Publications

Start of main content

Thresholds of collective redundancy

| Publications | Employment Law and Social Security

The calculation unit: the establishment and the undertaking. Regarding the Supreme Court Judgement issued in unification of case-law on 6 April 2017

The controversy of the dispute discussed herein is of extreme interest and relevance and lies in knowing whether to use the undertaking or the establishment in order to determine the number of terminated contracts and the calculation unit for the purposes of setting the boundaries between collective redundancies and multi-individual redundancies.

Anticipating the final conclusion, as in the case in question the termination affected 20 workers at an establishment with 38 workers, although the undertaking as a whole had over 300 employees, the collective redundancy is declared invalid as it was not processed through the channels for collective redundancies. Indeed, as the establishment had a staff of fewer than 100 employees and the employment of more than 10 employees was terminated (specifically, 38), the thresholds would have been exceeded.

The background relates to:

  • The claimant was employed by the company Fundasa Control de Datos y Servicios SA (FUDOSA) in a Special Employment Establishment located in Seville. The company has other establishments in Madrid and Barcelona. The establishment in Seville has two lines of business: the Document Management Service and the Direct Marketing Service. The claimant was employed in the latter of these two services in the position of recorder/scanner operator.
  • She was made redundant on 16 October 2012 on financial, production and organisational grounds.
  • As a result of the redundancy, the Direct Marketing Service of the Seville establishment was closed, as 20 workers (including the claimant) were made redundant for the same reasons. Prior to the redundancy, the Seville establishment had 38 employees and the undertaking as a whole had 300 employees.
  • The worker was in disagreement with the decision to terminate her employment and filed a claim with the Employment Courts of Seville. On 20 September 2013, Employment Court Number 7 of Seville issued a judgement finding partially in favour of the claim brought by the worker as it declared the redundancy to which she was subject was inadmissible.
  • The two parties were in disagreement with the ruling, and both lodged an appeal with the High Court of Justice of Andalusia (the claimant seeking the nullity of the redundancy). The High Court Judgement dated 15 April 2015 dismissed the two appeals.
  • The claimant lodged a cassation appeal for the unification of case-law, which was ruled on through the recent Supreme Court Judgement issued on 6 April 2016 (RCUD 3566/2015, presented by Judge Sempere Navarro) that ruled in favour of the appeal, declaring the nullity of the redundancy.

A series of important reflections can be drawn from said Supreme Court Judgement with regard to the most recent settled case-law on calculating the thresholds, which is explained in detail below through questions and answers. Namely:

1º.- Is it possible to cite as a contrasting judgement in the notice of appeal the judgement issued by the Court of Justice of the European Union of 13 May 2015 (Rabal Cañas case), which addresses a situation of a company belonging to the public sector when the case in question relates to a private company?

Citing the case-law of the ECJ as a contrasting judgement is admissible as it is recognised in Article 219.2 of Labour Jurisdiction Act.

The doubt as to whether the aforementioned Judgement of the Court of Justice of the European Union was viable for supporting the unifying cassation as it affected a public company and deciding on the case in question, a lawsuit against a private company, has been decided on in a positive sense by the Supreme Court. The Employment Chamber believes that the relevant aspect is the fact that the appealed judgement of the High Court of Justice of Andalusia (Seville) maintains the criterion that the calculation unit must always be the undertaking as a whole, while the Judgement of the Court of Justice of the European Union cited for contrast considers it is essential that the numerical thresholds can refer to the establishment and not to the undertaking as a whole. As it states: "That the employer of the Rabal Cañas case has a different nature from the employer now appealed against does not mean that it breaks the mandatory identity of comparative assumptions" (Grounds of Law II.4).

In short, the contradiction will be evident between the case-law of the European Court of Justice and the content of the Judgement of the High Court of Justice of Andalusia. We should remember that the ECJ argues that:

"National legislation can be regarded as compatible with Article 1(1)(a)(i) of Directive 98/59 only if it provides for the application of the information and consultation obligations under Articles 2 to 4 of that directive, at the very least, in the event of the dismissal of 10 workers in establishments normally employing more than 20 and fewer than 100 workers.  That obligation is independent of the additional requirements imposed, under national law, on undertakings normally employing fewer than 100 workers.”

And the appealed judgement of the High Court of Justice maintains that the calculation of workers for the purposes of the thresholds set out in Article 51.1 of the Workers’ Statue should not be made by establishment, but for the undertaking as a whole.

2º.- Is it possible to give direct effect to the provisions of Council Directive 98/59 on the approximation of the laws of the Member States relating to collective redundancies? Is the aforementioned Directive only binding for the States, with the affected individuals required to make a claim against the State for its deficient transposition?

The case-law of the appealed Judgement of the High Court of Justice is based on the premise that it is not possible to give direct effect to the provisions of Council Directive 98/59 on the approximation of the laws of the Member States relating to collective redundancies.

