Layoff plans and headcounts: the reference unit is not only the total number

Today we’re going to focus on an aspect of social jurisprudence that generates a lot of interest, layoff plans (Expedientes de Regulación de Empleo or ERE in Spanish); specifically, the unit of measurement which determines whether or not the thresholds established in art. 51 of the Workers’ Statute, which separate collective dismissals from the sum of several individual dismissals, are exceeded. Understanding this is important for both employers and employees, because the dismissal regime and the guarantees required by labor regulations are dependent on whether it is one kind of dismissal or another.

Put simply, what differentiates between types of layoffs is the number of employees affected in relation to the total workforce: firing 10 employees from a total workforce of 12 is not the same as 10 employees from a workforce of 350. The law and judges deal with each type of dismissal in a very different way, and unions have a different say.

What the Workers’ Statute says is that a layoff plan is required for the dismissal of 10 employees at companies with less than 100 total; 10% of the total number of employees at companies that have between 100 and 300 employees in their workforce; or 30 employees at those that have over 300 employees.

Furthermore, art. 51 of the Workers’ Statute considers collective dismissal to be the dismissal of the entire workforce, as long as more than 5 employees are dismissed and when contractual termination is due to the cessation of business activity by the employer.

A key question, but also a ploy that tends to be used in order to lean towards one type of dismissal over another, is whether to use the headcount of the entire company, instead of that of the workplace. Using the former, the proportion tends to fall short of the threshold, so the company moves towards the individual objective dismissal of several employees.

However, a recent decision by the Supreme Court (SC), in cassation appeal 36/2016 dated 17 October 2016, establishes that the workforce to be taken into consideration is not necessarily the company’s total workforce, but instead the total for the workplace. The appeal had been filed by Zardoya Otis S.A. against the decision of the Labor Chamber of the High Court of the Basque Country, which had declared invalid the individual dismissal, for organizational and productive reasons, of 27 employees at a workplace in Vizcaya which had 77 employees.
The employees considered the action to be a collective dismissal, while the company contended that they were individual objective dismissals since it hadn’t exceeded the number of 30 affected employees out of the total of 3,100 employees who make up the company’s workforce at its various workplaces.

The SC decided that in order to be a collective dismissal, the numerical criteria should be based on either the company total (3,100 in this case) or the workplace total (77), if there are more than 20 employees at the workplace.
The SC didn’t come up with these criteria out of the blue, but instead based them on the doctrine of the Court of Justice of the European Union (CJEU)’s judgment in case C-392/13 from a preliminary ruling from Barcelona Labor Court No. 33 in July 2013.

The Barcelona Court drew attention to the fact that art. 1.1 of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of member states relating to collective dismissals defined “collective redundancies” using the workplace as the reference unit, while the Workers’ Statute used the company.

The CJEU establishes that when a company has several entities which meet the criteria to be considered a “workplace”, it is the workplace where the employees affected by the dismissal carry out their duties which must be taken into consideration. However, it does not preclude the possibility of using the concept of “company” if it favors the protection of employees.

Moral of the story? European Union Law should be given more consideration, because by handling decisions like this one, as well as the Court of Justice of the European Union’s decision dated 14 September 2016 which approximates the rights of temporary employees with those of permanent employees, we can reduce the number of legal disputes and provide greater comfort to employees; which in the end results in greater productivity for companies.

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