Labor/HR

We bid farewell to the legislative year with the publication in the Official State Gazette of Royal Decree-Law 32/2021, of December 28, on urgent measures for labor reform. A text that includes the agreement reached by trade unions and employers' organizations after a long negotiation process.

The following is a brief summary of the main novelties of this important and announced reform, although the final text may undergo modifications during its parliamentary processing depending on the support that the Government manages to obtain in order to validate the law.

1. Main objectives of the standard.

Based on a diagnosis of the main problems affecting our labor market, RD-Law 32/2021, the reforms focus on four fundamental aspects:

• Temporary contracts and training contracts.
• Collective bargaining.
• Contracting and subcontracting of companies.
• Establishment of the RED mechanism for flexibility and stability.

2. Temporary hiring.

The contract for work or service is eliminated and two types of temporary contracts are distinguished, the fixed-term contract due to production circumstances and the contract for substitution.

Fixed-term contract due to production circumstances

The new Article 15 of the Workers' Statute allows the use of this type of contract, but requires that "the contract must specify precisely the reason for the temporary contract, the specific circumstances that justify it and its connection with the planned duration".

The standard distinguishes between two different cases or circumstances:

• occasional unforeseeable circumstances and fluctuations which, even when dealing with the normal activity of the company, generate a temporary mismatch between stable employment; and
• occasional circumstances.

In the first case, the duration of the contract may not exceed six months, which may be extended up to one year by a sector-wide collective bargaining agreement.

In the second case, companies may only use this contract for a maximum of ninety days in the calendar year, the occasional foreseeable circumstances must be duly identified in the contract and the ninety days may not be used continuously.

The new art. 15 ET, in relation to the contract due to foreseeable circumstances of production, also establishes that:

"The performance of work under contracts, subcontracts or administrative concessions that constitute the usual or ordinary activity of the company may not be identified as a cause of this contract, without prejudice to its conclusion when circumstances of production in the above terms."

It should be noted that the regulation of this type of contract -which will become the most widely used temporary contract- includes numerous indeterminate legal concepts ("occasional increase"; "unforeseeable increase"; "temporary mismatch"; "available stable employment"), which will complicate a peaceful interpretation of the rule, with the risk that the contract will have to be classified as indefinite and be subject to penalties.

Substitution contract

According to Art. 15 ET, the substitution contract can be used in three situations:

1. To replace a person with job reservation: specifying the name of the person replaced and the cause of the replacement.
2. To complete the reduced working day by another worker when such reduction is based on legally established causes or the collective bargaining agreement. It shall also require specification of the name and cause of substitution.
3. For the temporary coverage of a job position during the selection or promotion process for its definitive coverage by means of a contract In this case, the duration may not exceed three months.

Effects of unlawful temporary employment and the concatenation of contracts

Art. 15.4 ET establishes that: "Persons hired in breach of the provisions of this article shall acquire the status of permanent employees. Temporary workers who have not been registered with the Social Security after the expiration of a period equal to that which could have been legally established for the trial period shall also acquire the status of permanent employees".

On the other hand, Art. 15.5 ET provides for the conversion to "permanent" of workers if they have been hired:

"who in a period of twenty-four months have been employed for a period of more than eighteen months, with or without interruption, for the same or a different job with the same company or group of companies, by means of two or more contracts due to circumstances of production, either directly or through temporary employment agencies".

In order to discourage the fraudulent use of temporary contracts, Royal Decree Law 32/2021 has introduced some changes in the Law on Social Order Infringements and Penalties (LISOS) that result in a possible increase in penalties through, fundamentally, the consideration of the infringement for each worker affected.

What about the contract for a specific work or service?

As we have already mentioned, with the Labor Reform of 2021 this contractual figure disappears, although for the Construction Sector a new "indefinite-term contract assigned to work" is foreseen, which is defined as:

"those whose object are tasks or services whose purpose and result are linked to construction works, taking into account the activities established in the functional scope of the General Agreement of the Construction Sector".

With this contract, at the end of the work, the company must make a relocation proposal to the worker, after the development, if necessary, of a training process that may be carried out prior to the end of the work.

The following are assimilated to the completion of a work: the actual decrease in the volume of work due to the gradual completion of the corresponding execution units, as well as the definitive or temporary stoppage of a work, due to causes unforeseeable by the company and beyond its control.

Once the outplacement proposal has been made, the contract may be terminated for reasons inherent to the employee in any of the following circumstances:

1. The affected worker rejects the outplacement.
2. The qualification of the person.
3. The non-existence in the province in which the worker is hired of works of the company in accordance with his/her professional qualification, level, function and group.

The termination of the contract must be communicated "seven days prior to its effectiveness and will give rise to a seven percent indemnity calculated on the salary concepts established in the tables of the applicable collective bargaining agreement and which have been accrued during the entire term of the contract, or the higher amount established by the General Agreement of the Construction Sector".

