ERTE/ERE procedure: temporary dismissal and reduction in working hours
As a result of the situation of economic crisis arising from the COVID-19 pandemic, the companies will have to take employment measures. The Spanish law provides two legal mechanisms in this regard: the so-called ERE (meaning in Spanish “Expediente de Regulación de Empleo”) and the so-called ERTE (meaning in Spanish “Expediente de Regulación Temporal de Empleo”).
The most essential difference between both legal mechanisms is that by means of an ERTE the employment of a given employee experiences a temporary flexibilization. It is therefore possible that the number of worked hours of each of the employees decreases or that the affected employees get temporarily unemployed.
This is to say, via an ERTE the labor costs for the company decrease without the need of dismissing employees. The company will be able to recover its activity and employment level little by little without the need to carry out a severance payment.
While the state of alarm has been in force in Spain, an “express mechanism” has been established in in order to carry out an ERTE in case of force majeure arising from the COVID-19 pandemic.
However, in case of not being in front of a force majeure scenario arising from the COVID-19 pandemic, there is an ordinary legal mechanism to carry out an ERTE. Therefore, those companies considering that an ERTE must be carried out, will have to establish a mechanism of negotiation and obtain an authorization in advance from the competent labor authority.
On the other hand, an ERE offers the possibility to reduce the number of employees collectively, this is to say, affecting all the employees or a certain number of employees, hence the way to call it “collective dismissal” (in Spanish: “despido colectivo”). Through this legal mechanism, it is possible to carry out an objective dismissal for economic, technical, organizational and productive reasons, achieving as a result a decrease of the amount of the severance payment to be paid to the employees due to the dismissal.
Said the above, it must be highlighted that, once the company has decided to restructure the number of employees, it is essential to proceed with an ERTE of ERE correctly. Otherwise, in case of taking wrong steps along the process, there would be grounds for challenging the decision taken by the company.
In case of any challenge and existing proof that the ERTE of ERE has not been managed correctly, the employees will then have the possibility to challenge the decision, since it will have to choose between taking back the employees and paying their salaries or paying the maximum amount of compensation as set out by law.
For this reason, in case of finding yourself in a situation in which you have to reduce the number of employees in order to save the company, we recommend you to contact a labour lawyer of OTIS Advocaten before taking any decisions so as to advice and guide you properly in order to avoid trouble in the future.