Good faith negotiation in the framework of business restructuring

We are well aware of the duty of negotiating in good faith imposed on the entrepreneur during a business restructuring procedure in Spain. However, we are less conscious that this same good faith in the negotiation is also required to the representatives of the workers.

The recent September 18th, 2018 ruling of the Supreme Court, Judgment no. 843, dictates jurisprudence on this matter and allows us to draw interesting conclusions on this issue.

Specifically, the Supreme Court clarifies that, although the representation of the workers does not allege certain claims during the consultation period, and that it ends without an agreement, the workers do not lose the power to wield them in the judicial challenge of the measure. Thus, for example, would occur with a fundamental issue such as the existence of a labour group of companies.

The aforementioned has important consequences since, if there is a labour group of companies, there will be a solidary sentence for the companies of the group once the nullity of the business measure has been declared. If there is not, on the contrary, the sentence will only affect the employing company of the affected workers.

The most pertinent question is that of good faith in the negotiation by the representation of the workers.

In particular, and in the judgment in question, it appears that the complainant union did not raise any objection about the labour group of companies in the negotiation phase of the consultation period. Moreover, it appeared that the complainant union had peacefully accepted that the only real employer was the employing company, without bringing up the rest of the companies that were subsequently sued. The question is whether this constitutes a procedural obstacle, which prevents this question from being raised in the application. If so, then this procedure would be invoked by the co-defendants.

As we have mentioned, it seems that the facts are as described. However, the complainant union was able to demonstrate, through the minutes of the consultation period, that it acted in good faith. This is because it put on the negotiation table the existence of certain links between the companies of the group and asked the company for information on all of these accounts.

The Spanish Law is clear on this point: during the consultation period, the parties must negotiate in good faith with a goal of reaching an agreement.

For the Supreme Court, the content of the demand for collective dismissal or temporary suspension of contracts is not conditioned to the issues that would have arisen during the negotiation period. In the same way, the obligation to negotiate in good faith during the negotiation is equally applicable to both parties, within their respective obligations. The Supreme Court says that it is likewise impossible to translate to workers’ representatives the jurisprudential criteria on the scope of the good faith duty required of the company because the Law has only been in charge of regulating, in detail, the company’s rules of action.

To understand the consequences of such action, a question of special relevance is required.

The Supreme Court begins by stating that it is possible that the actions of the workers’ representatives during the consultation period could effectively constitute a breach of the duty of good faith. This applies if they were to maliciously hide the elements they had about the existence of a labour group of companies and if they did not mention their possible links with other companies. Moreover, the workers’ actions could constitute a breach if they did not claim any type of information or documentation about other companies with which they may have had a relationship, thus invoking this circumstance by surprise in the judicial process.

Nothing prevents the claim from acknowledging the existence of a labour group of companies when the workers’ representatives know for the first time about the possibility of a group by analysing in greater detail the information and documentation gathered during the consultation period.

Generic rules do not apply to the valuation of the good or bad faith in the negotiation because the elements of each concrete case must be considered.

In accordance with this doctrine, the scope of the good faith negotiation in corporate restructuring does not go so far as to impose on workers’ representatives the accusation of the possible existence of a labour group during the consultation period.

As a final reflection, it can be concluded that fine and complex rules of negotiation are applied to both parties; rules are much more burdensome for the company than for the workers’ representatives. The degree of judicial control is much less restrictive towards the workers’ representatives than towards the company. Due to the omission of documentation, information or to the singular negotiation itself (not mentioning in the negotiation the other companies of the group), this would consequently lead to the automatic nullity of the business restructuring measure.

This article is not considered as legal advice

Ana Gómez

With both a degree in Law and a Master in Business Law, Ana Gómez specializes in Labour Law, Social Security Law and Litigation Law in labour and administrative matters. Working Languages: English and Spanish. For any further enquiries please Contact us