MAIN MEASURES OF THE LABOUR REFORM

On 31 December 2021, the labour reform approved by Royal Decree Law 32/2021, of 28 December, on urgent measures for job reform, ensuring stability in employment and transformation, came into force which amends, inter alia, the Workers Statute (Estatuto de los Trabajadores), the General Social Security Act (Ley General de la Seguridad Social) and the Labour Infringements and Sanctions Act (Ley de Infracciones y Sanciones en el Orden Social).

The main matters agreed on by the social agents that we summarise in this note are:

1.- The modification of training contracts.

2.- The disappearance of temporary contracts for a specific work and service and the reformulation of temporary contracts due for (foreseeable or unforeseeable) production reasons and for substitution purposes.

3.- The reduction of the maximum periods for successive temporary contracts.

4.- The increase in sanctions for breach of the legislation on temporary contracts, with a sanction for each worker concerned.

5.- The promotion of the legal figures of permanent-intermittent workers.

6.- The implementation of the collective bargaining agreement for the activity sector of contractors and subcontractors.

7.- The update to the law on temporary lay-offs (ERTEs).

8.- The implementation of the RED Mechanism aimed at work flexibility and stabilisation.

9.- The loss of the applicable priority of the company collective bargaining agreements in terms of wages.

10.- The return to the indefinite ultra-activity of collective bargaining agreements in the absence of an agreement.

1. New training contracts

The previous placement and training contract modalities disappear and two new training contract modalities are established.

The positions, activities, levels or groups applicable under a training contract may be determined by a sectoral collective bargaining agreement. Regulatory implementation is also pending as regards the establishment of number of training contracts in terms of workplace size, the number of individuals undergoing training under a tutor or the requirements in relation to staff stability.

1.1. Training contract alternating with paid work:

• Recipients: workers who lack the professional qualifications recognised by the degrees or certificates required to enter into the training contract to gain regulated professional practice (as described in the following section).
• Maximum age: up to 30-years of age.
• Maximum duration: that envisaged in the training programme, with a minimum of 3 months and a maximum of 2 years. The possibility of providing services on a non-continuous basis and an extension by agreement of the parties to the maximum total of 2 years is envisaged.
• Effective work: a maximum of 65 percent during the first year and 85 percent during the second year.
• Remuneration: that envisaged in the applicable collective bargaining agreements and, failing these, a minimum of 60% in the first year and 65% in the second year, as regards that set forth in an agreement for the professional group and in proportion to the effective working time. Under no circumstances may remuneration be lower than the minimum wage as regards the actual working time.
• Prohibitions:

o Supplementary working hours and overtime (except in cases of force majeure),

o Night work and shift work (except when training activities cannot be carried out in other periods, due to the nature of the activity); or

o No probationary period may be agreed.

o Training contracts may not be entered into alternating with paid work when the worker has previously performed the same activity in the company for a period exceeding 6 months in any modality.

1.2. Training contract to gain professional practice appropriate to study levels:

• Recipients: workers with a university degree or an medium-level or higher degree, speciality, professional master’s degree or certificate in the professional training system or an equivalent arts or sports title in the educational system.
• Deadline for signing: 3 years after completion of studies (5 in the case of disabled persons). Individuals who have gained professional experience or received training in the same activity for more than 3 months (with the exception of the practice required to obtain the certificate or degree linked to that contract) may not sign this contract.
• Term: not less than 6 months and not more than one year (unless the sectoral agreements specify a different term).
• Trial period: maximum one month (unless otherwise provided for in the collective bargaining agreement).
• Prohibition of overtime (except for force majeure)
• Remuneration: that set forth in the applicable collective bargaining agreement or, failing this, that of the professional group corresponding to the functions performed.

2. New temporary work regime

Temporary contracts for a specific work and service disappear and the modalities of temporary contracts are simplified: (i) due to production needs; or (ii) to replace a worker.

To limit fraudulent use of temporary contracts, the cases in which temporary workers become indefinite are extended, the periods for which successive temporary contracts may be entered into are reduced, and an additional social security contribution is established for the employer in fixed-term contracts shorter than 30 days. The way was also opened for collective bargaining agreements to set maximum percentages of temporary contracts in relation to the company's total workforce, criteria for converting temporary contracts into indefinite contracts, maximum percentages of temporary work, and the consequences of breaching them.

The Government will also assess the results obtained from the measures envisaged by analysing the temporary and indefinite contracting data in January 2025, so that, if progress is not made in reducing the temporary rate, additional measures will be taken.

