The Supreme Court has determined that, if the termination of a temporary contract is declared to be an unjustified dismissal, companies do not have to pay double severance. Rather, the severance pay of 33 days’ pay per year worked will be subtracted from the severance pay of 12 days’ pay per year for the termination of the latest temporary contract.


In a judgment dated February 14, 2019, issued in an appeal in cassation for a definitive ruling on a point of law, the Supreme Court confirmed the view taken previously (judgments of June 29, and July 11, 2018), whereby it is understood that the severance paid for the termination of a temporary contract can be offset against the severance paid for an unjustified dismissal.


Until now, there were contradictory rulings, some expressing a view that held that it was not possible to offset the severance for a temporary contract against the severance for an unjustified dismissal since it was considered that these types of severance were different in nature and, therefore, could not be offset against one another.


This situation led to the paradox that, in cases where a temporary contract had been terminated and the related statutory severance had been paid and a claim was filed against the dismissal, if the claim was upheld, workers received double severance, without the courts declaring the right to refund the severance already received for the termination of the temporary contract. In our opinion, this situation entailed a clear case of unjust enrichment.


Against this backdrop, in the above-mentioned judgment the Supreme Court debated precisely whether the severance for the termination of a given temporary contract for project work or services could be offset against the severance that was subsequently recognized for an unjustified dismissal based on irregularities in the temporary contract and relating to the very termination.


The court was inclined to consider that the severance paid upon the termination of the latest temporary contract that entailed the severance for the end of the contract of 12 days’ pay for each year worked pursuant to article 49.1.c) of the Workers’ Statute (WS) could be offset against the severance for unjustified dismissal of 33 days’ pay per year worked, subject to a cap of 24 months’ pay, pursuant to article 56.1 of the WS, which applied because the court declared that the temporary contract was fraudulent and, therefore, should be considered an unjustified dismissal.


In short, the irregular termination of a fraudulent temporary contract entails the recognition of higher severance that should be subtracted from what has already been collected, on the grounds that the same act cannot give entitlement to two types of severance to repair the same damage, since this would trigger a situation of unjust enrichment that would be neutralized by the offset.


The rule established by the Supreme Court closes the debate that allowed workers to collect double severance for the same event, which clearly led to unjust enrichment, just as the case law has concluded.


Álvaro Pérez Carmona

 Garrigues Labor and Employment Department