The Supreme Court recently found that the implementation of individual redundancies which collectively exceed the applicable statutory thresholds should be carried out in accordance with the legal procedure for collective dismissals, even if agreements have been reached with employee representatives.
The plaintiff (and the appellant before the Supreme Court) was an employee of a company which specialised in agricultural work. The company employed several employees through seasonal employment contracts. These employees would wait to be 'called' to start or recommence their services for the company based on its business needs.
The company implemented different business restructuring-related measures, which triggered a reduction in the volume of its activity and, in turn, the number of seasonal employees that it called.
In view of the direct damage that the company's restructuring measures were causing to its employees, their legal representatives (ie, the works council), together with their trade union, planned an indefinite strike involving all of the company's employees.
According to a formal communication issued by the employee representatives and the trade union, the strike aimed to persuade the company to provide its employees with sufficient work.
In order to avoid the strike, and considering its current situation, the company reached an agreement with the employee representatives. Under the agreement, a certain number of employment contracts would be terminated and compensation of 25 days' salary per year of service (an additional five days' salary on top of the statutory compensation) would be paid.
As regards the manner in which the employment contracts would be terminated, the following was agreed:
- Seasonal employees would not be called and would thus be unable to work.
- The affected employees would challenge this decision before the labour courts in order to have it declared an unfair dismissal.
One of the affected employees challenged the company's decision, but requested the labour court to declare his dismissal null and void on the basis that the employer had not terminated the employment contracts in accordance with the procedure set out in law.
Under the Workers' Statute, when a certain number of employment contracts (which depends on the number of employees at a company) are terminated in a 90-day period, the specific procedure set out for collective redundancies must be observed. In particular, this procedure must be followed when the dismissal affects at least:
- 10 employees in companies which employ fewer than 100 employees;
- 10% of the workforce in companies which employ between 100 and 300 employees; and
- 30 employees in companies which employ more than 300 employees.
At first instance, the labour court sustained the lawsuit and declared the dismissal null and void, concluding that the employment termination had been implemented within the framework of a collective dismissal (provided that the applicable threshold had been exceeded). Therefore, the employer should have followed the relevant legal procedure.
The company appealed the first-instance judgment and the Murcia High Court partially sustained the appeal. Therefore, the dismissal was declared unfair.
The employee appealed the Murcia High Court's ruling before the Supreme Court, which sustained the appeal by declaring the dismissal null and void.
Based on its own judicial precedents, the Supreme Court concluded that the dismissal was void, based on the following arguments:
- The company had implemented several employment terminations exceeding the statutory thresholds; therefore, the legal procedure for collective redundancies should have been applied.
- The foregoing applied irrespective of the fact that the company had not implemented the employment terminations through redundancies (but rather by not engaging seasonal workers).
- Even if the company had reached an agreement with its works council in the context of the strike, such an agreement is not grounds to avoid the application of the legal procedure for collective dismissals when the legal requirements are met (ie, the dismissals exceed the applicable thresholds within a 90-day period).
Based on the above, the Supreme Court overturned the Murcia High Court's ruling and declared the employee's dismissal null and void.
This case was particularly complex due to the fact that the employment terminations were not de facto implemented through a redundancy. Instead, the company did not call employees to work (an action which is deemed a dismissal if it is unjustified).
In any case, when several employment contracts have been terminated gradually and on an individual basis, it is essential to analyse the type of termination and the period in which they have been carried out in order to verify whether the collective dismissal thresholds have been exceeded.
For these purposes, it is not only redundancies and dismissals stricto sensu which must be considered, but also other types of employment termination, such as the termination of:
- employment contracts due to substantial changes in working conditions; and
- fraudulent fixed-term employment contracts.
The above analysis should help employers to avoid the potential risks and penalties for failing to apply the collective dismissal procedure. These include the nullity of employment terminations and administrative fines of up to €187,515.
For further information on this topic please contact César Navarro or Alejandro Gil at CMS Albiñana & Suarez de Lezo by telephone (+34 91 451 9300) or email ([email protected] or [email protected]). The CMS Albiñana & Suarez de Lezo website can be accessed at www.cms-asl.com.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
