Difficulties of the employment relationship

Redundancy Procedures

One of the employer’s powers to temporarily adapt the volume of staff to an unfavourable economic situation is the measure of the suspension of employment contracts and the reduction of the working day, which must be implemented through a Redundancy Procedure (ERTE). Whenever feasible, the measure of reducing working hours will be prioritised over the suspension of contracts.

Grounds: Redundancy owing to Economic, Technical, Organisational or Production reasons (ERTES ETOP):

These procedures must be justified on economic, technical, organisational or production grounds.

Economic: When it can be gleaned from the earnings of the company that there is a negative economic situation, in cases such as the existence of current or anticipated losses, or a persistent reduction in its ordinary income level or sales. In any case, it will be assumed that the decrease is persistent if for two consecutive quarters the level of ordinary income or sales of each quarter is lower than that registered in the same quarter of the previous year.
Technical: When changes occur, inter alia, in the field of the means or instruments of production.
Organisational: Changes, inter alia, in terms of staff working methods and systems or in the way in which production is organised.
Production: Changes, inter alia, in the demand for the products or services that the company intends to place on the market.

Types of procedures depending on the measure to be adopted:

Suspension of employment contracts: This consists of temporarily interrupting, completely, the provision of services of all or part of the workforce, with no salaries being accrued during the suspension period.
Reduction of working day: The working day of each affected worker is reduced between 10% and 70%, on a daily, weekly, monthly or annual basis.

Common effects:

The application of the measure requires the company's intention to be previously communicated to the Directorate-General of Employment and Training of the Regional Ministry of Industry, Employment and Economic Promotion of the Principality of Asturias and, concurrently with said communication, a period of consultations is commenced with the legal representation of the workers, lasting no more than 15 calendar days - 7 calendar days if the company has a workforce of less than 50 people - whereby negotiations must be carried out in good faith to try to reach an agreement. Once this consultation period has ended, whether or not an agreement has been reached with the representation of the workers, the company will inform the employment authority and the negotiating committee about the decision it has adopted and administrative authorisation will not be required for the application of the measure.
This collective measure must be processed regardless of the number of workers affected.
The company must continue to pay all Social Security contributions, although it will have the power to voluntarily request an exemption of 20% of the business contribution for common contingencies, which will be conditional on the carrying out of training actions and the maintenance of employment of the affected workers during the 6 months following the end of the validity period of the procedure. Non-compliance will give rise to the obligation to reimburse any exempted social security contributions in relation to the workers in respect of whom this commitment has been breached.
The worker may receive unemployment benefits during the affected period.
No type of indemnity or compensation is generated to the benefit of the worker, without prejudice to that which may be agreed upon within the consultation period.
The company must establish at the beginning of the ERTE the duration of the measure to be applied, without there being a legal limitation on the maximum duration - without losing sight of the necessarily temporary nature of the measure - and with the possibility of applying a single extension whose requirement must be previously discussed with the representation of the workers.
The company may allocate or release the workers included in the ERTE, depending on the alteration of the circumstances that led to the procedure.
During the period of validity of the file, overtime may not be carried out, nor any new outsourcing of services established nor new staff taken on, except on duly justified grounds.

ERTES due to force majeure.

Companies may also suspend employment contracts or reduce the working hours of workers - the reduction must be included between a minimum of 10% and a maximum of 70% - on grounds deriving from force majeure, upon a request from the company addressed to the Directorate-General of Employment and Training of the Regional Ministry of Industry, Employment and Economic Promotion of the Principality of Asturias and with simultaneous communication to the legal representation of the workers.

The decision by said body must be issued within a maximum period of 5 days as from the request, - being upheld if no answer is given - with said decision being limited to verifying whether or not the force majeure alleged by the company occurs, taking effect, if favourable, as from the date of the event causing force majeure.