2.1. Temporary contracts due to production needs

Two subtypes can be distinguished within this type of contract:

a) Temporary contracts due to unforeseeable production needs

• Reason: occasional and unforeseeable increase and fluctuations that generate a temporary imbalance (even if it is part of the company’s normal activity) provided that it does not correspond to cases of permanent-intermittent work. This modality can be used for holidays.
• Maximum term: 6 months (which may be extended to one year in the collective bargaining agreement). It may be extended to a maximum of 6 months if the initial term agreed does not reach the legal maximum.

b) Temporary contract due to foreseeable production needs

• Reason: to handle occasional, foreseeable and time-limited situations. The performance of works within the framework of contracts, subcontracts or administrative concessions that constitute the usual or ordinary activity of the company are excluded from this subtype.
• Maximum term: 90 days within the calendar year that may not be used continuously.
• Duty to inform the workers’ legal representatives of the annual forecast for the use of these contracts in the last quarter of the previous year.

2.2 Fixed-term contract for replacement purposes

Such contracts may be arranged to:

• Replace a worker entitled to have their job reserved. The replaced worker and their replacement are allowed to overlap in time before the replaced worker’s absence for up to a maximum of 15 days.
• Completing the reduced working hours left vacant by another worker.
• Temporary coverage during the selection or promotion process of a job to be permanently covered by a permanent contract, with a term of no more than 3 months (or a shorter term specified in the collective bargaining agreement)

2.3. Limitation of successive temporary contracts

The following will become permanent workers:

• All temporary workers who have been engaged in breach of the above requirements.

• Workers who were not registered with the Social Security after the applicable probationary period ended.
• Workers who, within a period of 24 months, have been hired for more than 18 months, continuously or not, for the same or different job with the same company or group of companies, by means of two or more contracts due to production needs, either directly or through temporary work agencies (previously the period was 24 months within a 30-month period).
• Workers holding a position that was held, continuously or not, for more than 18 months within a period of 24 months through contracts due to production needs, including availability contracts with temporary work agencies (the so-called "contratos de puesta a disposición").

Within 10 days following the deadlines above, the company must notify the worker in writing of their permanent status and inform the workers’ legal representatives.

2.4 Increase in sanctions related to fraudulent temporary contracts

The Labour Infringement and Sanctions Act was amended and failure to provide the correct type of contract was classified as a serious infringement, with an infringement for each worker concerned (when previously the breach was classified as a single sanction for up to a maximum of EUR 7,500 regardless of the number of workers affected).

2.5 Transitional rules for training and temporary contracts

a) The law on types of contract will come into force on 30 March 2022 and the following transitional regime must be taken into account.

b) Contracts entered into before 31 December 2021: they will be governed by the text in force before Royal Decree Law enters into force for the period of their maximum term.

c) Contracts entered into from 31 December 2021 to 30 March 2022: they will be governed by the legal or conventional regulations in force on the date when they are entered into and their term may not exceed 6 months.

d) Limits on successive temporary contracts: the maximum periods for successive temporary contracts will apply to employment contracts entered into following its entry into force. As regards contracts entered into previously, to calculate the number of contracts, the term and the provisions envisaged above, only the contracts in force upon the entry into force of this Royal Decree Law will be taken into consideration.

3. Promotion of permanent-intermittent contracts

• The concept of permanent-intermittent contracts (the so-called "fijos discontinuos") is strengthened, such that this type of contract includes:

- Seasonal work or work linked to seasonal production activities.

- Intermittent work, with specific, determined or indeterminate activity periods.

- Work consisting of the provision of services within the framework of the commercial or administrative contracts that, being foreseeable, are part of the company's ordinary activity.

The maximum period of inactivity between subcontracts will be that envisaged in the sectoral collective bargaining agreements and, failing this, 3 months. Once this maximum period has ended, the company must implement the appropriate short-term or definitive measures.

• Formalisation in writing and inclusion of basic conditions (the duration of the activity period, working days and hours may be given as estimates and specified in the relevant period).
• Call (notice to workers to start providing their services after inactivity periods; the so-called "llamamiento"): the objective and formal criteria for call will be set in the collective bargaining agreement or, failing this, in a company agreement.
• Duty of information to the workers' legal representatives: at the beginning of each year, they must be informed of the annual or half-yearly calls and the registration of the permanent-intermittent workers when it takes place.
• Sectoral collective bargaining agreements may establish a job exchange that includes permanent-intermittent workers during periods of inactivity, allow part-time permanent-intermittent contracts, and establish a minimum annual appeal period and an amount for end of call.
• Seniority: the entire duration of the employment relationship must be considered, not the time of the services effectively provided. With the exception of those criteria that require a different treatment.

4. Applicable collective bargaining agreement for external contractors and subcontractors

The Workers Statute is amended to reflect case law on the collective bargaining agreement applicable in the event of subcontracting, so that the collective bargaining agreement applicable to contractors and subcontractors will be that of the sector of the activity performed through the contract or subcontract (regardless of the corporate purpose of the subcontract). However, when the contract or subcontract has its own collective bargaining agreement, this will apply.

5. Strengthening of internal flexibility measures

Taking the measures applied and the experience acquired during the pandemic for job preservation as a starting point, the regulation of temporary lay-offs (ERTEs) is updated.

