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COVID-19 and suspension of employment

22/03/2020

Due to COVID-19 the Spanish government has published the Spanish Royal Decree 8/2020, of the 17th of March for “urgent measures of stabilization at the state of alert” including among other some temporary employment measures for employers in order to keep workstations.

 

Before COVID-19

Until now, the Spanish Labour Act regulated the terms for employers regarding dismissal of their employees, due to economic and technical problems.

 

Those terms were:

 

  • Collective dismissal with a severance payment of 20 days salary per worked year.
  • Temporary suspension of the employment relation, where employer had to paid 100% of the social security contribution during this suspension, without a severance payment.
  • Temporary reduction of the working hours, where the employer had to paid 100% of the social security contribution during this reduction without severance payment.

During COVID-19

From the 17th of March of 2020 and for a period of one month, with the possibility of extension, Spanish Government has approved new terms in order to maintain the employments in Spain.

 

ERTE: An ERTE means that the employer can suspend the employment contracts for a temporary period while the emergency is in force.

 

SUSPENSION: The suspension can be collective or only for some employees, depending on functions and needs of the company.

The suspension can be without severance payment.

 

REDUCTION OF WORKING HOURS: This means that employer, temporary and while the emergency is in force, can agree with employees a reduction of the working hours collectively or for some employees, without a severance payment.

 

In order to be accepted as an ERTE, the suspension or reduction of working hours must be caused by one of the following:

 

  1. Force majeure: suspension of the activity, temporary closing of the premises, difficulty in the mobility, not reception of supplies.
  2. Economical, technical and organizational causes: companies take the decision unilaterally when they consider it impossible to continue with the activity as they cannot attend their obligations.

Procedure

  • It is necessary to draft a report and inform the Labour Authorities including documentation that proves the force majeure or the economical, technical and organizational causes.
  • Employees must be informed.
  • The Labour Authorities have 5 days to come with a resolution after confirming or denying the force majeure and 7 days after confirming the economical, technical and organizational causes.
  • The Labour authorities can ask Labour and Social Security Inspectorate for a report. In case of force majeure the content of this report is not mandatory, but it is in the case of economical, technical and organizational causes.

Is COVID-19 a cause of force majeure?

No!

 

COVID-19 is NOT automatically considered a cause of force majeure.

 

As said, it is necessary to deliver a report and prove that the company must cease the activity and the causes.

 

For instance, recently a fast food company asked the authorities to approve a collective ERTE, as they decided to close all premises in Spain due to force majeure. The Labour Authorities has denied the force majeure, as they consider that it is still possible for the company to deliver food at their customers homes, and there is not any prohibition for people to go out to buy take-away food by car. Further the Labour Authorities considered that a collective suspension of the employments could be avoided with a reduction of the working hours.

 

If ERTE is approved, then what? 

Once the Labour Authorities have approved the causes of the ERTE or working hours reduction to be force majeure, the new terms are:

 

  • If the company has less than 50 employees, it is exonerated to pay the social security contribution.
  • If the company has 50 or more employees, it is exonerated to pay 75% of the social security contribution.
  • Employees will receive unemployment benefit for the temporary suspension or for the hours reduced.
  • Waiting period and conditions for receiving unemployment benefits disappear.

Duration of the extraordinary measures

The duration of these extraordinary measures is while the extraordinary health emergency is in force and for 1 month.

 

Next 25th of March the Spanish Congress will celebrate a meeting and decide if there should be any extension of the extraordinary measures.

 

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