The Supreme Court admits severance payment in installments in collective layoff procedures
In its Judgment of July 22, 2015 (appeal 2161/2014), among others, the Supreme Court recently analyzed the possibility of payment in installments of severance for dismissal agreed upon at the end of the relevant consultation period in collective layoff proceedings that conclude with an agreement.
In the case at hand, the company had incurred substantial losses in recent years and, with the aim of improving the negative situation, initiated the procedure provided for in article 51 of the Workers’ Statute based on economic grounds. As mentioned, the procedure concluded with an agreement with the worker representatives in which both parties acknowledged the existence of the negative financial situation and serious cash flow problems the company was experiencing at the time.
The agreement also provided for higher severance than the statutory amount for dismissal. However, in light of the company’s liquidity problems, it was agreed that payment of the full severance amount, which in certain cases reached a maximum of 28 days’ salary per year of service, with no limit whatsoever on the increased severance amount, would be paid in installments, meaning that the workers affected by the dismissal would receive their severance in four installments, the last installment being received nine months after the effective date of dismissal.
In the case of reference, the dismissal was challenged individually and both the first instance Judgment and the Judgment of the Labor Chamber of the High Court of Justice of the Basque Country concluded that the agreement reached was null and void, as it was in breach of a mandatory legal provision (article 53.1 b) of the Workers’ Statute) that requires the simultaneous delivery of the letter of dismissal and payment of severance amounting to 20 days’ salary per year of service, up to a limit of 12 months’ salary.
However, the Supreme Court stated that the provision in question is negotiable by the parties under a collective layoff procedure, basing its decision on the right to collective negotiation set forth in article 37 of the Spanish Constitution. The Supreme Court therefore overrules the criteria of the High Court of Justice of the Basque Country and validates the payment in installments of statutory severance; in the understanding that said payment is not disproportionate and therefore does not constitute an abuse of rights.
Garrigues Labor and Employment Department