Increase in compensation for unfair dismissal in Spain

Dismissal by a company, whether for objective or disciplinary reasons, is a unilateral decision made by the employer to conclude an employee’s contract. The courts in Spain may consider this decision null, fair, or unfair. To be unfair, the employee must challenge the employer’s decision in the labour court. An unfair dismissal can occur under two circumstances:

  • When the employer has failed to comply with the legal requirements (e.g. deliver the dismissal letter)
  • When the employer makes a decision that lacks legal grounds.

Article 56 of the Workers’ Statute outlines the regulations for unfair dismissal and states that when a judge declares a dismissal as unfair, the employer has five days to:

  • Reinstate the worker with the same rights and benefits before the dismissal and pay the salary from the time of the layoff until the judgement.
  • Pay the worker a compensation equivalent to 33 days’ salary per year of service, with a maximum of 24 monthly payments (until 12th February 2012, the compensation for unfair dismissal was 45 days per year worked, with a maximum of 42 months).

Recently, the High Court of Justice of Catalonia made a significant decision regarding compensation for unfair dismissal. The court’s ruling, numbered 469/2023 and dated January 30th, goes against the compensation rates outlined by law, increasing them to 48 days’ salary per year of service, capped at 36 monthly payments. This decision represents a significant departure from the current legal standard of 33 days’ salary per year of service, with a maximum of 24 monthly payments.

On the fifth legal basis of the ruling, the judge asserts that the compensation awarded under the law may be inadequate to compensate for the damages resulting from the unfair dismissal. Thus, he advocates for a higher indemnification to remedy the situation.

In this decision, the court has awarded the worker an additional compensation of 48 days’ salary per year of service, as it deemed the legally assessed 1,000 euros inadequate and insignificant. With the increase, the worker will receive 4,435.08 euros, which the court believes is a more appropriate compensation for the damages caused by the loss of employment.

The validity of the ruling by the Supreme Court of Catalonia is subject to controversy since it hinges on the decision of the Supreme Court regarding the increased compensation amount. Therefore, companies must adhere to all legal requirements to mitigate the possibility of being awarded compensation above the legally established amount.

If you need additional information about the compensation for unfair dismissal in Spain,

This article is not considered legal advice

Carlos Rivero graduated from the Carlos III University of Madrid with a Law degree and has a Master’s in Labour Law and a Master’s in Mediation. Practice areas: Company labour law and employment law. Working languages: English and Spanish. If you have a query contact Carlos Rivero