The double salary scale in the company for new incorporations

The possibility for companies in Spain to introduce a double salary scale for new incorporations has been a highly controversial issue. During the last year, there have been pronouncements from different courts that may lead to the conclusion that there is a contradictory doctrine. Through this article we will try to shed some light on the issue of the double salary scale in Spain.

The conflict arises from the recent Judgment of the Court of Justice of the European Union (Case C-154/2018 of 14 February 2019) in relation to the Judgment of the Supreme Court (Social Chamber, Section 1, No. 224/2019 of 18 March of the same year).

On the one hand, the European Court ruled that it was lawful for a firm to apply a different salary scale to employees, depending on their date of entry into the company.

However, the Supreme Court’s decision of a later date decreed that the implementation by a company of a double salary scale over a seniority bonus according to the date of incorporation of the employees into the company was not in line with the law.

It seems, at first sight, that these are two contradictory pronouncements. However, it is necessary to analyse the specific cases that have been prosecuted, in order to be able to decide whether, in fact, such conflict exists.

Judgment of the European Court

The judgement of the European Court ruled a case in which, with the publication of a Circular that affected public school teachers, a different salary scale had been implemented for new arrivals. Namely, new employees were to be paid 10% less than the teachers already in service at the time of publication of the Circular.

As a result, two teachers entering the labour market at the time brought an action before the Irish Equality Court claiming that the scale was discriminatory given that it was based on the age.

In this context, the EU Court of Justice ruled that the criterion taken into account when applying such a double scale was simply the date of entry of the employees and that the age was not a determining factor. The Court held therefore that the double salary scale was not discriminatory as it was not based on the age of the individuals but on their date of entry, which can in no case be regarded as a factor of discrimination.

Judgment of the Supreme Court

The Supreme Court’s ruling, on the other hand, occurred in a case in which, as an consequence of the approval of a new Collective Bargaining Agreement, a seniority supplement, which was contemplated in the prior CBA had been removed. As a result, an employee who had joined the company on a later date to said suppression, claimed the existence of a double salary scale based on the date of incorporation of each employee.

The Court ruled that this salary scale was null, and void based on the uniform doctrine that vetoed the possibility of a collective agreement to establish wage differences between employees due to their entry date into the company exclusively.

In this case, two fundamental aspects were relevant for the resolution of the case:

  • On the one hand, that Collective Bargaining Agreements constitutes a conventional source that regulates the labour relationship and that applies to all companies included in its functional scope. As they are a mandatory provision, they must submit to and comply with the Constitution, the Law and the regulations.
  • On the other hand, the fact that the new agreement did actually include a complement that, although named ad personam instead of seniority was intended to replace it, so that the establishment of such a scale could have been avoided.

Similarly, the Judgment stated that, by virtue of the principle of freedom of contract, the company may freely dispose of the employee’s salary. This, provided that the applicable law is respected, and insofar as the pay gap does not respond to a discriminatory cause.

After a study of both factual assumptions, it should be noted that these are very different factual circumstances, which implies that the two pronouncements are not contradictory to each other.

Conclusions on the double salary scale

In view of the foregoing, we must draw a double conclusion:

  • Collective Bargaining Agreements, since they are an instrument of regulation and must be complied with, cannot include provisions that generate a double salary scale based on the date of incorporation of the employees.
  • Companies, by virtue of the principle of freedom of contract, can indeed establish such differences, as long as they respect the legal and conventional minimums (specifically in the Applicable Collective Agreements) and do not respond to discriminatory parameters

Companies can therefore set a double salary scale for new arrivals, as long as they respect the provisions established by the law and the collective agreements.

This article is not considered as legal advice

Alejandra Sanz

Alejandra Sanz graduated from the Universidad Pontificia de Comillas (ICAI-ICADE) with a Law degree. Her practice areas are employment and company labour law. Contact Alejandra Sanz