Termination of employment

Termination of employment

Under Spanish employment law, there are various ways that termination of employment can take place:

  • The employee may resign
  • The temporary contract expires
  • Objective dismissal (despido objetivo) for economic reasons (layoffs)
  • Disciplinary dismissal: firing the employee

In Spain, an employment contract that exceeds one year can be terminated by either party giving the other a minimum of 15 days’ notice in writing.

Employment law lists various grounds for termination of the employment relationship which includes mutual agreement of the parties, reasons established in the contract, resignation, retirement, employer or employee death or disability, and dismissal.

An employer can legally dismiss an employee for the following three reasons:

  • Objective Dismissal: This includes reasons such as employee incompetence, inability to adapt to reasonable technical changes, and layoffs based on organizational, economic, technical, or productivity grounds.

  • Disciplinary Dismissal: Grounds for disciplinary dismissal include repeated and unjustified absence or tardiness at work, disobedience and lack of discipline, and harassment or verbal and physical aggression towards the employer or other employees.

  • Collective Dismissal: This is termination based on economic, technical, organizational, or productivity grounds. Collective dismissal occurs when in any 90-day period: 10 employees in a company with less than 100 employees are dismissed; at least 10% of the workforce in a company with 100 to 300 workers; 30 employees in a company with at least 300 workers, or all employees in companies with more than five workers.

So, if an employee is dismissed for any of the reasons discussed above, are they entitled to severance pay?

For disciplinary dismissals, the answer is no. So long as the dismissal is given in writing and clearly communicates the employee behavior, such employees have no legal standing to ask for severance or other benefits.

However, a court could deem it as unfair dismissal or wrongful termination and then require severance pay to be provided after the fact. In that case, the employee would be due severance for 33 days’ salary per year of service, with a cap of 24 months’ pay. That would be notably higher than the standard 20 days’ salary per year of service, with a 12-month cap for objective dismissal.

Finally, there are also separation agreements where both parties mutually consent to termination of contract. In this instance, severance depends upon the agreement, but it’s typically still subject to taxes and social security contributions.

Employees with special protections:

Note that under Spanish law, certain employees have more protection. Among other groups, this includes:

  • employees who have been granted reduced hours for child care
  • employees on maternity/paternity leave
  • pregnant women

Because of the protections for these employees, it may be very difficult to fire them. If the dismissal does not comply with the special regulations, the courts may deem the dismissal as void (despido nulo). In this case, the employer must reinstate the employee. To avoid reinstatement, a settlement is often reached between the lawyers.

If any employee disputes their dismissal, they can challenge their employer before an Employment Court.

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