The effects on employment contracts are the same as those already explained in section 7.1.3., although with the difference that, in ERTES due to force majeure, the exemption from Social Security contributions – in relation to the employer contribution due to common contingencies - will be 90%, always subject to the same requirements as those already described.

Substantial alterations to the working conditions

Another of the company's powers to organise work based on its needs and situation is to be able to modify the working conditions that govern the contractual employment relationship.

In addition to any non-substantial alterations and changes that the company may introduce unilaterally and without the need for any prior procedure within its organisational and management power, there is also the possibility of substantially modifying the most relevant conditions of the employment contract, although in this case a series of prior formalities and justification of the measure are required.

The determination of whether or not the measure is substantial does not depend on the contractual condition subject to variation, but on the importance or relevance that said modification entails for the worker and the greater or lesser damage that could arise for them.

Contractual conditions subject to modification:

Working day.
Schedule and distribution of work time.
Work regimen in shifts.
Compensation system and salary amount.
Work system and performance.
Functional mobility to permanently perform the duties of another professional group.
Any other contractual conditions that involve a substantial modification.

Grounds justifying the substantial modification of conditions:

As is the case for suspensions of employment contracts and reductions in working hours, the measure must necessarily be justified by economic, technical, organisational or production reasons, as long as they are related with competitiveness, productivity and technical or work organisation in the company.

Procedimiento:

Unlike that which occurs with suspension and reduction measures, a distinction must be made between substantial modifications of individual and collective conditions.

Modifications are only deemed to be collective which in a period of 90 days – calculated, both forward and backward – affect:

10 workers in companies that employ less than 100.
10% workers in companies of between 100 and 300.
30 workers in companies that employ more than 300.

Taking into account the previous differentiation, the procedure is as follows:

In the case of an individual, it shall suffice to submit a written communication to the person concerned and to the legal representatives, which shall clarify the reasons and effects of the modification, giving minimum notice of 15 calendar days prior to the planned modification date.
If it is collective, prior to the handover of individual communication – in this case with minimum notice of 7 calendar days – a consultation period of no more than 15 calendar days must be held with the legal representation of the workers. This process is internal and it should thus not be communicated to the employment authority, unlike that which is foreseen for ERTES.

Efectos

The employer's decision has immediately enforceable effects and it must be complied with by the worker concerned as from the same date of effect of the measure, without prejudice to any legal actions that the person concerned may bring, which are the following:

Compliance with and acceptance of the substantial modification, which thus becomes permanent.
Judicial challenge within a period of 20 business days as from the notification of the employer's decision, to which end a process is foreseen before the employment courts of an urgent nature and with preferential processing, without any need for prior administrative conciliation.
Unilateral termination of the contract by the worker, but solely in cases of modifications that affect working time (working day, schedule, distribution and shift work regime), remuneration system, salary amount and duties, and provided that in these cases harm to the worker is proven. In this case, compensation would be accrued for the amount of 20 days of salary per year worked, with a limit of 9 monthly payments. This decision option can also be exercised, always in these same cases, when the worker had previously chosen to judicially challenge the modification and the judgment had rejected his claim.

Geographical mobility

In addition to the specific cases of substantial modification of conditions, the employer's power to geographically vary the place of provision of services to the worker is also envisaged. If geographical mobility does not imply the need to change residence, the modification does not require any formality or justification - except as provided for in the specific collective bargaining agreement - and it falls within the management and organisation power of the company.

