The future of dismissal in Spain

Tuesday, 16 de April de 2024

Over the last few months, the application of a severance payment in addition to the legally established compensation, either by application of Convention 158 of the International Labour Organisation (ILO) or the European Social Charter (ESC), has been widely discussed by our High Courts of Justice, a discussion that seems to have reached its zenith with the conclusion reached by the European Committee of Social Rights (ECSR) in its latest evaluation of Spain's compliance with the ESC, which has received an unfavourable rating.

Although the ECSR, in its ruling, does not specifically state how the Spanish compensation system should be improved, it is clear and categorical about the fact that the current Spanish legislation does not comply with the provisions of the ESC, as it does not allow the judge to grant an adequate compensation that considers the damages suffered by the employee as a consequence of the dismissal.

Although articles 56 of the Workers' Statute and 110 of the LRJS do not establish a scale for the calculation of compensation for unfair dismissal that takes into account the damage suffered by the employee, it is not true that these articles completely ignore the damage actually caused, but, on the contrary, treat it as an objective damage. The employee does not have to prove at any time that the unfair dismissal has caused them any damage, as our system understands that, in cases where the employee loses their job without just cause, there is always damage.

So, how will the aforementioned ruling be applied in Spain? At the moment, although we cannot give a precise answer to this question, some potential theoretical scenarios can be put forward, such as an increase in the legally established compensation (who knows if up to the 45 days per year worked prior to the 2012 legislative reform), or the establishment of an additional compensation that would be applied taking into account the specific damages that the employee may have suffered as a result of the dismissal, thus having to take into account the specific case and the personal circumstances of each employee.

That said, the mere increase in the legally fixed compensation does not seem to provide an adequate response to the provisions of the ECSRC, since the aim is that the affected employee should be able to receive an adequate compensation according to their personal circumstances and the specific damage that the dismissal may have caused them. Although it is true that on a large number of occasions the legally established compensation will sufficiently compensate the damage suffered, this may not occur in all cases, and it is in those cases in which it should be possible to apply, as stated by the ECSR, an additional element to the fixed compensation, which allows for an adequate reparation of these damages, which, in any case, must be proven by the affected employee.

It could also be argued that, with an increase in the fixed compensation, Spain could continue to fail to comply with the provisions of the ECSR, since the latter has always been against the existence of a maximum limit to compensation, as was evidenced in the cases of Italy (see Decision of the European Committee of Social Rights of 11 September 2019) or France (see Decision of the European Committee of Social Rights of 8 September 2023) , among others, in which it understood that limiting compensation to a maximum amount corresponding to certain months of salary did not allow for reparation of the damage as such.

Therefore, the second option proposed (requesting compensation in addition to the legally assessed compensation, the amount of which depends on the damage proven that the employee has suffered as a result of the unfair dismissal) seems to be the most coherent with the arguments put forward by the ECSR. This is the line that the Minister of Labour and Social Economy, Yolanda Díaz, seems to be taking, following her recent statements before the Senate Labour and Social Economy Commission.

The minister, although she has not detailed how this change will be applied in Spain, has been forceful about the aim of the modification of dismissals, which will be none other than to dissuade companies from making unjustified dismissals, most likely through a significant increase in the cost of the dismissal, as she has declared her intention to make dismissals unprofitable for companies. Thus, a legislative reform including the possibility of additional compensation based on damages is seen as plausible, in line with the statements made by Díaz.

The main question that arises at this point is, how will these damages be assessed? It is a reality that in our legal system we are constantly faced with conflicting rulings from different High Courts of Justice, which generates profound legal uncertainty, both for the interested parties and for the legal operators themselves. In order to avoid a disparity of criteria and judicial pronouncements, it would perhaps be desirable to establish a scale that would make it possible to quantify the damages suffered. In this way, we would avoid legal uncertainty, which would allow us not only to be able to advise our clients more accurately, but also to establish more reasonable expectations for both parties, which would facilitate the adoption of a settlement agreement.

The last of the questions that arises with respect to the ECSR ruling and which, although it should be the easiest to answer, is not a peaceful one, is whether or not the ruling is binding on Spain. Well, the truth is that, as I said, this is not a question on which there is consensus, since, on the one hand, some authors agree with the Madrid High Court of Justice, in its ruling of 3 November 2020 (rec. 587/2020), which states that "[...] the European Committee of Social Rights, despite being independent and composed of experts, does not have the power to issue binding rulings, but only recommendations and conclusions". However, other authors advocate the analogical application of the Supreme Court judgement of 29 November 2023 (rec. 85/2023), in which it recognised the binding nature of the resolutions issued by the Committee on the Rights of Persons with Disabilities. However, it is important to highlight that this judgement has a dissenting vote against this line of jurisprudence, which is recommendable reading and which, in summary, defends that "the acts of international organisations do not automatically have binding force or value in Spanish law", and this is based on the fact that the fact that treaties are created by international organisations does not mean that the acts issued by the bodies of these organisations automatically acquire the status of domestic law.

It is clear that there is no unity of criteria regarding the binding or non-binding nature of the resolutions issued by the ECSRC, and although these have led to regulatory changes, to date they have been treated more as mere recommendations.

We will have to keep a close eye on the evolution of this issue, given its relevance and the legislative changes that may take place.

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