In cases b) and c) the obligation to give fifteen days' notice of termination of the contract is established.

Transitional regime and "vacatio legis".

For fixed-term contracts entered into prior to December 31, 2021, Transitional Provision 3 of RD-Law 32/2021 provides that temporary contracts due to production circumstances, interim contracts, contracts for specific works and services, as well as permanent contracts entered into pursuant to the provisions of Article 24 of the VI State Construction Agreement, which are in force on the aforementioned date, will be governed by the previous regulations until their maximum term.

For fixed-term contracts entered into between December 31, 20221 and March 30, 2022, the 4th Transitional Provision establishes that the regulations for contracts for specific work or services and temporary contracts due to production circumstances "shall be governed by the legal or conventional regulations in force on the date on which they were entered into and their duration may not exceed six months."

New regulation of permanent-discontinuous contracts

The important limitations on the use of the contract for circumstances of production, as well as the disappearance of the contract for work or service, are accompanied by a new regulation of the fixed-term contract, which broadens its purpose and now includes:

• Work of a seasonal nature.
• Jobs related to seasonal productive activities.
• Work that does not have such nature but, being of intermittent performance, has certain, determined or undetermined periods of execution.
• Provision of services within the framework of the execution of commercial and administrative contracts that, being foreseeable, are part of the ordinary activity of the temporary employment agency and a person hired to be assigned.

The significant increase in the number of qualifying legal assumptions is a consequence of the firm commitment to this type of contract to replace the use of fixed-term contracts and reduce the high rates of temporary employment.

New training contracts.

In accordance with the new wording of Article 11 ET, the purpose of the so-called "training contract" will be training in alternation and obtaining professional practice.

Training contract in alternationThe alternating training contract: may be entered into with persons of any age, except in the case of the Professional Qualifications Catalog, with a limit of up to 30 years of age, who do not have a degree to enter into a professional practice contract and with a maximum duration of two years, with no probationary period being agreed upon.

Two tutors must be appointed by the company and the training center or entity and an individual training plan must be drawn up specifying the content of the training.

The remuneration will be adapted to the agreement and may not be less than 60% in the first year, and 75% in the second year, and will never be less than the Minimum Interprofessional Wage proportional to the working day.

Contract for obtaining professional practiceThe internship contract: when you have a university degree, an intermediate or higher degree, a specialist, or a professional master's degree. It may be concluded up to three years after completion of studies and will have a duration of between six months and one year, as opposed to the two years allowed by the previous internship contract. A trial period of 1 month maximum may be agreed.

It also establishes the obligation of the company to draw up an individual training plan specifying the content of the internship and the assignment of a tutor with adequate training to monitor the plan.

The remuneration will be that established by the collective bargaining agreement applicable in the company for these contracts, but in no case may it be less than that established for the alternating training contract.

4. Collective bargaining: changes in priority of application and ultra-activity of agreements.

The new regulations maintain the priority of the company agreement over those of a higher level, except for the amount of the base salary and salary supplements, including those linked to the company's situation and results, in which the provisions of provincial, autonomous community or state agreements will prevail.

For the rest of the working conditions of Article 84.2 ET (working hours and distribution of working time, vacation planning, payment or compensation for overtime, etc.), the priority of application of the provisions of the company's collective bargaining agreement is maintained.

Article 86 of the Spanish Workers' Statute is amended to restore the indefinite ultraactivity of collective bargaining agreements one year after their termination without agreement:

"After one year has elapsed since the termination of the collective bargaining agreement without a new agreement having been reached, the parties must submit to the mediation procedures regulated in the interprofessional agreements at the state or autonomous community level provided for in Article 83, in order to effectively resolve the existing discrepancies. Likewise, whenever there is an express, prior or contemporaneous agreement, the parties shall submit to the arbitration procedures regulated by said interprofessional agreements, in which case the arbitration award shall have the same legal effectiveness as the collective bargaining agreements and may only be appealed in accordance with the procedure and on the grounds set forth in Article 91, without prejudice to the development and final solution of the aforementioned settlement procedures, in the absence of agreement, when the bargaining process has elapsed without an the negotiation process has elapsed without reaching an agreement, the agreement has been reached, the collective bargaining agreement shall remain in force.."

5. Contracting and subcontracting of companies.

RD-Law 32/2021 adds a new section (number 6) to Article 42 of the Spanish Workers' Compensation Law:

"The collective bargaining agreement applicable to contractors and subcontractors shall be that of the sector of the activity carried out in the contract or subcontract, regardless of its corporate purpose or legal form, unless there is another applicable sectoral agreement in accordance with the provisions of Title III."

However, when the contractor or subcontractor has its own agreement, this shall be applied in the terms resulting from Article 84″.

