Procedures For Terminating the Agreement
The procedure for terminating the agreement varies depending on the reason for termination. The employer may terminate the contract on the following grounds: the worker’s known incompetence; the failure of the employee to adapt to technical changes at work; where jobs need to be eliminated, in which case the employer shall have to base the decision to terminate on financial, technical, organisational or production grounds; The employer shall give the employee written notice, setting out the ground for dismissal and simultaneously providing a severance pay. The notice period shall be fifteen days and the worker shall be entitled to appeal the decision to terminate as an unfair dismissal.
A contract of employment may be terminated by the employer, by instant dismissal based on the employee’s serious breaches and gross misconduct. The employee shall be given written notice of instant dismissal, setting out the grounds on which the dismissal is based and the date on which it shall be effective. Instant dismissal may be considered justified, unjustified, or unfair. Dismissal shall be considered justified where there is evidence of the breach argued by the employer in the written notice and this shall validate termination of the employment contract and leaves the employer with no right to compensation. When the instant dismissal is considered unjustified, the employer shall choose between reinstating the employee and making the corresponding severance payments.
It is considered unfair dismissal where the employer fails to satisfy the legal requirements and could even be considered null and void when termination is due to any of the events of discrimination prohibited in the Constitution or in the Workers’ Statute Act or where collective dismissal limits have been exceeded.
The employee’s decision to terminate the contract must be voluntary and freely made. The employee must notify the employer of his/her unilateral decision to terminate the contract of employment, observing the relevant notice period, and satisfying certain requirements. The employee is entitled to terminate the contract on the following grounds: substantial changes in the working conditions; failure to pay or continuous delay in payment of the agreed salary and any other serious breach of obligations by the employer. The Workers’ Statute Act provides that where the contract of employment is cancelled based on any of the above grounds, the employee shall be entitled to the severance pays specified in the event of unjustified dismissal.
Termination On Notice
The employment contract can be terminated in the events provided for in the contract, upon expiry of the agreed term or completion of the contract work, namely in the following kind of contracts: training contracts, part-time, permanent-intermittent and hand-over contracts, fixed-term contracts and work or service specific contracts. There are different notice periods depending on the length of the contract.
Termination By Reason Of The Employee's Age
The contract can be terminated when the employee reaches the statutory retirement age, pursuant to the Social Security regulations, if it is foreseen in the applicable Collective Bargaining Agreement, in compliance with the requirements established in the Tenth Additional Provision of the Workers' Statute.
Automatic Termination In Cases Of Force Majeure
Employment contracts may be terminated on grounds of Force Majeure, but such termination has to be previously authorised by the corresponding administrative body, after an investigation to confirm that the performance of services by the employee is impossible. The indemnity in such cases will be 20 days salary per year worked.
Collective dismissal shall be understood as the termination of employment contracts for economic, technical, organizational or production reasons when, within a period of ninety days, it affects:
- —Ten workers in companies with less than one hundred workers.
- —Ten percent of the workers in companies with between one hundred and three hundred workers.
- —Thirty workers in companies with more than three hundred workers.
- —When it affects the entire workforce in companies with more than five workers.
To carry out a collective dismissal the company must comply with the procedure established in Article 51 of the Workers' Statute, starting a period of consultation with the workers' representatives with a duration not exceeding thirty days or fifteen days when the company has less than fifty workers.
The parties must negotiate in good faith the conditions under which the collective dismissal will be implemented, trying to avoid or reduce as much as possible the degree of affection of the collective dismissal. The consultation shall take place in a single negotiating committee. Where there is more than one workplace, the committee shall represent the workplaces concerned and shall consist of no more than thirteen members.
At the end of the consultation period, the employer shall inform the employment authority of the agreement reached, if any (the employment authority may contest the agreement) and, if there is no agreement, shall inform the employment authority and the workers' representatives of the final decision on the dismissal and its conditions.
The employer's decision may be contested by the individual workers concerned through dismissal proceedings. If the claim is submitted by the workers' representatives collectively, the procedure for individual actions initiated shall be suspended until the claim is resolved.
Termination By Parties’ Agreement
The parties may terminate the contract by mutual agreement. The most common scenario is the employee’s request to finish his/her employment relationship with the employer and the acceptance of such decision by the employer. Both parties sign a liquidation agreement by which all pending obligations between the parties are settled. In this case, the employee is not entitled to any severance payment or to unemployment benefits.
