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Collective dismissal

Labour

Collective dismissal based on economic, technical, organizational or production reasons. Reference unit: Work Centre

The determination to resolve if a dismissal must be considered individual or collective and, consequently, the procedure to be followed in each case (which is called “calculation of collective dismissal threshold”) has led many misunderstandings and judicial conflicts with serious economic consequences for companies.

The Workers’ Statute establishes in its article 51.1 that individual dismissal will be automatically null and void when the numeric threshold fixed in such rule is exceeded. As a consequence, the dismissed employee recovers his position, the company must pay the salary and social security quotes for the whole period (which can be very long depending on the appeals filed by the parties) and agree a new dismissal in an appropriate manner (collective dismissal process is intended to offer greater guarantees to employees than individual dismissal).

Thus, the Workers’ Statute understands as collective dismissal the termination of employment contracts based on economical, technical, organizational or production reasons when in a ninety-day period the termination concerns at least to: 10 employees in companies with less than 100 employees; 10% of employees in companies ranging between 100 and 300 employees; and 30 employees in companies normally employing 300 employees. So, the Workers’ Statute establishes the threshold according to the number of employees affected, the number of employees hired by the company and the period of time (ninety-day period which sometimes is complicated to calculate if there are dismissals in different dates).    

The article 1 of the Council Directive 98/59CE of July 20th, 1998 defined collective dismissals as redundancies made by an employer based on one or several reasons not inherent to the person of the employees, depending on the number of the employees assigned to the affected work centre and also according to certain periods of time.

The Court of Justice of the European Union ruled a judgment on May 13th, 2015 stating that it must be described as collective dismissal, and consequently it must respect the legal applicable rules to this matter, both the situations in which the terminations of the contracts exceed the threshold established in the abovementioned article 51.1 of the Workers’ Statute (which takes as reference unit the whole company), and other situations in which such threshold (10% of dismissals) is exceeded in the work centre and, in a ninety-day period, in cases in which the terminations concern to 10 employees in a sole work centre which usually employs between 20 and 100 employees. The judgment of April 30th, 2015 stated that it must be considered collective dismissal if, within a ninety-day period, the dismissal affects at least 20 employees of a specific work centre, regardless of the number of employees working in the work centre.  

The Supreme Court, on a judgment dated on October 17th, 2016 unanimously approved by the Labour Chamber, has applied the doctrine set in the judgment of the Court of Justice of the European Union of May 13th, 2015, interpreting the national rule pursuant to the Union Law. Thus, it is deemed as collective dismissal when it exceeds the legal threshold established in a sole work centre, employing more than 20 employees, instead of taking as reference the whole staff of the company.

In conclusion, the Supreme Court has changed the definition of collective dismissal of the Workers’ Statute, being able to describe as such, both the situations in which the termination of contracts exceeds the threshold established in the article 51.1 of the Workers’ Statute, taking into account the whole company as reference unit, and other situations in which such threshold is exceeded, when it concerns to a sole work centre, provided that it employs more than 20 employees.    

 

The information contained in this note should not be regarded in itself as specific advice on the matter discussed, but only a first approach to the subject. Therefore, it is highly recommended that the recipients of this note search professional advice about their particular case before taking specific measures or actions.