The Employment Contract

Minors aged under 16 may not be contracted. Workers under 18 years of age may not perform night work, particularly dangerous work or work overtime.

Ordinary employment relationship

An employment relationship is taken to mean one in which the provision of services is carried out by an employee who is subject to the management and organisational power of an employer. Accordingly, the characteristic elements of the employment relationship are dependency, employment by a third party and the very personal nature of the service.

This provision of services will be elaborated upon in an employment contract which will be subject to the provisions of Royal Legislative Decree 2/2015 of 23 October which approves the Workers' Statute (the "Workers' Statute").

The importance of the collective agreement in the regulation of the employment relationship must be highlighted, since these regulations specify, and sometimes expand, the rights and obligations provided for in the law, adapting the content of the employment contract to the nature of the business activity carried out, as well as the specific features of the geographical area in which it takes place.

This concept excludes those who carry out an activity on a self-employed basis, in other words, assuming the risks of business activity and without being subject to any management authority.

Furthermore, the activity carried out by public officials, work undertaken as a result of friendship, benevolence or good neighbourliness and family work are excluded from the concept of an employment relationship, unless the status of employees of those who carry it out is demonstrated.

Special employment relationships

Taking into account the personal characteristics of the workers, as well as the activity carried out, the following are considered to be special employment relationships and are thus subject to their own regulations:

That of senior management staff.
That of family domestic service.
That of those convicted in penitentiary institutions.
That of professional athletes.
That of artists in public shows.
That of people who intervene in commercial transactions on behalf of one or more entrepreneurs, without assuming the risk and responsibility of the latter.
That of people with disabilities who provide services at special employment centres.
Those of minors subject to the fulfilment of detention measures to comply with their criminal liability.
That of residence for the training of specialists in Health Sciences.
Those of lawyers who provide services in law firms.

As they are governed by their specific regulations, these special employment relationships fall outside of that which is stated in this document.

The special senior management employment relationship

This special employment relationship is worthy of specific mention given that it is common to formalise this employment relationship with the person who occupies the highest position on the business organisation chart without being part of the administrative body. This relationship is defined by the breadth of powers available to the senior manager who must act in relation to the general objectives of the company, with full autonomy and responsibility and solely bound by the guidelines granted by the company's governing body.

It is regulated in Royal Decree 1382/1985 of 1st August which regulates the special employment relationship of senior management staff (RD 1382/1985).

The special trust on which this employment relationship is based determines the following specialised aspects:

Regulación:

The will of the parties prevails and it must be assumed that the stipulations of Royal Decree 1382/1985 constitute a minimum necessary right which may be improved by way of an agreement of the parties.
Common employment legislation, including the Workers' Statute, will only be applicable when RD 1382/1985 specifically establishes this or this is agreed upon by the parties.
As regards anything not regulated, and in the absence of the specific agreement of the parties, civil or commercial legislation and their general principles will apply.

The contract:

Must be formalised in writing. However, even if the contract has not been formally concluded as senior management, the courts may recognise this status if it is proven that the actual existing relationship pertains to that of a senior manager.
The contract may have the term that the parties determine.
The trial period may not exceed 9 months if the contract is indefinite.
The senior manager may not enter into other employment contracts with other companies unless authorised to do so by the employer or in writing.

Internal promotion

In the event that the employee was part of the company as an ordinary worker and was promoted to senior management, it must be stated in writing whether the previous ordinary relationship is replaced by that of senior management or if it is suspended. In the absence of agreement, it will be assumed that the common employment relationship has been suspended.

Extinción

It may be terminated:

a. According to the wishes of the senior manager

There must be a notice period of 3 months, extendable to 6 months by way of an agreement between the parties in indefinite contracts or contracts lasting more than 5 years.
He will have the right to receive the agreed compensation, and failing that, the equivalent of seven days of salary in cash per year of service with a limit of six monthly payments.
One of the following circumstances must occur:
- Substantial modifications to working conditions that significantly harm their professional training, undermine their dignity or which are decided in serious violation of good faith.
- Non-payment or continued delay in payment of the agreed salary.
- Any other serious breach of contractual obligations, except for force majeure.
- Succession of a company or a significant change in its ownership which results in a renewal of its governing bodies or in the content of its main activity, provided that this occurs within three months following such changes.

b. At the discretion of the employer

Owing to withdrawal: without the need for any justification, the withdrawal may be communicated, respecting the agreed prior notice period and, failing that, with minimum prior notice of 3 months (it may be extended by agreement between the parties to 6 months if the contract is indefinite or has a longer term than 5 years). The compensation agreed in the contract will accrue and, failing that, the equivalent of seven days of salary in cash per year of service with a limit of six monthly payments.
As regards disciplinary dismissal based on a serious, culpable breach by senior management. If the dismissal is declared unfair, the compensation amount to be paid will be the amount agreed upon in the contract. In the absence of any agreement, it will be the equivalent of twenty days of salary in cash per year of service and up to a maximum of twelve monthly payments.

c. By dint of the grounds and procedures provided for in the Workers' Statute.

