Up to recently, whether an agreement was reached with the employees’ representatives in a collective dismissal procedure was important. Reaching that agreement meant a (very) significant legal effect: the case law considered that the reasons justifying the collective dismissal had to be presumed to exist and, as a consequence of the above, the employees affected could not question their existence in each of the individual proceedings which they might commence. However, this legal approach which had been adopted by the Plenary Session of the Labor Chamber of the Supreme Court has been overturned by the Constitutional Court, in a judgment handed down on July 12, 2021.
With the reaching of an agreement during the consultation period of a collective dismissal, the reasons for the collective dismissal were rather unassailable and in individual claims only strictly individual issues could be alleged and analyzed (for example, breach of rules regarding continued service, inappropriate t application of selection criteria, etc.).
In other words, an employer who reached an agreement in the consultation period of a collective dismissal was not forced to face as many individual trials as there were employees affected by the collective dismissal, alleging and proving in each of them the existence and scope of the reasons justifying the dismissal, and subject to the risk of obtaining judgments with contradictory grounds and rulings.
This legal certainty regarding the effects of the collective dismissal was one of the reasons which drove many employers to enter into agreements containing significant increases of the indemnity payable to the employees affected, sometimes even exceeding the statutory indemnity for unfair dismissal.
This legal solution was established in judgment no. 699/2018, issued by the Plenary Session of the Labor Chamber of the Supreme Court on July 2, 2018.
In this judgment, the court had to consider the cassation appeal for unification of case law filed by four employees whose respective employment contracts were terminated by a collective dismissal procedure.
That collective dismissal procedure concluded with an agreement between the employer and the employees’ representatives in which the latter accepted the existence and the scope of the reasons for it. The plaintiff employees, disagreeing with the dismissal, sought to question the existence of those reasons. However, the Supreme Court impeded any substantive debate or analysis in this respect by stating that they could not question the existence of the reasons alleged when the consultation period had ended with an agreement –as was the case considered–.
In order to reach that conclusion, the Supreme Court began by analyzing the legislation directly applicable in this respect –essentially, articles 120 to 124 of the Labor Jurisdiction Law–, concluding that it did not establish any difference between the situations in which the collective dismissal ends with an agreement or, on the other hand, the collective dismissal is implemented by unilateral decision of the employer, for the purposes of assessing the capacity or standing of the employees affected to review the reasons for the collective dismissal.
Precisely the opposite occurs in the case of all the other labor institutions related to business crisis situations: substantial modification of employment conditions –article 41 of the Workers’ Statute (ET)-, suspension of employment contracts or reduction of working hours –article 47 of the ET– or nonapplication of the collective agreement –article 82 of the ET–. In all the above cases, their applicable legislation expressly provides that, if the mandatory consultation period ends with an agreement, the reason justifying the measure will be presumed to exist and the agreement can only be contested if it has been reached by fraud, willful misconduct, coercion or abuse of law in concluding it.
However, the court goes on to argue, this could not be used to rule out the possibility that the agreement reached in the consultation period may have some impact for these purposes. Quite the contrary. In the opinion of the Labor Chamber of the Supreme Court, a systematic and purpose-based analysis of the applicable legislation as a whole supports the idea that parliament did not wish to treat the collective dismissal differently from those other labor institutions and, therefore, if the collective dismissal ended with an agreement with the employees’ representatives, the reason had to be presumed to exist and the employees affected were forbidden to criticize it in their individual proceedings.
However, this legal approach of the Supreme Court has been overturned by the Constitutional Court, in its judgment of July 12, 2021.
In that judgment, the Constitutional Court considers the appeal for constitutional protection filed against the judgment of the Supreme Court and, in particular, whether the approach adopted by the latter constituted a violation of the right of the employees affected to effective judicial protection, from the perspective of access to judicial proceedings.
This court, although emphasizing that the grounds given by the Supreme Court “cannot be branded as arbitrary, manifestly unreasonable or patently erroneous” and agreeing that the arguments offered on which to base the ruling are “thorough and detailed”, grants constitutional protection to the plaintiffs since, allegedly, there is no legal basis which excludes from the subject matter of the individual proceedings the reasons given to justify the collective dismissal and, therefore, in the Constitutional Court’s opinion, the appraisal of whether or not such reasons exist is necessary in order to assess the unfairness of the dismissal.
In relation to the above, the Constitutional Court gives importance to the fact that the regulation of collective dismissals does not provide that, where the mandatory consultation period ends with an agreement, the reason justifying the measure will be presumed to exist and the agreement may only be contested if it has been reached by fraud, willful misconduct, coercion or abuse of law in concluding it, unlike what occurs with the rest of the labor institutions associated with a business crisis.
That legislative difference –the court points out– must be considered as revealing parliament’s wish not to limit employees’ capacity to question the existence of the legal reason for the collective dismissal, although this had ended with an agreement between the employer and the employees’ legal representatives.
Thus, the judgment handed down by the Constitutional Court revokes that given by the Supreme Court and overrides the approach indicated earlier.
From now onwards, reaching an agreement with the employees’ representatives will not prevent the employer from possibly being required to face as many individual proceedings as there are employees affected in the collective dismissal process. In all of them it will have to defend the existence of the reasons, provide full evidence regarding the reality and scope of such reasons, and of course, all of this will be subject to the rulings which will be issued by the courts that will hear them.
This will certainly lead to less legal certainty in this type of processes –the Supreme Court already pointed out in advance that the employer may be faced with contradictory rulings which may be very difficult to reconcile–; a substantial increase of costs associated with this type of processes and, of course, a factor discouraging agreement in the consultation period.
If the agreement is not going to ensure a uniform legal solution at least in relation to the assessment of the existence of the reasons alleged, the employer no longer has much motivation to strive to reach it.
In any event, the rules governing the collective dismissal process change from this judgment onwards and those of us who participate in them must be very aware of this as long as parliament fails to proceed, as would be desirable, to resolve this issue by giving the same value to the agreement reached in a collective dismissal as in the other collective negotiation processes.
