Change in the basis for collective dismissals in Spain

In its judgment dated 13 May 2015, the Court of the European Union changed the sphere of influence of Article 51 of the Spanish Workers’ Statute. This article governs collective dismissals due to substantiated economic, technical, organizational or production-related reasons. The basis of these circumstances is no longer centred around the entire enterprise (as formulated in Article 51 of the above-mentioned law), but is limited to the circumstances that prevail at the specific workplace.

The basis is the specific workplace under restructuring

According to the judgment of the Court of the European Union, Article 51 of the Spanish Workers’ Statute violated European Directive 98/59/CE. In particular, this means that the Spanish law must be modified and as a basis for individual and collective dismissals, only the workplace that is affected by the restructuring must be considered (and no longer the entire enterprise).

This, of course, only applies to companies that have more than one workplace. Many companies will be affected, due to the above reasons, and they should distribute burdens throughout its various workplaces. Therefore, in the future, restructuring of an entire enterprise through individual or collective dismissals, which previously could be performed in compliance with Article 51 for the procedure for collective dismissals, will no longer be permissible.

The Court has not evaluated the scope of the basis of assessment of the workplace, that is, whether those criteria also apply to the negotiation process of collective dismissals. In this case, the documents verifying the dismissal must relate to reasons in the workplace and not across the entire enterprise. However, this question requires a review by the Spanish courts in the near future.

The number of collective dismissals will increase

As a result of this ruling, it is likely that there will be an increase in the number of mass dismissals in addition to court rulings that declare this form of procedural irregularities in the constitutional phase void (which does not happen in the case of individual dismissals). Thus, entrepreneurs will lose flexibility and responsiveness, and the information obligations with respect to the employees’ representatives will rise.

Leonard Dorny & Karl H. Lincke

This article is not considered as legal advice

Karl H. Lincke

Lawyer and Rechtsanwalt, Karl H. Lincke specialises in mergers and acquisitions, company law, TMT law and real estate law. Working languages: Spanish, German and English. For any query Contact Karl H. Lincke