have never been on the dialogue table despite the proposals made by the labour unions. The labour reform carried out in 2012 reduced compensation for unfair dismissal from 45 days to 33 days' salary per year of service, up to a maximum of 24 monthly payments (Article 56 of the WS), and it seems that this aspect will not be modified. However, there are proposals aimed at reforming the current regime of contractual terminations. For example, the government proposed to incorporate into Article 55 of the WS a new null dismissal for those temporary contracts that do not have defined grounds for employment contracts and, therefore, do not meet the requirements of labour legislation. Under the current regulation, temporary contracts that do not meet the requirements of the law will be presumed to be indefinite, so that in the event of unfair dismissal the worker will receive the corresponding compensation. However, if Article 55 of the WS is reformed in the sense proposed by the government, the dismissal will be considered null and void and not unfair. The declaration of null dismissal implies the immediate reinstatement of the worker in the same job and with the same conditions as before the dismissal, and the payment of the wages lost . However, the company will not be obliged to pay compensation, except in cases in which the worker claims compensation for the damages that the dismissal may have caused them.

Another important aspect of the reform has to do with Article 41 of the WS, which regulates substantial modification of working conditions. The current wording of the article establishes that the decision to modify collective working conditions substantially must be preceded by a period of consultation with the workers' legal representatives, and in the event that the company does not have such representation, an ad hoc committee will be set up. However, the government wants to externalise the process and redirect the negotiation towards the labour unions, and consequently eliminate the possibility of using an ad hoc internal workers' commission. However, the CEOE has opposed this modification and everything suggests that the current text will be maintained.

In short, many issues are being reviewed and negotiated within the social dialogue. Until each of them is finalised separately, it will not be possible to speak of the final agreement, so it is difficult to know for sure whether the changes and measures that are being negotiated will be definitive or not in the proposal. We know for sure that the reform will entail a series of important changes for companies, and, consequently, they will have to adapt their policies to the content of the reform.