The Supreme Court allows the partially retired to accumulate working hours between years
It has been the practice at some companies to allow partially-retired workers to accumulate their working hours in the first year or first months of the term of their early retirement arrangement. So the partially-retired workers concentrate their work in the first year of the contract and have no contact with the company’s activities for the remainder of their employment until their regular retirement date, although over that period they continue receiving wages, they remain on the roll for social security taxes and their contributions are made.
The social security bodies, the labor inspectors and the courts have been seeing this practice as a circumvention of the law by companies because it implies de facto the termination of the worker’s employment and is therefore really an early retirement scenario, requiring the associated impact on the worker’s pension, which would have to be lowered using reduction multipliers based on the real age at which the worker stopped working.
The legal definition of partial retirement does not provide an answer to this issue, in that the only legislative provision on this subject is in the preamble to Royal Decree 1131/2002, of October 31, 2002, on the social security of part-time workers and on partial retirement, which mentions that company and worker may agree that the annual hours under partial retirement contracts may all be worked together in certain periods of each year. In other words, the law expressly allows the working hours to be accumulated in a year but does not say anything about accumulating working hours between years.
Until now there had only been very isolated court decisions which, from an examination of the impact of this practice on the validity of hand-over contracts when they were terminated, contradicted the majority view supporting the validity of accumulating the working hours of the partially retired between years.
The Supreme Court appears to have settled this issue in a judgment rendered on January 19, 2015, in which it examined the validity of the termination of a hand-over contract in a case where the replaced worker worked all of his 15% partial working hours in the nine months following the signing of the hand-over contract and the partial retirement arrangement. He did not work any hours after that date but remained on the payroll at the company, which continued paying his contributions until his regular retirement date.
The Supreme Court’s reply (confirming the view taken by Catalonia High Court on October 3, 2013) was that the termination of hand-over contracts is valid after the replaced worker has reached the regular retirement age; this is because it considers that the hand-over contract must be adapted to satisfy the associated procedural and factual requirements, and therefore, once these have been satisfied, the termination of the contract on its termination date must be seen as a valid termination of a temporary contract.
And on the subject of whether or not there was circumvention of the law in the hand-over contract where all the hours are worked in a given stretch of time, although this was definitely not the center of the debate, the judge added that, while anomalous, this is not a circumvention scenario. That view came from the definition itself of “retirement”, which consists of a situation of need generated by the absence of salary income determined by the worker stopping working because of his age and accompanied by the ceasing of contributions.
The Supreme Court judge concluded that in the case at issue the replaced worker could not be considered to be on early retirement because he has continued receiving wages, the replaced worker has remained on the social security tax roll and kept up contribution payments in the period between partial retirement and the regular retirement age.
The judgment is important because, despite concerning the validity and later termination of the replacement worker’s contract, it ruled out the existence of circumvention of the law in the practice of accumulating the partially-retired worker’s annual working hours between years, although it described this practice as an “anomalous scenario”.
Garrigues Labor and Employment Department