Spain changes unfair dismissal compensation calculations

 

The Superior Court of Justice has recently ruled that when an employer is calculating an employee's length of service for the purposes of making a compensation payment to him it should take into account his entire service with various group companies, not just his service with the last group employer.

In Spain a dismissal is only considered to 'be fair' if it is for one of the given reasons laid down in the Workers' Charter: misconduct, incapability, etc... If a dismissal is found to be unfair, a Labor Court can order the employer to re-instate an employee with immediate effect, or alternatively to pay them a compensation payment based on the length of service with the employer, up to a maximum of 42 months' salary.

In practice, rather than arguing about whether the reason are fair or not, many Spanish employers simply make a dismissal, then if and when an appeal is made, acknowledge it was unfair and then pay compensation.

From a legal point, this action does not imply any kind of wrongdoing on the part of the employer. It is just seen as a quikc and easy way to dismiss an emploee. Any compensation payment can be made tax-free, up to the maximum 42 months' salary.

Following the court's ruling, any employers considering this approach should ensure that if an employee has worked continuously for a number of businesses under the same group or holding company umbrella, they calculate any such compensation based on his first date of service with the group.