In the event of a change of residence, the geographical mobility measure involves a series of formalities and requirements and it must be justified by economic, technical, organisational or production reasons, varying the procedure depending on whether it is a transfer (permanent nature) or a (temporary) posting:

In the case of transfers, regarding the latter as being of a permanent nature or with a duration of more than 12 months in a reference period of 3 years, it will also be necessary to distinguish between whether it is collective or individual (see section 7.2.3.). It will be deemed collective when the transfer affects the entire workforce of the workplace, as long as it employs more than 5 workers.
- If it is collective, a consultation period lasting no less than 15 calendar days must be followed with the legal representation of the workers, whereafter the measure must be notified to the person concerned, giving minimum notice of 30 calendar days.
- If it is individual, a written communication must be submitted directly to the worker and the legal representation, giving minimum prior notice of 30 calendar days regarding the effective date.
- In both cases, once the transfer decision has been notified, the worker may choose the options provided for the substantial modification of the conditions (see section 7.2.4), although in this case the resulting compensation is 20 days of salary per year worked, with a limit of 12 monthly payments.
In the case of postings, always of a temporary nature but which also require changes in the residence of the worker, the company must inform them sufficiently in advance, which must be at least 5 working days when the posting is for a period greater than 3 months, with this being regardless of the number of people affected, as no distinction is made between an individual and collective nature.

Employer subrogation

Amongst the most daily operations in the life of the company is the acquisition or sale of other companies or business units. The mere transfer of shares or stakes in a company does not formally imply a case of business subrogation from an employment point of view, since there is no real substitution of the employer for the worker, but only a change in the ownership of the share capital of said company.

On the contrary, when it comes to the acquisition of a business or an autonomous productive unit, taken to mean the transfer of a set of organised means to continue carrying out an economic activity, there is actually a substitution of the employing company for the workforce of employees included in said production unit or business being transferred.

In these cases, there is thus a change in ownership between the employer and the worker, who should not be affected in terms of the working conditions they already enjoyed in the previous company.

Both companies, both the transferor and the transferee, must give their respective bodies of legal representation of the workers sufficient advance notice and in any case, before carrying out the transfer, of the following aspects:

Expected date of transfer.
Reasons for transfer.
Legal, economic and social consequences for workers as a result of the transfer.
Planned measures to be adopted, where applicable, with respect to the workers concerned.

In the event that there are no representatives of the workers, this information must be provided directly to those who may be affected by the transfer.

The effects deriving from employer subrogation are the following:

The new employer is subrogated as regards the employment and Social Security rights and obligations of the previous one.
The transferor and the transferee will be jointly and severally liable for any outstanding employment obligations arising prior to the transfer for a period of 3 years.
Both will also be jointly and severally liable for any obligations arising subsequently, when the transfer is declared to be an offence.
The employment relations of the workers concerned will continue to be subject to the collective bargaining agreement which was applicable in the transferring company at the time of transfer, unless agreed otherwise.
If, as a result of the transfer, it is wished to adopt employment measures, a consultation period must begin in any case prior to the effective date of said measures.

Outsourcing and temping agencies

Outsourcing

Companies may outsource those services or works which are required to carry out their activity. The regulation differs according to the type of services.

Contractors of auxiliary services, defined as those which do not pertain to the company's own activity, an example thereof being security or cleaning. In these cases, only a subsidiary liability of the main company is established - which must be declared subject to a procedure prepared for this purpose and solely when the subcontractor has been declared insolvent - with respect to any Social Security benefit debts accumulated by said subcontractor.
Contractors of services related with the main company's own activity. In these cases, a series of effects and obligations occur:
- The principal company must verify that the contractors are up to date with the payment of Social Security contributions, being released themselves from liability if the General Treasury fails to issue a clearance certificate within the non-extendable period of 30 days as from the submission of the application.
- The principal company will be jointly and severally liable during a period of 3 years as from termination of the assignment, for any Social Security obligations taken on by the contractor and the subcontractors during the term of validity of the contract.
- The principal company will also be liable, during a period of 1 year as from the end of the assignment, for any salary obligations taken on by the contractors and subcontractors during the contract period and with respect to the staff employed therein.
- The employees of the contractor or subcontractor must be informed in writing of the identity, registered office and tax identification number of the principal company for which they are providing services at any time.
- Both the principal company and the contractors and subcontractors must also inform their respective bodies of legal representation of the workers about the performance of said contracts, with detailed information on the purpose thereof.
- The collective bargaining agreement applicable to the contractor and subcontractors will be that pertaining to the sector of the activity carried out, unless there is another applicable sectoral agreement.