5.1. ERTEs for economic, technical, organisational and production reasons (ETOP)

The aim is to facilitate their processing and flexibility, especially for SMEs. The legislation is therefore amended as follows:

• Reducing the duration of the consultation period: it is reduced to 7 days in companies with less than 50 employees (compared to the previous 15 days).
• Reduced periods for the constitution of the representative committee: 5 days (previously 7) in companies with workers’ legal representatives and 10 days (previously fifteen) in companies without them.
• Duty of informing both workers and the labour authority of the period within which those measures will be implemented.
• If the ERTE is declared to be unjustified as the ETOP causes do not apply, in addition to the employer's obligation to resume its activity, to pay workers the salaries they have not received, and to reimburse the unemployment benefits, it the employer must also cover the income from Social Security contribution discrepancies.
• During the term of the ERTE, it may be extended through a period of consultations of up to 5 days with the representatives who agreed on the ERTE in force, and the company decision must be notified to the employment authority within a maximum of 7 days.

5.2 ERTEs due to force majeure

• Impediments or limitations to the company's usual activity, as a result of decisions taken by the public authority with jurisdiction, including those aimed at protecting public health, are not regarded as temporary force majeure.
• The procedure is specified in more detail and it is indicated that a mandatory report from the Labour Inspection Department is required. The employment authority must give a resolution within five days, with administrative silence being considered a positive answer.

5.3. Provisions common to ETOP and force majeure ERTEs

• The reduction in working hours may be between 10% and 70% (and, as far as possible, priority will be given to implementing reduction measures compared to the suspension of contracts).
• Possibility of release and engagement of workers based on changes in the justifying causes.
• In general, overtime, new outsourcing, and new employment contracts are not allowed.
• Voluntary exemptions are envisaged as regards Social Security contributions on corporate contribution due to common contingencies and joint collection concepts for:

- 20% for ETOP ERTEs linked to companies carrying out training actions.

In the event of a breach in the availability of the training actions, the company must exclusively return the exemptions for every worker affected by that breach.

- 90% for ERTEs for force majeure and due to impediments or limitations in the company's usual activity.

• Social Security contribution benefits are conditional on maintaining employment for six months following the end of the term of the ERTE. In the event of a breach of the employment maintenance commitment, the company must exclusively return the exemptions for each dismissed worker.

• The Labour Infringement and Sanctions Act was amended and the breach of the prohibition on new contracts (with one infringement for each affected worker) and the outsourcing of activities in the event of ERTEs was classified as a serious infringement, so the company may be sanctioned by the Labour Inspectorate with a fine of up to EUR 7,500.

5.4. RED mechanism for work flexibility and stabilisation

The RED Mechanism for Employment Flexibility and Stabilisation (the Mechanism), which once activated by the Board of Ministers will allow companies to voluntarily request from the employment authority the reduction of working hours or the suspension of employment contracts.

Two modalities are envisaged:

a) Cyclical: when there is a general macroeconomic situation that recommends the implementation of additional stabilisation instruments, with a maximum duration of one year. During this suspension period, workers' training will be encouraged.

The voluntary exemptions from social security contributions on corporate contribution due to common contingencies and joint collection concepts in this type of contract will be:

• 60% from the date of activation, by resolution of the Board of Ministers, to the last day of the fourth month after that activation date.
• 30% during the four months following the end of the previous period.
• 20% during the four months following the end of the previous period.

b) Sectoral: when permanent changes are seen in a given sector or sectors of activity that generate requalification needs and professional transition processes for workers, with a maximum initial duration of one year, and the possibility of two 6-month extensions.

Voluntary exemptions from social security contributions in this type of contract will be 40%, linked to making shares available to workers.

In the event of a breach of the availability of the training actions, only the exemptions for the workers affected by that breach must be returned only and the exemptions are conditional on employment maintenance for six months following the end of the temporary lay-off procedure.

6. Loss of the priority of the Company's Collective Bargaining Agreement as regards wages

The reform maintains the priority of the company collective bargaining agreement over the sectoral agreement in all the aspects specified above except in determining the amount of the base salary and salary supplements (including those linked to the company's situation and results), which will take the estimates in the collective bargaining agreement as a benchmark.

7. Return to indefinite ultra-activity of collective bargaining agreements

One of the most controversial measures introduced in the 2012 labour reform was the restriction on ultra-activity (the period in which a collective bargaining agreement remains in force after the end of its validity while its renewal is being negotiated) to one year.

However, as a result of the existing case law in this area, the truth is that in practice this loss of ultra-activity envisaged in the 2012 reform has not had a significant impact on employment relations.

The Royal Legislative Decree reinstates indefinite ultra-activity and establishes that once a year has passed since the collective bargaining agreement ended a new agreement having been arranged, the parties must submit to the mediation procedures established in State or regional interprofessional agreements to try to settle the existing discrepancies. In the absence of an arrangement, when the negotiation process has ended and an agreement has not been reached, the collective bargaining agreement will remain in force for as long as the negotiations last.