Spain: Implications of court rulings on severance payments for temporary employees

A ruling by the Court of Justice of the European Union that temporary and permanent workers in Spain should receive the same severance pay has led to some confusion, with different Spanish courts coming to different decisions in separate cases. There were 3,968,000 temporary employees in Spain in 2016 (26.1% of the total workforce).

Background

Current legislation in Spain provides for different severance payments for dismissed employees according to different contract types.

  • Permanent employees get 20 days per worked year (up to 12 months) if their dismissal is regarded as ‘objective’ (due, for example, to economic, technical or organisational reasons).
  • Temporary workers receive a severance payment of up to 12 days per worked year.
  • Temporary substitutes (Personal interino) – workers providing temporary cover (for example for maternity leave or for those undertaking political leave, or in particular jobs in the civil service) get no severance payment.

On 14 September 2016, the ruling (C-596/14) by the Court of Justice of the European Union (CJEU) established that:

  • temporary substitutes have the same right to receive severance payment as other Spanish workers;
  • temporary workers and permanent workers should receive the same severance payment amounts, irrespective of the differences in their type of contract.

The CJEU’s decision is based on the principle of ‘non-discrimination’ (unless an objective justification is possible). It also takes into account the framework agreement on fixed-term work annex of Directive 1999/70/EC (PDF).

The first reactions of the Spanish social partners to this have been mixed. Trade unions welcomed the ruling, demanding legal reforms to facilitate its full application of the CJEU ruling. However, the Spanish Confederation of Employers’ Organisations (CEOE) said there was no need for changes as Spanish legislation provides for different ways of dealing with completely different legal situations.

First judicial decisions by Spanish Justice Courts

On equal severance payments for temporary employees

Following the CJEU ruling, the Higher Justice Court of the Basque Country made an important judicial decision (PDF) on the issue on 18 October, suggesting that there were no objective or reasonable grounds for differences in severance payment levels for temporary and permanent employees.

This court was hearing a case in which the plaintiff was a researcher with a temporary contract at a hospital. The plaintiff’s initial one-year contract had been extended to two years and six months, but the hospital fired him when funding was withdrawn.

The plaintiff received a severance payment of 12 days per worked year, and initially went to court with a case for incorrect dismissal, not over the amount severance payment amount. The court, however, decided that the contract was terminated correctly but, because of the CJEU decision, it decided that the issue of a severance payment could be applied to the case.

Here, the court suggested there were two main reasons for the existence of a discriminatory treatment.

  • The reasons for unilaterally terminating the contract were objectively the same both for permanent and temporary employees (that is, a cut in funding).
  • There were no differences in the job content of the temporary worker in relation to his permanent colleagues.

Based on these reasons, the court granted the plaintiff the same severance payment as a permanent employee (20 days per worked year).

On equal severance payments for temporary substitutes

On 5 October, the Higher Justice Court of Madrid decided, in line with the CJEU decision, that, for the first time in Spain, the Spanish Ministry of Defence should compensate a former temporary substitute (PDF) (whose contract had already expired) with a severance payment of 20 days per worked year, the same as a permanent employee. This initial ruling has been supplemented by another court decision in Vitoria-Gasteiz, in March, which ordered the Basque Public Health Service to compensate a temporary substitute with the same severance payment as a permanent employee.

Consequences of the decisions in the near future

Despite the different courts’ decisions, current Spanish regulation on severance payments remains the same, stressing the differences for different types of contracts. More cases involving these payments have been submitted to courts of justice and are awaiting a decision. In the Basque Public Administration alone, representative trade unions estimate that there could be more than 1,300 temporary substitutes who are pursuing similar claims through the courts.

The issue is very important in Spain. According to data from the National Institute for Statistics (INE) compiled from the Spanish Labour Force Survey, in 2016 there were a total of 3,968,000 temporary employees in Spain, 26.1% of the total workforce (26.9% of private employees and 22.5% of public employees).

The Spanish government has not taken a definitive position on the issue. The Spanish Ministry of Employment and Social security, together with the main representative trade unions and employer organisations, set up a group of experts in October 2016 to look at the issue. The conclusions of this group (PDF) show important differences within it – some experts suggest that there is a conceptual confusion because the sentence does not reflect the reality of Spanish legislation and want to wait for new judicial guidance; others want to fully absorb the CJEU decision into Spanish law, solving the inequality over severance pay.

However, the majority of experts defend the notion that temporary substitute workers should get 12 days of severance pay, while pointing out the need to wait for further judicial decisions from competent Spanish courts and from the CJEU that may further clarify the issue. The Spanish government is of the same opinion. Nevertheless, the decisions mentioned above can be regarded as very important as they establish legal precedents.

Commentary

The CJEU’s decision has been incorporated rapidly in several recent Spanish courts’ decisions on severance payments for temporary substitutes and temporary workers. Despite the fact that a final decision has not been taken by the government to incorporate the CJEU decision in the Spanish legislative corpus, these courts’ initial decisions are important in the sense that they are establishing legal precedents.

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