However, the case-law established by the Supreme Court contained in the Supreme Court Judgement of 19 October 2016 follows different criteria (implicitly assumed by the aforementioned Supreme Court Judgement of 6/4/2017) on:

Emphasising that there is no doubt that the Directive should be directly applied in favour of the individual against the non-complying State which has incompletely transposed the categorical mandate of protection of workers at the level of establishment under the qualitative and quantitative circumstances set out in the Directive.

Interpreting Article 51(1) of the Workers’ Statute in accordance with Directive 98/95, in the sense that it should be applied not only when the thresholds set therein at the level of the whole undertaking are exceeded, but also when they are exceeded with regard to any of its establishments considered individually in which there are more than 20 workers.

3º.- Should the calculation of workers, for the purposes of the thresholds set out in Article

51.1 of the Workers’ Statute be based on the establishment or the total number of workers in the undertaking?

Following, for reasons of legal certainty and equality in application of the law, the Supreme Court Judgement of 17 October 2016 (issued in a plenary session, presented by Zardoya Otis), the Supreme Court understands that the classification of collective redundancy should be applied, and therefore the legal regime applicable in this matter should be respected, both to situations in which the terminations of eligible contracts exceed the thresholds set out in Article 51.1 of the Workers’ Statute by taking the undertaking as a whole as reference unit, and those other situations in which those same thresholds are exceeded affecting one single establishment that normally employs over 20 workers (Grounds of Law III.B).

Applying the above case-law to the aforementioned Supreme Court Judgement of October 2016, and considering the case under analysis, we would be faced with a situation of an individual redundancy as the undertaking has over 300 workers and it has been demonstrated that 20 contracts were terminated, therefore the scale set out in Article 51.1 of the Workers’ Contract would establish that the threshold for collective redundancy has not been met (“30 workers in undertakings employing over 300”).

Notwithstanding the above, taking into account that the establishment in Seville had 38 workers and the contracts of 20 workers were terminated, the threshold for collective redundancy was exceeded if the calculation is carried out in that exclusive establishment (“10 workers in undertakings employing fewer than 100 workers”, Article 51.1.a. of the Workers’ Statute).

4º.- Can the case be decided on in accordance with case-law different from another existing at the same time? In other words, is there a serious breach of legal certainty if a case arising when the case-law has a certain meaning is decided on in accordance with subsequent criteria?

This question is important because when there is a collective redundancy (16/10/2012), the case-law of the Employment Chamber of the Supreme Court, substantially contained in the Supreme Court Judgement of 18 March 2009, did not take into consideration the establishment as the calculation unit as the change in case-law arose from the aforementioned Supreme Court Judgement of 17 October 2016.

For the Chamber, there is no breach of effective legal protection (Article 24.1 of the Spanish Constitution) or breach of the principle of legal certainty (Article 9.3 of the Spanish Constitution) for having changed the case-law and deciding on a case using the case-law held (in force, valid) when it is decided on.

It expressly states that:

"There is no breach of constitutional principles or values as a consequence of the fact that workers made redundant under the same conditions receive different responses with the rulings made at different times between which there has been a significant change in case-law applicable to the case. In applying (as in previous and subsequent situations) the case-law of the time in which the case is decided on, we are following the requirements of the system of sources of our legal system” (Grounds of Law IV.E.).

5º.- Is it possible that in legal practice redundancy may be declared void four and a half years after its effective date?  And with the consequent order that the employer readmit the worker with payment of the salary that he/she stopped receiving as well as social security contributions?

We have already seen this with the analysis of the Supreme Court Judgement issued on 6 April 2017, and it is therefore possible. Thus, as stated in point 4 of the Ruling:

"Declare the nullity of the dismissal communicated by the company to the appellant on 1 October 2016, ordering the employer to readmit the worker, with payment of the unpaid salaries and social security contributions, without prejudice to the reimbursement or offsetting of the amount of the severance pay that may have been received as a result of the aforementioned redundancy".

In conclusion, following the current settled case-law (Supreme Court Judgements 17/10/16 and 6/4/17), the calculation unit will be the establishment when the redundancies take place in an establishment considered individually. In contrast, the calculation unit will be the undertaking when the thresholds are exceeded taking the undertaking as a whole as reference unit.

The so-called "gleaning technique” in this legal case, which has been condemned so often by the Supreme Court, is now corroborated by taking as reference in addition to the undertaking, also the establishment (parameter of the Directive), together with the numbers and time periods (90 days) provided for in Article 51.1 of the Workers’ Statute.

 

For additional information, you can consult the following link.

 

For further information, please contact:

Alfredo Aspra Rodriguez

alfredo.aspra@AndersenTaxLegal.es

 

José Antonio Sanfulgencio Gutiérrez

jose.sanfulgencio@AndersenTaxLegal.es

End of main content