Companies that have been affected by COVID-19 outbreaks and the strengthening of certain measures and administrative restrictions could consider implementing a temporary collective layoff procedure that enables them to survive the second wave of the pandemic.

Companies did not exactly make a killing in August this year. The macroeconomic figures provided by the different official bodies, certify an extraordinary decrease in activity. This is in addition to the fact that the legislative machinery in the different autonomous communities generates new restrictions on business activity every day. Long gone is the idea of an easy and gradual de-scaling process. Every day, the number of restrictions on business activities increases, which means that the moment may have come to apply new solutions to deal with the situation.

The de-scaling process, from a labor perspective, commenced on June 26, with the publication of Royal Decree-Law 24/2020, of June 26, 2020 on social measures to reactivate employment and protect individual contractors and competitiveness in the industrial sector. This is the legislation that establishes the new legal regime applicable after exceeding the worst part of the health emergency due to COVID-19 and acknowledges that the crisis would have further effects on companies.

In addition to certifying the end of temporary collective layoff procedures due to force majeure as a result of COVID-19 (ERTE COVID), Royal Decree-Law 24/2020 encouraged the use of ERTEs on financial, technical, organizational and/or production-related grounds (ERTE ETOP) and created an additional provision for a new type of ERTE to confront further possible health restrictions. This new procedure were baptized by the Council of Ministers as an “outbreak” ERTE, enabling companies that adopt the measure to benefit from an exoneration of corporate Social Security payments ranging from 60% to 80%, according to the number of employees.

As from June 26, 2020, the de-scaling process has not stopped generating new and constant health restrictions. The social confinement caused by the measures adopted by autonomous communities on a regular basis has caused a number of authentic limitations and restrictions being imposed on business activity. These restrictions are what could justify the application of an “outbreak” ERTE.

There are up to 4 procedures that a company could use to go “back to an ERTE”. Firstly, the labor regulations in force following the 2012 reform are still applicable. The classic ERTE based on force majeure still exists in situations that classify as such. This procedure will obviously not be as fast, nor have the benefits of those requested prior to the entry into force of Royal Decree-Law 24/2020.

Secondly, companies may resort to an ERTE ETOP when there are financial, technical, organizational and/or production related grounds that justify the adoption of a temporary suspension measure or reduction of working hours. These ERTEs also benefit from a similar system of exoneration as those of an ERTE due to force majeure after they expire. Thirdly, companies may resort to the new “outbreak” ERTE when the above-mentioned new health restrictions are applicable. Finally, it is also possible to implement a pre-existing ERTE COVID procedure to overcome the adversities resulting from the pandemic, to the extent applied since March 2020, which will possibly be extended for several months more.

With these four procedures, there are formulas that help to overcome the difficulties being faced in this month of September and in coming months. If the pandemic has allowed the business to reactivate, with part of its employees affected by an ERTE COVID and the other part having returned and there are no signs of a future setback, perhaps the best idea would be to maintain the authorized measure, while not losing sight of the more than likely ERTE ETOP which would have to apply in the future, if the current legislation is not extended. This ERTE-ETOP would be the best solution for companies that do not have an ERTE based on force majeure and can prove a temporary reduction in their business, as it enables them to make their business activity more flexible.

However, if the company situation is not as foreseeable or more affected by the health restrictions passed by autonomous communities, the solution could be an “outbreak ERTE”.

The administrative criteria of several Labor Authorities with respect to these ERTEs recently became known, such as the Community of Valencia and the Balearic Islands. In both cases it can be claimed that companies are entitled to resort to this procedure, whether they have a previous ERTE in force or have waived one, provided they have been obliged to close a work center based on a decision that was the result of restrictions or confinement measures due to the pandemic.

Unlike an ERTE COVID, “outbreak” ERTEs include a procedure that provides for an interview with the workers’ legal representatives and a mandatory report by the Labor and Social Security Inspectorate. Therefore, access to the improved exonerations of 60% and 80% will necessarily require the automatic procedures applicable in previous legislation requirements. In other words, highly technical work will be required to convince, defend and prove that the orderly closure is due to the new restrictions and not to previous pandemic effects or temporary business difficulties in the entire sector.

In short, all company situations could have an answer in the next few months, although they must be suitably managed and planned in order to be successful. Therefore, it would be advisable to review the steps taken since March and determine whether the strategy in coming weeks or months requires going “back to an ERTE”.

Pablo Salguero

Garrigues Employment & Labor Law Department