Spain: Can An ERTE Be Converted into An ERE?

Monika Bertram Abogada [email protected] +34 91 319 96 86

In a recent article, we examined the employment safeguarding clause included in the Sixth Additional Provision of Royal Decree-Law 8/2020 of 17 March and its scope when carrying out an objective dismissal for economic, technical, organisational or productive reasons (ETOP) when, previously, the company had already processed a Temporary Collective Dismissal Procedure (ERTE) pursuant to the provisions of Articles 22 and 23 of the aforementioned Royal Decree-Law. If you wish to access that article, click here.

This time we will consider whether, pursuant to current legislation and case law, it would be easy to go from an ERTE ETOP to a Collective Dismissal Procedure (ERE) ETOP. For this purpose, we will examine ruling number 63, handed down by the High Court of Justice of Catalonia on 3 December 2020.

In order to analyse this matter, we must first consider the background of the case:

1. The sued company, by virtue of the provisions of Article 22 of Royal Decree-Law 8/2020 of 17 March, and effective from 23 March 202, previously processed an ERTE for force majeure, which was approved by way of so-called “administrative silence” by the labour authority.
2. On 20 May 2020, the company converted the ERTE for force majeure into an ERTE for ETOP reasons, alleging, specifically, the existence of economic reasons (current losses) and production-related reasons (disturbance in supply and demand from the health crisis and the measures that went with the declaration of the state of alarm). Said ERTE, which ended IN AGREEMENT between the negotiating parties, would be effective between 1 July 2020 until 30 October 2020.
3. On 3 July 2020, that is, when the ERTE for ETOP reasons was already in force, the company communicated its decision to process an ERE ETOP, specifically alleging the same economic and production-related reasons as those alleged when the ERTE ETOP was processed, and which would affect the entire staff and come into effect on 4 August 2020.

Along with the documentation provided, the company, despite alleging the existence of production-related reasons, did not include the Technical Report required pursuant to Article 5 of Royal Decree 1483/2012, of 29 October and Article 51.2 of the Workers’ Statute.

In contrast to what occurred in the ERTE ETOP, the consultation period with the workers’ representatives ended WITHOUT AN AGREEMENT. This is the reason for which the workers’ representatives challenged the corporate decision and attempted to obtain a declaration that it was NULL AND VOID.

In light of the background, the evidence presented and the applicable regulations and case law, the High Court of Justice of Catalonia declared the ERE to be null and void for the following (summarised) reasons:

1. Although in principle it is possible to go from an ERTE to an ERE, in order for the latter to be valid, the underlying cause must be either (i) different and unexpected or, (ii) if for the same reasons, there must be a substantial and significant change in the reasons that justified the processing of the prior ERTE. On the contrary, that is, if the reasons are same, or no relevant change has taken place, it shall be understood that “the company’s situation is still the same – it has not improved, but it has not worsened, either” and, consequently, that the ERE has not been carried out in a legal and effective manner. This implies a breach of the principle of good faith and abuse of rights by the company.
2. Due to the fact that, pursuant to Art. 124.11 of the Law Governing the Labour Jurisdiction:
   • The company did not deliver the documentation legally required to the workers’ legal representatives, specifically the Technical Report, as the ERE was also justified by production-related reasons; and
   • Since the absence of obligatory documentation, and consequently a clear lack of information for the workers’ representatives, implied the inexistence of an effective and true consultation period. This, thus, led to the breakdown of the principle of negotiating in good faith which is mandatory in these types of proceedings.

In conclusion, we can conclude that the High Court of Catalonia, through this ruling, is attempting to “refresh” the doctrine and regulations to be considered in processing a collective dismissal procedure with all of the guarantees, specifically at a time in which, as a consequence of the health crisis provoked by the pandemic, many companies will find themselves tempted to process a collective dismissal procedure affecting some or all of their employees.