Extensive labour market reform

After months of negotiations with employers and trade unions, the Spanish government reached an agreement on 23 December 2021 on a far-reaching reform of the labour market. It has been implemented through Royal Decree-Law 21/2021 (RDL), published on 30 December 2021, on urgent measures to reform the labour market, guarantee employment stability and transform the labour market. With the reform, Spain is complying with EU requirements, especially with regard to combating fixed-term employment. Contrary to the expectations raised by the governing coalition, however, the last major labour market reform was not "repealed"; most of the measures introduced in 2012 by the conservative government to make the labour market more flexible remain in force.

Content overwiev

The RDL comprises 54 pages and a multitude of very different rules. Without claiming to be exhaustive, we present below the innovations that are likely to be most significant in practice. Where there have been no changes, the previous rules remain in force.

1. Fixed-term contracts

This is probably the area with the most significant changes for employers. The fixed-term contract for a specific activity or service has been abolished. In future, fixed-term employment contracts will only be possible in two constellations: due to production circumstances (seasonally higher demand) or to replace an employee. The former may have a maximum duration of six months (extendable to one year by collective agreement).

At the same time, sanctions for unauthorised fixed-term employment contracts are increased.

2. Training contracts

Training contracts are reformed with the aim of better ensuring the alternation between work and theoretical formation. This type of contract may be concluded for a maximum of two years. In addition, the type of contract for career starters is changed (maximum duration now one year), through which initial practical work experience is to be gained after the end of studies.

3. Open-ended interrupted contracts

This type of contract is suitable for seasonal work that recurs regularly. It has been strengthened in comparison to its previous importance and replaces employment relationships previously concluded as fixed-term contracts. To this end, the subject matter of this type of contract is considerably expanded, inter alia, to include the performance of commercial and/or administrative contracts; moreover, this type of contract can now be used in temporary employment contracts (ETT).

4 Subcontracting

During the reform negotiations, a restriction of the possibility of subcontracting was discussed for a long time, but in the end the existing provisions on this are essentially retained. However, it is clarified that for subcontractors providing services in connection with the principal's activities, the sectoral collective agreement that corresponds to the activity carried out by the subcontractor applies, irrespective of the purpose of the subcontractor and its legal form, unless another sectoral collective agreement is applicable.

5 Short-time work (ERTE) and the new RED system

The conditions and procedure for implementing an ERTE are changed in detail (in particular for ERTE due to force majeure). In addition, a new mechanism called RED is introduced: This allows enterprises to request measures to reduce working hours and suspend labour contracts. RED must first be activated by the Council of Ministers and consists of two modalities: cyclical and sectoral. The first is activated when there is a general macroeconomic situation that suggests the use of additional stabilisation instruments. The sectoral modality is used when a particular sector or sectors experience permanent changes that generate a need for retraining and occupational transition of workers. During periods of suspension of contracts or reduction of working hours, companies can apply for partial exemption from their social security contributions and the workers concerned are entitled to unemployment benefits that do not count towards your contributions.

6. Applicable collective agreement

Collective agreements continue to apply after their initial period of validity has expired if they have not been replaced by another one by that time. One year after the end of the period of validity, the negotiating parties must settle their differences in arbitration.

If you have any questions about the reform, please feel free to contact our labour law department:

Autor: Luis Bravo