Unions oppose new law sanctioning greater flexibility
On 11 February 2012, the Spanish Government brought in labour legislation which radically changed existing rules on collective bargaining and employment protection. The government’s main goals were to encourage open-ended contracts as well as other forms of work, to promote internal flexibility and to improve the efficiency of the labour market. The reform is strongly opposed by unions, who have organised a national protest, and who are threatening a general strike.
The Popular Party (PP) gained an absolute majority in the general elections held on 20 November, 2011, returning to government after eight years. The new government’s stated priorities are deficit reduction and encouraging an increase in employment. This combination has meant that their first move to reduce unemployment has been to enact new legislation designed to give more external and internal flexibility to the labour market.
The assumption behind this reform is that current labour market institutions are inefficient. The government says there is too much protection for indefinite contract workers, while fixed-term contract workers can be easily dismissed. Accordingly, they are reducing dismissal costs in open-ended contracts. The government also argues that collective bargaining should be more decentralised so that enterprises can adapt wages and working conditions to their specific circumstances. It believes that it should be possible for businesses to opt out of collective bargaining, and it should be easier to move workers from one job to another within companies, encouraging internal rather than external adjustment. In addition, the government is of the opinion that the previous regulation of the Collective Redundancy Procedure (ERE) is inefficient. According to ministers, it tends to postpone decisions which ought be carried out as quickly as possible and therefore increases the costs of dismissals.
Decreasing dismissal costs in open-ended contracts
Dismissing a worker for economic reasons is now considered valid when a company makes or foresees a loss, or experiences a persistent drop (defined as occurring for nine consecutive months) in its revenues or sales.
A new open-ended contract has been created for enterprises with fewer than 50 employees. Under this contract, the trial period will last one year. This type of contract requires lower employers’ social security contributions, and the aim is to encourage companies to recruit the young unemployed (aged between 16 and 30 years), unemployed people who are older than 45; and women in sectors where they are under represented. Workers newly employed on such contracts will be able to claim 20% of the unemployment benefit they would have been entitled to if they were out of work, in order to supplement their wages. In this way, the government is also hoping to eliminate dismissal costs during the first year of employment and, at the same time, reduce direct and indirect wage costs.
Compensation in the case of wrongful dismissal for open-ended contracts is reduced from 45 days per year worked (up to a maximum of 42 months) to 33 days per year worked (up to a maximum of two years).
Measures to encourage internal flexibility
Company agreements are now given precedence over multi-employer agreements. Moreover, the law allows opting out from collective bargaining if the enterprise records a drop in its revenues or sales for six consecutive months. The reform also stops the so-called ‘ultra activity’ of collective agreements, establishing that they will become invalid two years after their completion.
Wages can be modified on the grounds of technical or organisational reasons.
Enterprises are allowed to move employees from one professional group to another which requires lower educational qualifications, if this can be justified for technical or organisational reasons. Part-time contract workers are allowed to work extra hours. These extra hours will be counted when calculating social security contributions.
Revision of the ERE
The Collective Redundancy Procedure (ERE) is an administrative procedure which includes:
- redundancy procedures;
- temporary dismissal;
- working time reduction.
It can be applied for economic, technical, organisational or production reasons, to a minimum of:
- 10 workers in companies employing less than 100 workers;
- 10% of the payroll in companies employing between 100 and 200 workers;
- 30 workers in companies employing 300 or more workers.
When an enterprises applies for ERE, a consultation process must be opened with employee representatives. This process cannot exceed 30 days, or 15 days for enterprises employing fewer than 50 employees. If the consultation process ends with an agreement, the measure is authorised. However, if it ends without agreement, collective redundancies need to be authorised by the labour authority. Until now, the majority of the EREs authorised by the labour authority have been agreed by the enterprise and employee representatives. This fact usually implies that enterprises agree to pay more compensation than that which is applied in the case of dismissal for objective reasons (20 days per year worked).
Under the new regulations ERE will not need to be authorised by the labour authority. If the consultation process ends without agreement, the company will be able to pay what they want – although it is anticipated that companies will tend to pay the same rate as for objective dismissals.
The reform also introduces measures to foster employability. These include changes to training contracts, intended for young workers with no upper secondary vocational diploma or a tertiary education. Enterprises are now allowed to hire, on this basis, workers aged 16–25 years (previously 16–21, with some exceptions). The maximum length of the contract has been extended from two to three years. The law also establishes that any qualifications gained during training contracts will be accredited according to the national framework of qualifications. Furthermore, vocational training is recognised as an individual right. The Public Employment Services are expected to develop individual training accounts linked to workers’ social security numbers. Other measures which can be cited come with the authorisation of Temporary Work Agencies which can now operate as outplacement agencies.
Reaction from the social partners
The unions strongly oppose the new law. They say it will not create employment and will instead encourage companies to use dismissal as a first resource. They also argue that the reform eliminates the controls and protection mechanisms provided by collective bargaining and collective redundancy regulation. They have called for demonstrations on 19 February in every provincial capital, and are threatening to call a general strike in the next few months. However, the Spanish Confederation of Employers’ Organisations (CEOE) have welcomed the law, saying that it is a positive step towards the modernisation of Spanish labour legislation.
Pablo Sanz de Miguel, CIREM Foundation