Redundancies

Redundancies and dismissals are an inevitable part of employing staff and as a company owner, you will have to deal with this aspect at some point. You might have to let an employee go because of your business situation or because their role is no longer relevant. Or have to fire a staff member for not fulfilling their part of the contract. Whatever the reason, redundancies are an intrinsic part of a company.

As is the case in most countries, Spain has strict employment legislation and if you need to fire or make a member of staff redundant, you must follow the rules to the letter. It’s therefore essential to consult a professional with experience in employment law before you dismiss an employee. At Costaluz Lawyers, we have a specialised team who will be happy to offer advice. Get in touch now.

However, as well as professional advice, it’s also a good idea to have a basic understanding of redundancies in Spain.

Under what circumstances can an employment relationship in Spain be terminated?

Spanish employment legislation specifies four instances for ending a contract:

End of the fixed contract.
The employee’s wish to end the contract.
Redundancy (known as objective dismissal in Spain) of the employee for financial or organizational reasons.
Disciplinary dismissal of the employee for misconduct or nonfulfillment of the contract.

What’s the process when a fixed contract comes to an end?

In most instances, when an employee’s contract comes to an end and you do not wish to renew, the legal process is straightforward. You may, however, be liable for severance pay, the terms of which are set out in the contract. It is typically 12 days salary for every year worked (the equivalent of one day for every month).

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What about when an employee decides to leave the company?

Every employee has the right to terminate their own contract with a company and the process is usually straightforward providing the employee fulfills their period of notice. Employees must usually give their notice one calendar month before they leave.

What are the grounds for objective dismissal and how does it work?

In English, an objective dismissal is usually referred to as redundancy and usually occurs for economic, business, productive or organizational reasons. For example:

The company is in financial difficulties and needs to scale back its costs.
The company wishes to reorganize a department and streamline its staff.
The company is subject to a merger or acquisition by a third party, which necessitates changes in staff.

How does the company go about terminating contracts under redundancy?

Spanish employment legislation allows for redundancies (objective dismissal) at any time within a company. However, the company must justify the reason for the redundancies and comply with the following procedure:

You must issue each employee affected by your redundancy plans with a letter terminating their employment with you. The letter must state that their contract is ended, the date of its termination and the reasons behind it.
You must pay compensation to each employee, usually the equivalent of 20 days salary for every year worked up to a maximum of 12 years.
You must give minimum notice of 15 days from the date the employee receives the letter unless you agree to pay them in lieu.

Redundancies are not always plain sailing, particularly if the employee contests the redundancy and you may find yourself facing legal action from your employees.

What about disciplinary dismissal?

In simple English, a disciplinary dismissal is when you need to fire an employee. Grounds for dismissing someone are usually for misconduct or nonfulfillment of their contract. Some examples include:

Repeated impunctuality.
Repeated absences with no justification.
Regular failure to do or complete the assigned work.
Verbal or physical abuse towards anyone at the company.
Sexual harassment or misconduct.
Racism, sexism or any type of harassment towards anyone at the company because of their faith, sex, disability or sexual orientation.

Once the misconduct or failure to comply with a contract comes to your notice, you must take action within 60 days and no later than 6 months afterwards.

Is there anything to bear in mind regarding disciplinary dismissal?

Yes, several factors will influence your decision:

The position of the employee in the company. Those in management positions have less protection under Spanish employment law and dismissals come under mercantile law.
The existence of a collective agreement with a union. If there is one, the dismissal must also comply with its terms to be considered fair.
If the employee has extra protection by law. Examples include union representatives, pregnant women and employees on parental leave. Additional legislation applies in these cases.

How do you dismiss someone?

You must issue the employee with a letter stating that you are ending their employment with you, its effective date of termination and the exact reasons for dismissal. Describe your reasons in detail as this letter may be used as evidence if the employee takes you to court for unfair dismissal.

You are under no obligation to pay compensation or give the employee a period of notice. Dismissal can be immediate if you wish.

What’s the legal process in a disciplinary dismissal?

As you might expect, disciplinary dismissals are potentially complex and involve litigation if the employee disputes your grounds for dismissal. If this is the case, the employee must lodge a claim against you for unfair dismissal within 20 days of receiving your letter.

You are then both subject to a conciliation process whose aim is to bring both parties to an agreement. Spanish employment law actively advocates and encourages conciliation, which may be reached at any point in the process even when court proceedings are underway.

If there is no agreement, the employee may start legal proceedings against you.

What are the possible outcomes of legal action?

A court has three possible options and must declare the dismissal fair, unfair or void.

Fair dismissal – the court upholds your decision and no further action or compensation is required on your part.

Unfair dismissal – you must either reinstate the employee or pay them compensation. The amount depends on how long the employee has worked for you and when they started as follows:

Employment prior to 11 February 2012: 45 days pay per year of service with a maximum of 42 months salary.
Employment after 11 February 2012 – 33 days salary per year of service up to a maximum of 24 months salary.

Void dismissal – you must usually reinstate the employee and compensate them for loss of earnings from the date you terminated the contract to the court sentence.

Where can I find professional help?

As the information in this article shows, making staff redundant or firing them is a complex process and one that you must follow carefully to avoid possible legal action and costs.

At Costaluz Lawyers, we offer professional advice on all aspects of employment law including redundancies in Spain. Get in touch with our team for a free consultation now or fill in the form below.