Directors Or Other Senior Officers
There are special rules to terminate a director’s or senior officer’s employment, established in a specific law (Royal Decree 1382/1985). In case of termination by the senior manager, at least three and not more than six months’ notice shall be given, depending on the contract term. The senior manager may terminate the contract and be entitled to the severance pays agreed in his/her employment contract, based on serious breaches of contractual obligations by the employer. The employment contract may be also terminated upon withdrawal by the employer or by dismissal based on a serious breach by the senior manager with the same above-mentioned notice period. The senior manager shall be entitled to the severance pays agreed therein.
Special Rules For Categories Of Employee
There are special rules for some categories of employees, such as professional sportsmen practicing sport as their job, who are sponsored by an organization within a sport entity, and who are being paid for this performance. Additionally, the Workers’ Statute Act provides special rules for some other employment categories: i) housework, ii) senior management personnel, iii) disabled people employed in special employment centres, iv) harbour stevedores, etc.
Although it is a concept of Anglo-Saxon origin, with little tradition within the Spanish jurisdiction, there are already regulations in this regard. Specifically, article 31bis of the Criminal Code determines the company's obligation to adopt accusation channels by providing that the company will be exonerated from criminal liability if it adopts management models that include surveillance measures to prevent crimes, imposing the obligation to report possible non-compliance.
Similar concepts to this figure may also be found in regulations on data protection and on effective gender equality.
Currently, the applicable law on Whistleblowing is Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of individuals who report infringements of Union law. It was published in the Official Journal of the European Union on 26 November 2019, setting a deadline of two years for the implementation of its guidelines, which must be applied by member countries from 21 December 2021.
The objective of these regulations is to protect companies in which the commission of certain crimes is likely (frauds and money laundering; non-compliance with data protection regulations; tax evasion; labour non-compliance; etc.), and to comply with these regulations, communication channels must be established to encourage the reporting of criminal acts for their subsequent resolution.
The implementation of these measures is mandatory for companies with more than fifty employees.
Specific Rules For Companies in Financial Difficulties
There are specific rules for employees working in a company which is in financial difficulties, namely when the company enters into insolvency or bankruptcy. According to the Workers’ Statute Act, a collective dismissal or redundancy procedure shall be deemed to exist where termination of the contracts of employment is based on financial grounds. Employees whose contracts are terminated as a result of the redundancy procedure, shall be entitled to receive a severance pay of 20 days’ pay for each year of service, up to a maximum of 12 months.
Special Rules For Garden Leave
The figure of the Garden Leave has no specific regulation, as it is a concept of English law origin. Specifically, it refers to the situation of an employee who is excluded from the right to go to work, while maintaining his or her right to receive remuneration. This figure is usually used in cases where the employee has been dismissed or has resigned, and this situation applies to him/her during the days that run from the notification to the effective date.
Although it is not specifically regulated in the Spanish jurisdiction, the company is entitled to prevent the employee from going to work, while maintaining his or her remuneration, for a certain period.
Restricting Future Activities
Generally, the employer may establish an obligation of non-competition, for a period of not more than two years after the termination of the employment agreement the employer has to prove an effective industrial or commercial interest and must offer the employee financial compensation.
Severance payments depend on several circumstances, such as the length of the contract, the salary received and the seniority of the employee, as well as the kind of dismissal. When the dismissal is considered unjustified or unfair, the employee shall be entitled to a severance payment of 33 days’ salary per year worked and, in some cases, a severance payment of 45 days’ salary per year worked, depending on the date of the beginning of the labour contract. Severance payments for dismissals based on objective and economic grounds are for 20 days’ salary per year worked.
Special Tax Provisions And Severance Payments
Severance payments, up to the established limits, are exempt from Social Security payments and income tax withholding.
Allowances Payable To Employees After Termination
Following termination, the employer is not required to contribute towards any allowances payable to the employee, apart from the severance payments above indicated.
However, Spanish legislation provides that companies making a collective redundancy must contribute a sum of money to the Public Treasury when dismissing people over 55 years of age and a series of additional requirements are met,
Time Limits For Claims Following Termination
In case of unjustified, unfair or dismissal based on objective reasons, the employee has 20 days from the termination notice to present the corresponding claim before Court.