Types of employment contract

We can differentiate between three main types of hiring: indefinite, temporary and for training.

Employment legislation on hiring has been reformed, reducing the possibilities of temporary hiring. This is why the employment contract is assumed to have been concluded for an indefinite period and temporary hiring can only be concluded for reasons established by law.

Indefinite contract

This is an employment contract which is concluded without setting time limits on the duration of the provision of services. The contract may be concluded on a full or part-time basis or for the provision of permanent seasonal services.

As a subtype of the indefinite contract, the permanent seasonal contract will be concluded for the performance of work of a seasonal nature or linked to seasonal production activities, or for those that do not have any such nature but which, as their provision is intermittent, have specific, definite or indefinite implementation periods.

The Public Employment Service has an indefinite contract template.

Temporary contract

This is an employment contract which is concluded for a limited temporary period. For it to be understood that there are justified grounds for temporary employment, it will be necessary for the contract to precisely specify the enabling cause for the temporary hiring, the specific circumstances that justify it and its connection with the planned duration.

Failure to comply with the rules established for temporary hiring will mean that workers acquire permanent status.

There are two types of temporary contract:

Contract in line with production circumstances:

This contract allows two variants:
- a. To meet the occasional and unpredictable increase in activity and the fluctuations which, even if they are the normal activity of the company, generate a temporary mismatch between stable employment and that which is required as long as they do not pertain to seasonal or cyclical activities typical of permanent seasonal employment.
  
  Its maximum duration is 6 months, although the sectoral collective bargaining agreement may establish its extension to a maximum of one year.
  
  If it has been agreed for a duration less than the legal maximum allowed, it may be extended only once by way of an agreement between the parties.
- b. To cover any occasional, predictable situations which have a reduced, limited duration deriving from the increase in activity.
  
  This variant may only be used by companies for ninety non-continuous days per year, regardless of the workers hired in said timeframe.
  
  The termination of the contract due to expiry of the agreed time entitles the worker to receive compensation equivalent to the proportional part of the amount which would result in the payment of twelve days of salary per year of service or the amount established, where applicable, in the applicable collective bargaining agreement.
Contract for the replacement of workers:

This contract may be concluded to replace workers with the right to a guaranteed workplace and the name of the person replaced and the reason for their replacement must be specified in the contract. The provision of services may begin up to fifteen days before the absence of the replaced person occurs.

Furthermore, this contract may be entered into to complete the reduced working day by another worker when said reduction is based on legally established grounds or those provided for in the applicable collective bargaining agreement.

The termination of this contract due to its completion does not involve the accrual of any compensation by law.

Although there are two types of contract, the temporary contract template of the Public Employment Service is unique.

Contract for training

There are two types of contract:

Alternating work-study contract

This sets out to make paid work activity compatible with the corresponding training processes in the field of vocational training, university studies or the catalogue of specialised training areas of the National Employment System.

When subscribing within the framework of level 1 and 2 professional certificates and programmes which form part of the catalogue of specialised training areas of the National Employment System, this may only be arranged for people up to 30 years old.

Amongst other obligations aimed at guaranteeing the acquisition of knowledge, it will be necessary to appoint a tutor, draw up an individual training plan and coordinate between the company and the training centre.

The effective working time may not exceed 65% during the first year or 85% during the second year of the maximum working day provided for in the applicable collective bargaining agreement.

Employees may not work overtime, complementary hours, night work or shift work.

The remuneration will be that provided for in the applicable collective bargaining agreement. In the absence of any provision in the latter agreement, it may not be less than 60% in the first year or 75% in the second year with respect to that determined in the agreement for the professional group pertaining to the duties performed. In any case, it may not be less than the National Minimum Wage.

The term of the contract will pertain to that provided for in the training programme with a minimum of three months and a maximum of two years.

