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Recently published judgment delivered by the Supreme Court on 18 November 2014


Disguised collective dismissal, Provisional Downsizing Plan and de facto collective dismissal are terms which have been used recently by many courts and/or tribunals, further emphasised by the influential Supreme Court judgment (Labour Division) delivered on 18 November 2014.

It is well known that companies must fulfil several legal requirements in order to set a collective dismissal in motion, such as exceeding the thresholds outlined in article 51.1 of the Workers' Statute in a period of 90 days as well as the existence of economic, technical, structural or production grounds. In such instances, aside from the dismissals executed on said grounds, other dismissals which are not based on reasons related to the employee, i.e. different from the motives set forth in article 49.1.c) of the Workers' Statute, must be taken into account.

Pursuant to case law, the following must be included:

  • Dismissals on disciplinary grounds declared unlawful in legal and out-of-court settlements
    When large scale dismissals on disciplinary grounds are carried out in a short period of time and half of them are acknowledged to be unfair and another is legally declared unfair, without the company proving the existence of an effective agreement with the affected employees, the High Court's case law concludes that said dismissals on disciplinary grounds lack disciplinary cause, i.e. they are not based on reasons attached to the affected employees.
  • Unfair objective dismissals regardless of cause.
  • Objective dismissals in which severance pay has been granted, accepting the nullifying effect via settlements.
  • The termination of temporary contracts not only if the contracts are classified as unlawfully temporary, but also if the termination thereof should be deemed an unlawful dismissal due to having occurred prior to the contract expiration.

The following shall be excluded:

  • Grounds for termination based on the employee's ability, such as those regulated in sections a) (ineptitude), b) (non-adjustment to technical modifications) and d) (justified absence) of article 52 of the Workers' Statute, should be considered inherent to the employee since they all point to his/her personality, even when not owing to their intentions.
  • Lawful dismissals on disciplinary grounds.
  • Terminations instigated by employees due to substantial modifications to their working conditions or geographical relocation.
  • Termination due to retirement.
  • Terminations of temporary contracts due to the legal expiration thereof.
  • Voluntary release.

The question to ponder here is: what are the effects of a judgment which, for example, as a result of a lawsuit filed by a minority Trade Union and originating from a de facto collective dismissal, having not followed a collective dismissal procedure, declares all the dismissals carried out within a certain period of time null and void?

Such case has been seen in the recent Supreme Court judgment delivered on 18 November 2014 (Unisono Soluciones de Negocios, S.A. case), sustaining a previously decided case before the High Court on 4 September 2013 declaring the “dismissals executed between 1 February and 30 April 2013 null and void".

The judgment delivered by our High Court (without individual vote, an usual situation as of late) raised the following questions after analysing the second reason given for the null and void declaration:

  • What happens with pending individual legal proceedings that have been suspended pursuant to article 160.5 of the the Law regulating the Labour Courts (LRJS)?
  • What happens with the resulting legal settlements?
  • What happens with the final judgments delivered on individual proceedings declaring the dismissals unlawful?
    The Supreme Court believes that it should be subject to specific cases and the intention of the affected parties, referring to the fact that said specific situations must be resolved in individual proceedings and not as part of the collective action under consideration, setting the "path to follow" by the affected employees in the following way:
  • Suspended proceedings in exchange for the collective dismissal lawsuit must be resolved with a null and void declaration in the collective judgment (reinstatement and back pay of salary).
  • With regards to individual proceedings resolved in court, an appeal for review shall be possible.
  • With regards to agreements reached with the Mediation, Arbitration and Conciliation Service or in court, the affected parties may petition the settlements to be declared null and void due to a lack of consent.

In other words, executing a disguised collective dismissal, Provisional Downsizing Plan or de facto collective dismissal may lead to disastrous financial consequences for the company. In essence, this is due to the raising of another question: what will the affected employees seek against a collective judgment declaring the dismissals executed in a certain period of time null and void? What will the Unisono employees affected by the Supreme Court judgment do?

The most unlikely scenario would be that they do not do anything (perhaps some retired employees would prefer less hassle). Nevertheless, the majority may initially request reinstatement to their former positions with full back pay of their salary (article 124.11 of the LRJS), although both unemployment benefits and any remuneration received from another company within the corresponding period would have to be deducted.

Perhaps in many cases the motive may not be to return to the company but to "make money" in an attempt to receive more compensation than previously. In any case, the consequences may be significantly less if we only consider the aforementioned case analysed by the Supreme Court as well as the employees who reached an agreement with the company in the first quarter of 2013, mediating a dismissal on disciplinary grounds recognised as unlawful (whether in court or an administrative settlement). Now, after the notification of the Supreme Court's judgment in February 2015, they may petition their reinstatement which would entail the back pay of two years' salary.

The subject matter being contemplated is not so trivial given that it is not the first time the Labour Courts have delivered a judgment on a disguised collective dismissal with several null and void declarations. By way of example, a null and void declaration has been delivered in the cases heard against:

  • Universidad de Huelva (Supreme Court no. 1 Huelva 14-7-14)
  • Hewlett Packard (High Court 14-5-14)
  • Madrid Espacios y Congresos (Supreme Court of Justice of Madrid 24-3-14)
  • Gastón y Daniela (Supreme Court of Justice of Madrid 18-3-14)
  • Araujo (Supreme Court of Justice of Galicia 11-2-14)
  • Fagor (Supreme Court of Justice of Castilla-León, Valladolid, 11-12-13)

Thus, this review shall serve to provide a means for assessing and/or estimating the risks which may arise from a disguised collective dismissal.

Employment Law Review | February 2015
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