The effects of COVID-19 were already being felt by companies weeks ago. It was forcing them to look into the possibility of taking measures aimed at reducing working hours or suspending the contracts of some of their employees.

The exponential increase in the number of people affected by COVID-19, in what is an unprecedented health crisis, forced the central government to declare a state of emergency  on March 14, 2020 in the whole of Spain for an initial period of 15 calendar days. Retail establishments, bars and restaurants, among others, have been ordered to close, with specific limited exceptions that are expressly regulated.

The forced closure of establishments, drop in sales and decrease in production of establishments that are legally entitled to continue their activity, the increase in employees infected by the virus or who must remain in quarantine and the adoption of other measures recommended by the health authorities and risk prevention authorities, is forcing many companies to take urgent measures which up until now, if at all, they were simply contemplating.

The adoption of these measures could enable companies, not just to bring the workforce into line with the current workload, or help to contain the spread of COVID-19, but also a large saving in costs, since they are fully released from having to pay employees’ salaries while the employment contract is suspended or partially released from doing so, when a reduction in working hours is involved, because employees receive an  unemployment benefit  proportionate to the percentage of working hours that they have stopped working, even if workers have not met the minimum contribution period. They could also benefit from a reduction in social security contributions, depending on the number of workers employed, the type of procedure involved and compliance with specific obligations on maintenance of employment.

However, for all of this to take effect, companies cannot unilaterally decide from one day to the next to implement these temporary measures. They need to follow a specific procedure specified in the law, which furthermore differs depending on whether it is based on a situation of force majeure or on production-related, organizational, technical and/or economic grounds.

In order to help companies and the public authorities manage these procedures,  Royal Decree Law 8/2020, of March 17, 2020 on urgent and extraordinary measures to confront the economic and social impact of COVID-19, published in the Official State Gazette of March 18, 2020 which came into force on that same date, in addition to defining force majeure in these situations of emergency, identifies a series of procedural characteristics, the purpose of which would be to simplify requirements on an exceptional and temporary basis.

Specifically, regarding  ERTEs due to force majeure, although the maximum 5-day term is maintained for the authorities to issue a decision, the following changes have been made to the procedure:

  • The company must send the relevant labor authorities a report on the relationship between the suspension of contracts or reduction in working hours and the measures adopted by the Government and supporting documentation. It must also deliver to workers’ statutory representatives, if there are any, a copy of said documentation.
  • If the labor authorities ask the employment and social security inspection authorities for a report, they have a term of 5 days to issue it.

In relation to the ERTE on objective grounds, whether production-related, organizational, technical and/or economic, the following changes have been made:

  • If the company does not have any workers’ statutory representatives, the maximum term to set up the representative committee is reduced to a maximum of 5 days.
  • The maximum duration of the  consultation periodis limited to a maximum term of 7 days.
  • If the labor authorities ask the  employment and social security inspection authorities for a report, they have a term of 7 days to issue it.

As was the case until the entry into force of  Royal Decree-Law 8/2020, in an ERTE due to force majeure, a positive decision by the labor authorities (whether express or due to administrative silence) will take effect from the date of the fact or event giving rise to the force majeure, that is, the measure is deemed to have been authorized from the start of such situation. However, in an ERTE on objective grounds, it takes effect, once the consultation period is over, after the company notifies the labor authorities and the individuals affected of the final decision.

Rosa Lara

Garrigues Employment & Labor Law Department