A recent judgment has opened the debate on the possibility of increasing severance compensation above the statutory amount in certain cases. For the time being, the courts require that very specific requirements be met, although we will have to wait and see how the situation evolves.
According to Supreme Court doctrine -among others, the judgment of January 28, 2013 (appeal 149/2012)-, with regard to employment contracts, unlike in civil cases, the statutory and traditional compensation for unfair dismissal is based on objective criteria such as salary and length of service, which compensates for all the damages that the termination of the contract may cause to the employee:
As an exception to this general rule, according to the doctrine itself, we can find cases in which the termination decision has been reached on discriminatory grounds or in breach of fundamental rights or other public freedoms, in which case compensation for damages is recognized in addition to the statutory amount for dismissal.
However, on January 30, 2023, the Social Chamber of the High Court of Justice of Catalonia issued a ruling, number 469/2023, in which, for the first time in Spain, a high court of justice granted additional severance compensation above the statutory amount for unfair dismissal, without discrimination or a breach of rights in the decision to terminate the employment.
The judgment granted the amount on the basis of a very particular case in which the dismissed worker, due to her seniority in the company, was entitled to very little compensation of less than 1,000 euros and, scarcely five days later, the dismissing company carried out a collective temporary suspension of employment (ERTE) based on force majeure in which the worker was not included, as she had already been dismissed.
The court considered that the low amount of compensation did not have a dissuasive effect on the company and that the dismissal deprived the worker of being included in the ERTE, which would have allowed her to benefit from the extraordinary measures on unemployment protection legally contemplated at the time. In the case judged, due to the lack of sufficient contributions, the worker was not entitled to unemployment benefits following her dismissal.
Based on the circumstances described above, the court considered that the requirements to establish additional severance compensation payable to the worker had been met, ruling that there was “a clear and evident illegality and abuse of law in the company’s decision to terminate the contract”.
Accordingly, in addition to the statutory severance pay for unfair dismissal, the worker was granted an additional amount that took into account the fact that she was not entitled to unemployment benefits.
The court based its decision on the provisions of the regulatory framework of the ILO Convention 158 and Article 24 of the European Social Charter, as well as on other rulings by the same court and by other higher courts of justice in 2021 and 2022 which, although they had not recognized additional severance compensation above the statutory amount for unfair dismissal, the possibility of such an increase had been admitted, with the same legal protection.
The peculiarity and uniqueness of the case analyzed in the judgment should be considered with care: it is not possible to conclude that this type of severance can be applied in general, since it is not expressly provided for in Spanish labor legislation and there is no Supreme Court case law in this regard.
Even in the cases mentioned that admit the possibility of granting additional severance compensation, it is understood that such possibility is conditioned to very specific requirements: (i) the amount of the severance pay is too small to be a deterrent; (ii) the existence of a clear and evident illegality or abuse of law in the termination decision; and (iii) the damages caused are determined and proven.
With this in mind, it will be necessary to pay special attention to how these types of rulings evolve and, in any case, to those that may be adopted in relation to this concrete issue by the Supreme Court.
Garrigues Labor and Employment Law Department