With this new wording, the agreement applicable to the contracting company is therefore established as the sector agreement applicable to the main company or the company agreement of the latter.

6. The new RED mechanism for employment flexibility and stabilization.

The recently approved legislation creates the so-called "RED Mechanism" for flexibility and stabilization of employment, subject to authorization by the Council of Ministers. This mechanism is regulated in the new article 47 bis ET and will allow companies to reduce working hours and suspend contracts in two cases:

Cyclical mode: general economic situation, maximum 1 year.

Sectoral modality: permanent changes in sector(s) requiring retraining and professional transition. Maximum 1 year, with 2 extensions of 6 months each.

The activation of this mechanism will mean that companies will be able to request ERTES for reduction of working hours or suspension through a specific procedure depending on the modality activated or used.

The Social Division of the Superior Court of Justice of Galicia (TSJG) has resolved by judgment of 16.11.2021 (appeal 2188/2021) the compatibility between the collection of the retirement pension and the condition of partner and Sole Administrator of a commercial company, when the Administrator performs exclusively the functions inherent to the ownership of the company and this does not imply "a dedication of a professional nature".

The judgment analyzes the case of a sole director of a company that owned 75% of the shares of the company he managed.

Once he reached retirement age, the Administrator left the Special Regime for Self-Employed Workers and applied for the retirement pension that the INSS granted him.

However, as a result of various actions carried out by the Labor Inspection, the INSS agreed to revoke this recognition and annul the retirement pension.

When the INSS decision revoking his retirement pension was unsuccessfully challenged, the Administrator appealed to the TSJG.

In its recent ruling, the Social Chamber of the TSJG establishes that the determining factor for compatibility between the receipt of a retirement pension and the status of partner and Sole Administrator of a commercial company is to analyze whether or not the "self-employed partner" is limited to maintaining the ownership of the business.

The magistrates emphasize that in order to be qualified as self-employed "it is not enough to be the owner of a company or business, but it is necessary to perform effective work, in an economic sense, in a habitual and direct manner".

On this point, the TSJG refers to Circular 5-028, dated October 14, 1999, of the TGSS, on the scope of the expression "Functions inherent to the ownership of the business", as well as the Resolution of August 13, 1999, of the DGOSS, on the scope of the expression "functions inherent to the ownership of the business".

In view of the above, the Chamber understands that a distinction must be made between "the exercise of functions inherent to the ownership of the business, among which are those of an administrative nature, relations with official bodies, town halls, taxation, etc., in which the retiree continues to be the owner of the business and, as such, pays taxes, signs contracts, represents the company, etc., from those other activities that involve personally running the business, with physical presence in it throughout the day, office work, office or otherwise, in such a way that only the incompatibility with the payment of taxes is produced, from those other activities that involve personally running the business, with physical presence there throughout the day, office work, office work or other types of work, so that incompatibility with the receipt of the pension only occurs in the second case".

In the case under analysis, the Administrator did not physically act on a daily basis in the company's business, his daughter being in charge of the daily management, assuming "the role of manager or director of the entity while the plaintiff performed functions as administrator", the plaintiff's daughter being the one who "assumed the ordinary management".

Therefore, the Court declares that, at the time of the recognition of his retirement pension, the Director limited himself to maintaining the ownership of the company, performing functions inherent to such ownership, without professional involvement in its performance, which leads the TSJG to the declaration of compatibility between the retirement pension and his status as a director.

Royal Decree-Law 18/2021, of September 28, on urgent measures for the protection of employment, economic recovery and improvement of the labor market.

The purpose of this Royal Decree-Law, approved by the Council of Ministers and published in the Official State Gazette, is to establish a series of measures for the protection of employment, economic recovery and improvement of the labor market.

The new regulation, in force until February 28, 2022, establishes, on the one hand, the extension of the ERTEs in their current modalities until October 31, 2021 and, on the other hand, the new ERTE modalities as from November 1, for which it is mandatory to apply to the competent labor authority for their extension between October 1 and 15. Therefore, the new ERTEs will be extended from November 1 to February 28, 2022.

The most relevant measures established by the Royal Decree-Law are highlighted below:

Training ERTE
From a model based on the so-called sectoral ERTE, with special protection for activities that had shown less recovery after the impact of the pandemic, greater protection is given to companies that promote the training of their employees. Training is thus encouraged in the new ERTEs, subsidizing the bulk of the cost of training and applying exemptions to companies that train their workers in ERTEs.

Companies that train people affected by this type of ERTE will be entitled to an increase in the credit for financing training activities, depending on their size:

• From 1 to 9 employees: 160 euros per person.
• From 10 to 49 employees: 240 euros per person.
• For 50 or more people: 320 euros per person.

Exemptions
The benefits, in the form of exemption from social security contributions and training subsidies, are greater depending on the size of the company and the training activities.

