Spain enacts labor reforms 

Recently enacted measures in Royal Decree-Law 32/2021 have simplified certain employment contracts, amended provisions for temporary employment adjustments, and introduced new labor infringements and penalties.

Highlights

• The most commonly used temporary contract (for a specific job or service) was eliminated, but other contract types (to meet production needs and employee replacement) will remain.
  
  
• Temporary contracts for the fulfilment of production requirements (for example, to meet a temporary and unexpected increase) will be limited to six months, extendable for up to 12 months depending on the applicable collective bargaining agreement (CBA). Fixed-term contracts entered into before 31 Dec 2021 will remain valid until their maximum term expires, but contracts entered into between 31 Dec 2021 and 30 Mar 2022 are capped at six months.  
  
  
• Additional employer social security contributions are payable for all temporary contracts with a duration of fewer than 30 days, and social security contribution rules will be introduced for reduced working hours or suspended employment contracts. 
  
  
• The use of fixed-term contracts (of indefinite duration but limited to specific periods of activity during the year) is allowed to take on tasks arising from subcontracting.
  
  
• One type of training contract will allow individuals to combine paid employment with study for up to two years, or obtain work experience commensurate with their education attainment for up to three years. The measure takes effect on 30 Mar 2022, but existing training contracts will remain in force for their maximum duration.
  
  
• Temporary layoffs for economic, technical, organizational or production reasons or for force majeure reasons (“ERTE”) now explicitly include public health reasons in companies with fewer than 50 employees, and the ERTE model has been adjusted to include elements permitted during the COVID-19 pandemic. The Council of Ministers can activate the “RED” Mechanism for Employment Flexibility and Stabilization to allow companies to request approval for temporary reductions in working hours, and to suspend employment contracts in certain circumstances. A new benefit will be paid to employees impacted by the RED mechanism (no prior social security contributions will be required). Companies are exempt from certain contributions if they meet the eligibility criteria.  
  
  
• The different categories of infringements (minor, serious and very serious) are revised, and increased penalties will apply to serious breaches of the law.
  
  
• The one-year limit on the validity (ultra-activity) of CBAs is eliminated. This means the terms of expired CBAs will remain applicable. CBAs with a national scope now take precedence over the basic salary and wage supplement measures included in CBAs with a regional or company scope.

Related resource

• Royal Decree-Law 32/2021 (Spanish) (Official journal, 30 Dec 2021)