Dismissals in Spain due to a company’s cessation of activity

In previous articles, we have discussed the different ways that an employer may terminate labour relations with its employees.

Since 2012, after the labour reform and because of the serious economic crisis that Spain suffered, many companies had to make such contractual terminations based fundamentally on accredited economic circumstances.

We will not discuss again the meaning of a negative economic circumstance, but will focus on what happens when a company loses its biggest or only customer and consequently must completely stop its activity.

The loss of the biggest or the only customer, which leads to the complete cessation of an employer’s activity, must be authenticated in order to allow the employer to terminate its employees’ labour contracts as objective dismissals in accordance with Articles 51 and the following articles of the Workers’ Statute.

For an employer, the loss of its biggest or its only customer means an irrevocable and continuous decrease of its usual incomes or sales, and consequently it will lead to a negative economic situation which will, according to the previous noted articles, justify those dismissals.

In that regard, the Superior Justice Court of Catalonia delivered its judgment on 16 October 2014, stating that the letter and consequently the judgment refer to the decrease in customers, which contrary to the notice of appeal, clearly has a relationship to every worker of the company as far as a decrease in customers and sales leads to less activity, lower income and eventually to a loss-making situation. In such cases the same level of production and the same number of workers that existed before those circumstances took place are unnecessary.

The number of workers affected by the measure will determine whether there is an individual or a collective dismissal

It will be a collective dismissal if the measure affects the thresholds fixed in Article 51 of the Workers’ Statute. In the case of a company made up of five or fewer workers, the dismissal for objective causes, even if it affects the entire staff, must be made individually.

This article is not considered as legal advice

Mariscal & Abogados provides corporate labour advice (employment contracts, collective bargaining, dismissals...). If you have a query, do not hesitate to Contact us.