R.D.-Law 18/2020: Measures regarding dismissals after the completion of the ERTE

One of the measures that generated the most controversy and concern in the business sector was the prohibition of making layoffs in the six months following the end of the ERTE due to force majeure. That concern was logical since it could lead many companies to an irreversible crisis and a subsequent contest, due to the decrease in activity that is expected precisely in that period.

Royal Decree-Law 18/2020, of the 12^th of May, has finally chosen to make that rule more flexible, contained in the Sixth Additional Provision of Royal Decree 8/2020, after the agreement reached between businessmen, unions and the Government.

The easing and clarification measures are as follows: 

o   The term of six months will begin to compute from the date of resumption of the activity, understanding as such the reinstatement to the effective work of people affected by the file, even when it is partial or only affects part of the workforce.

o   It will affect only the workers included in the ERTE.

o   It establishes that it will not be considered non-compliant if the termination of the contract is due to disciplinary dismissal declared as appropriate, resignation, death, retirement or total, absolute permanent disability or great disability of the worker.

o   Likewise, it will not be considered non-compliant if the termination is for the appeal of people with a discontinuous fixed contract.

o   Neither will it be considered non-compliant in temporary contracts when the contract is terminated by the expiration of the agreed time or the performance of the work or service that constitutes its object or when the activity object of the contract cannot be carried out immediately.

o   Compliance with this commitment will be valued based on the specific characteristics of the sectors, taking into account those companies where there is high variability or seasonality in employment. This clause is somewhat generic and ambiguous; however, we understand that the commitment not to make layoffs will not be strictly required of these types of companies, including those in the hospitality and tourism sector.

o   The prohibition of making dismissals will not apply to those companies that are in “risk of bankruptcy”. In other words, if a company is in crisis in that period, it may make layoffs. Furthermore, the definition of bankruptcy risk is clearly defined in the Bankruptcy Law. As an example, if the company is three months late in paying Social Security contributions or tax obligations, it would already be at risk of bankruptcy. This exception could also be accepted if the company is in a situation of a general dismissal of payments of its obligations, that is, suppliers, financial obligations, etc. In short, with this exception, the possibility of making redundancies in that period is considerably expanded.

The consequence of the breach of this prohibition is the reimbursement of all the contributions from whose payment the company was exonerated during the ERTE, with a surcharge and default interest. The norm is not clear in this regard, but we interpret that it refers to the refund of the contributions of the dismissed workers, not of all the workers included in the ERTE.

From Balms Abogados we remain at your disposal to advise you on the best way to apply the labour standards approved during the State of Alarm and to be able to overcome this situation in the most effective way possible.