Temping Companies (ETT).

The hiring of workers through duly authorised and registered temping companies is the only form of the temporary transfer of workers between companies.

The transfer will be formalised through an availability contract to be entered into between the company that requires the service (the user company) and the temping company, which will in turn formalise the employment contract directly with the employee which it will subsequently transfer to the user company.

This provision of services will have the following characteristics:

It may only be concluded for the performance of work under the same assumptions and under the same conditions and requirements that the user company could enter into a fixed-term contract (circumstances of production, substitution contracts, internships or for training and apprenticeship).
Under no circumstances may it be entered into to replace striking workers or to carry out work or occupations which are especially dangerous for health and safety at work.
Nor may it be used to cover the same job that has been repaid in the immediately preceding 12 months, due to unfair objective dismissal, collective dismissal or due to termination of the contract at the request of the worker, unless force majeure has occurred.
The user company must guarantee the transferred workers the same employment rights and the same working conditions (length of working day, remuneration, overtime, leave periods, holidays and bank holidays) as would have pertained to them if they had been hired directly.

Practices to avoid

Illegal transfer of workers

Besides that which is envisaged for Temping Companies, the transfer of employees between companies is considered illegal under employment regulations, based on the main premise that workers can only be under the management and organisation of the employing company for which they directly provide services under an employment contract.

It is thus advisable for the outsourcing between companies referred to in section 5.7.5 not to involve any mixing of their staff, and in all cases the employing entity must retain the management of the activity carried out by its staff.

Under this main premise, it is thus considered that there is an illegal transfer of workers when any of the following situations occurs:

When the object of the service agreements between companies is limited to the mere provision of the workers of the transferring company to the transferee.
The transferring company does not have its own stable activity or organisation or fails to have the necessary resources to carry out the activity.
The transferring company does not exercise the functions inherent in its status as an employer.

The consequences of the declaration of illegal transfer are essentially the following:

Joint and several liability of both companies, the transferor and the transferee, with respect to the obligations taken on with employees and with Social Security.
Administrative sanctions (it is considered to be a very serious employment violation with a fine of between €7,501 and €225,018).
It may also be regarded as an offence against workers’ rights.
If the existence of an illegal transfer is declared, the affected workers will have the right to acquire permanent status in the transferring company or in the transferee. If they opt for the latter, which is usual, they will have the right to enjoy the same conditions as the employees of the transferee who provide services in the same or equivalent job, although length of service will be calculated as from the start of said illegal transfer.

Labour enterprise group

Consideration of a business group must be differentiated at a commercial level and at an employment level.

The business group from a commercial point of view has no impact or relevance in terms of employment law, and no type of non-compliance or extension of responsibilities arises between them merely from the belonging or inclusion of the companies in the same business holding or group or for having the same address, provided that each of them has its own legal personality and operates in terms of employment as autonomous, differentiated employing companies.

On the contrary, when this business group is used abusively and fraudulently, to the detriment of the rights of workers, the figure of the so-called pathogenic employment group arises.

This employment group, prohibited by the regulations, occurs when some or all of the following situations occur:

Confusion of workforces owing to the undifferentiated provision of services for several companies by the same workers who could only provide their work for the company that is their employer in accordance with the employment contract formalised.
Existence of a single fund or confusion of assets between the different companies.
Confusion of company management that implies abusive use of legal personality.
Confusion of the external identity of the companies, appearing as a single company, provided that some of the previous situations also occur.

The declaration of the existence of an employment group of companies, whether by their own recognition, by judicial ruling or owing to a final administrative resolution, triggers a series of important consequences at an employment level since it is considered in this case that all companies function as a single company, with the consequent extension to all of the respective responsibilities and obligations of each of them.

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