The Public Employment Service has an alternating work-study contract template.
Internship contract

This may be arranged with those who hold a university degree or a middle, higher or specialised qualification, a professional master's degree, as well as those who have an equivalent degree in artistic or sports education from the educational system which entitle or qualify for the exercising of work activity.

An essential prerequisite is for the contract to be formalised within 3 years, or 5 years if it is concluded with a person with a disability following the completion of the attendant studies.

The remuneration will be that determined in the collective bargaining agreement applicable in the company or, failing that, that of the professional group pertaining to the duties performed. In any case, it may not be lower than that established for the alternating work-study contract or the National Minimum Wage.

Its term may not be less than 6 months nor more than one year.

The law does not provide for the accrual of any compensation for the termination of training contracts due to their completion.

Training contracts concluded in violation of the law or those with regard to which the company fails to comply with its training obligations will be assumed to have been concluded as ordinary indefinite contracts.

The Public Employment Service has an internship contract template.

Formal obligations

The employer’s obligations regarding hiring have been set out below:

Training contracts, part-time contracts, permanent seasonal contracts and temporary contracts must be set down in writing. In any case, either party may demand that the contract be formalised in writing even during the course of the employment relationship.
The employer must communicate to the public employment office within ten days following its formalisation, the content of the contracts entered into or their extensions. This communication will be carried out electronically via the application.
The employer will submit to the legal representation of the workers within a period of no more than ten days as from their formalisation, a basic copy of all contracts that must be concluded in writing, with the exception of special senior management employment relationship contracts. This basic copy will be sent to the employment office.
The company must inform people with fixed-term or temporary contracts, including training contracts, about any vacant jobs, in order to guarantee them the same opportunities to access permanent positions as other workers. This information may be provided through a public announcement in an appropriate place in the company or workplace, or through other means provided for in collective bargaining, which ensure the conveyance of the information. Said information will also be transferred to the legal representation of the workers.

Typical agreements in the employment relationship

It is common for the following clauses to be established in employment contracts:

Trial period

It is possible to agree in writing on a trial period during which either of the parties may declare their wish to terminate the employment relationship without alleging any just grounds and without any compensation accruing for the worker.

The purpose of this agreement is that both parties can verify the content of the employment relationship and so they are obliged to carry out the experiences which constitute the object of the contract.

This period will have the maximum duration provided for in the applicable collective bargaining agreement. In the absence of any provision in the collective bargaining agreement, the duration of the trial period will have the following maximum limits:

6 months for qualified technicians.
2 months for other workers.

In companies with less than 25 workers, the trial period may not exceed three months for workers who are not qualified technicians.

In temporary contracts concluded for a period not exceeding six months, the trial period may not exceed one month unless otherwise provided for in the collective bargaining agreement.

A trial period cannot be established in alternating work-linked training contracts. In internship contracts, the trial period may not exceed one month, except as provided for in the collective bargaining agreement.

During the trial period, the employee shall have those rights and obligations pertaining to the work post he performs as if he were part of the workforce, except for those deriving from the termination of the employment relationship which may occur at the behest of either of the parties during the course thereof.

Termination at the employer's request will be void in the case of workers due to pregnancy, as from the date of the start of the pregnancy until the beginning of the suspension period for maternity leave, unless there are grounds unrelated with pregnancy or maternity.

Once the trial period has elapsed without there having been any withdrawal, the contract shall take full effect, including the time of the service rendered in the length of service of the employee in the company.

Situations of temporary disability, birth, adoption, custody for adoption purposes, foster care, risk during pregnancy, risk during breastfeeding and gender violence, which affect the worker during the trial period, always interrupt the calculation thereof provided that an agreement is reached between both parties.

No concurrencia

In relation to professional non-competition, it is necessary to make the following distinction:

During the term of the contract

Non-competition is implicit in the employment contract, so the worker will not be able to carry out activities that involve unfair competition for his employer. Failure to comply with this obligation would constitute grounds for disciplinary dismissal.

However, the limitation of the worker's activity may be extended to any other job or activity, even if it does not constitute competition, by signing an exclusivity agreement which in any case requires the payment of financial compensation to the worker.
After the end of the contract

As long as the employer has an effective industrial or commercial interest, non-competition may be agreed upon after the employment contract has expired by paying the worker suitable financial compensation.

This agreement may not last more than two years for technicians or six months for other workers.

Permanencia

When the employer has provided the worker with specialised training, it may be agreed that the worker will remain at the company for a period of no more than two years. In the event that the worker leaves the job before the agreed period, the employer will have the right to be compensated for any damages caused.

Download full chapter in pdf [+]