• The exoneration scheme between November and February will distinguish between companies with less than 10 workers and those with a workforce equal to or greater than 10 workers. Thus, for the former, the exonerations in Social Security contributions will reach 80% if they carry out training actions and 50% for the rest; if the company has 10 or more workers, it will have an exoneration of 80% if it carries out training actions, and 40% in the rest of the cases.
• The minimum number of hours of training for each person will be 30 in companies with 10 to 49 workers and 40 for those with 50 or more. And these activities must be carried out during the suspended workday.
• In addition, the ERTEs of impediment, linked to activity limitations, are maintained. Companies in this situation will be exempted from 100% of the business contribution accrued from November 2021, during the closure period, until February 28.

Protection of workers
Workers under ERTE will continue to enjoy the exemption from the waiting period for access to unemployment benefits. Also, the so-called "zero counter" will be extended on an extraordinary basis until January 1, 2023.

The regulatory bases for workers, on which benefits are calculated, are increased from 50% to 70% for beneficiaries who have used 180 days.

Benefits are maintained for people affected by ERTE with part-time contracts and the extraordinary benefit for discontinuous permanent employees.

Accompanying measures
Guarantees from previous agreements such as limits on dividend distributions and access to aid for companies domiciled in tax havens are maintained.

Companies covered by these ERTEs will have to respect restrictions on access to overtime and outsourcing of activity.

The prohibition of dismissal is extended during the period of validity of the regulation and the calculation of the maximum duration of temporary contracts for persons under ERTE is also interrupted.

The commitment to maintain employment will have a new additional period of 6 months.

The regulation also provides for the extension of the MECUIDA plan and the extraordinary benefit for arts professionals until February 28, 2022.

Specific ERTE for the Canary Islands
Specific ERTEs have been approved for the companies affected by the eruption of the Cumbre Vieja volcano on the island of La Palma and in the Canary Islands as a whole.

Workers will be protected and companies will benefit from exemptions of up to 100% of social security contributions in the event that their activity is totally impeded and up to 90% in the case of activity limitation.

Simplified processing
Companies must apply to the labor authority for the extension of all files to extend the benefits of the ERTE until February 28, 2022. To process this request they must submit the list of hours or days of work suspended or reduced since July 2021. In the particular case of ERTE for economic, technical, organizational or production reasons, the so-called ERTE ETOP, the report of the legal representation of the workers must be submitted.

The simplification of procedures to go from an ERTE of impediment to one of limitation and vice versa is maintained. A communication in this sense to the labor authority and to the workers' representatives will be sufficient.

Extension of aid to the self-employed
The sixth aid scheme for the self-employed of this type has also been approved. With the aim of supporting the maintenance of the activity, it includes exemptions from Social Security contributions for all self-employed workers who have been protected in the previous period for the next four months.

These grants, in the form of exemptions, will be as follows: 90% in October, 75% in November, 50% in December and 25% in January 2022.

Benefits
In addition, the extraordinary benefits in force to protect those who have a significant impact on their activity are maintained until February 28.

• Firstly, the extraordinary benefit for suspension of activity continues, aimed at those self-employed workers with a temporary suspension of all their activity as a result of a resolution of the competent administrative authorities for the containment of the COVID 19 pandemic. The amount of the benefit is 70% of the minimum contribution base. In addition, the self-employed will be exempted from paying Social Security contributions, although this period will be counted as having paid contributions and, if applicable, will be compatible with income from employment up to 1.25 times the minimum wage.
• Secondly, the benefit compatible with the activity is maintained for those workers who, while meeting the requirement for the ordinary termination of activity benefit, meet two additional requirements:
• That its third- and fourth-quarter 2021 revenue will fall 50%, compared with the third and fourth quarters of 2019.
• Not having obtained during the third and fourth quarters of 2021 a net taxable income of more than 8,070 euros.
• Third, those who do not meet the requirements to access this benefit or the ordinary termination of employment may request an extraordinary benefit. The amount of the benefit is 50% of the minimum contribution base and is also exempt from paying contributions and counts as having paid contributions. The requirements are to prove a drop in income of 75% (the income of the fourth quarter of 2021 must be lower than that of the fourth quarter of 2019) and not to have a net computable income between July and December 2021 higher than 75% of the minimum interprofessional wage.
• Fourthly, the benefit for seasonal self-employed workers is also maintained, which is 70% of the minimum base and requires no income of more than 6,725 euros in the third and fourth quarters of 2021.
• Finally, a specific benefit has also been approved for self-employed workers affected by the eruption of the Cumbre Vieja volcano on the island of La Palma. Those self-employed workers who are forced to suspend or cease their activity as a direct consequence of this event will be able to receive the benefit for cessation of activity without the first five months of perception being counted.

This Royal Decree-Law will enter into force on the same day of its publication in the BOE.