Dismissal due to business reasons in Spain

AutorJuan Peña Moncho
CargoGraduate in Law and Student of the Master´s Degree in Labour Law, ESADE Law School
Páginas75-90
IUSLabor 1/2018
DISMISSAL DUE TO BUSINESS REASONS IN SPAIN
Juan Peña Moncho
Graduate in Law and Student of the Master´s Degree in Labour Law,
ESADE Law School
Introduction
The Spanish labour legislation on redundancies and dismissals due to business reasons
is characterized by the wide power it concedes to companies in adopting these
measures. In 2012, the Spanish legislator adopted an important labor reform (adopted
by Royal Decree 3/2012, February 10, and Law 3/2012, July 6, on urgent measures to
reform the labor market), which aim was to increase flexibility of companies, both
internally and externally. Analyzing redundancies in Spain, it is clear that companies
did not hesitate to use the faculties recognized by the regulation after the labor reform of
2012. In this sense, between 2012 and 2014, 189.102 workers were fired. However, the
tendency today is that less workers are being affected by collective redundancies:
24.572 workers were affected in 2015, 24.348 in 2016 and 20.813 in 2017.
78
One of the tools that has facilitated dismissals due to business reasons is the general
definition of the causes that enable the use of redundancies due to business reasons.
According to the current definitions of business causes included in the Worker’s Statute,
as will be analyzed in this paper, it is relatively easy for any of them to concur.
Therefore, the reaction of unions and workers has been to challenge the legality of
redundancies adopted by companies, specially attending to the formal requirements. For
example, attending to the lack of negotiation in good faith during the consultation
period, the illegal use of alternative proceedings to conduct a collective dismissal, the
designation of affected workers or the lack of the necessary documentation to prove the
existence of the alleged business cause. At the same time, courts have also determined
the scope of business causes by requiring the existence of proportionality between the
alleged cause and the measures adopted by the company.
Furthermore, the European Court of Justice has played a primary role in the delimitation
of the Spanish regulation on dismissals due to business reasons. Some of its rulings
have obliged Spanish courts to change its traditional positions on relevant matters, such
as the reference that must be taken into account to determine the collective or individual
nature of the dismissal (company vs. establishment) and the interpretation of the
concept of assimilated terminations of the employment contract
78 Statistics of the Spanish Ministry of Employment and Social Security (available at:
http://www.empleo.gob.es/estadisticas/reg/welcome.htm).
IUSLabor 1/2018 Juan Peña Moncho
76
In this context, the aim of this article is to analyze the legal regulation of redundancies
and dismissals due to business reasons in the Spanish legal system, along with recent
case law regarding this matter.
1. How does the legislation or the judicial bodies define the causes that allow for a
dismissal due to business reasons?
The Spanish legal system allows dismissals due to business reasons, distinguishing
between economic causes and technical, organizational or productive causes. The
definition and regulation of these causes has, in recent years, evolved to facilitate their
concurrence and, hence, favor redundancies.
Article 51.1 of the Spanish Worker’s Statute defines these causes as follows:
Economic causes are defined as the situation where the results of the company show
a negative economic situation, such as the existence of present or expected losses or
the persistent decline in the level of ordinary revenues or sales. In any case, the
decrease is persistent if for three consecutive quarters the level of ordinary revenues
or sales each quarter is lower than in last year’s same quarter. Therefore, due to this
definition, a company with profits but with expected losses or a persistent decline in
income can legally proceed to a dismissal for business reasons.
Technical causes are defined as changes, among others, in the field of the means or
instruments of production. Nowadays it is not the main cause of restructuration
alleged by companies because it tends to be complementary to the other causes, but it
is foreseeable that it will gain importance as new technologies are introduced in
companies.
Organizational causes are defined as changes, among others, in the field of systems
and working methods of the staff or the organization of production. Consequently,
they will be applicable when “working methods and distribution of the workload are
affected” (decision of the Spanish Supreme Court of March 3, 2016, [number
361/2016]).
Productive causes are defined as changes, among others, on the demand for the
products or services that the company intends to place on the market. Therefore, if a
productive cause is alleged, the company must prove that a mismatch within the
activity of the company has been produced, such as the la ck of orders or the
progressive fall of production or a ctivity within the company, and that it obliges the
company to modify or decrease the production, making obsolete one or several jobs,
since in case not to eliminate such jobs, an imbalance would be produced to the
company undertakings” (decision of the Spanish Supreme Court of January 31, 2018
[number 78/2018]).

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