RIVERO & GUSTAFSON ABOGADOS

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1 RIVERO & GUSTAFSON ABOGADOS October 2010 Special Labor Reform Newsletter Labor.. Measures for reducing the temporary nature of the labor market Measures for favoring internal flexibility in companies and in order to encourage the use of the reduction of the work day as a temporary adjustment of employment Measures for favoring the employment of young people and the disabled Measures for the improvement of labor intermediation and on the actions of temporary employment companies Duration of the economic benefit for termination of the activity of selfemployed workers Contacts... John R. Gustafson Litigation Department jgustafson@riverogustafson. com. Sebastián Rivero Litigation Department srg@riverogustafson.com. Eliécer Pérez Simón Mercantile Department eps@riverogustafson.com. Ángela Toro Labor Department at@riverogustafson.com. Javier Zapata Tax Department jzapata@riverogustafson.com Rivero & Gustafson Abogados Avda. de Burgos, 17-3º Madrid (Spain) Tel.: (34) Fax: (34) Labor LABOR REFORM LAW 35/2010, OF SEPTEMBER 17, ON URGENT MEASURES FOR THE REFORM OF THE LABOR MARKET Measures for reducing the temporary nature of the labor market Temporary Hiring - Works or services contracts shall have a maximum duration of 3 years, which may be extended for 12 more months more due to a collective bargaining agreement. - The limit on linking contracts is applied to the same or a different job with the same company or company group, extending its scope of application in cases of transfer or business subrogation. This limit shall not be applicable to training contracts, those of relief and provisional, temporary within the framework of public programs for employment training and those which are used by insertion companies. - Upon the worker achieving permanent status, the business owner must deliver to them an explanatory document that accredits their new status within a 10 day period. - Likewise the worker may request from the SPEE a certificate of the contracts executed in order to accredit their permanent status. - The indemnification due to termination of a temporary contract is increased from 8 to 12 days salary per year worked. Termination of the labor agreement due to economical organizational or production reasons - For the termination of the contract due to economical causes, the need to accredit the existence of the current or predicted losses or the persistent decrease of earnings that may affect the viability of the company or its This letter is also available in Spanish 1

2 capacity to maintain employment is established. Accordingly, the company must justify the reasonableness of the measure. - For terminating the contract due to technical, organizational or production causes, it is necessary to accredit the concurrence of the causes and justify that the measure adopted is a reasonable measure that contributes to preventing a negative evolution of the company or improving its situation through a more adequate organization of resources that favors its competitive position in the market or for a better response to the exigencies of the demand. - In the procedure for the regulation of employment, if the workers did not have legal representation, they could attribute their representation to a commission designated thereto. - The substitution of the consultation period for the mediation or arbitration shall be able to be agreed upon. - Consultation with the workers representatives ceases to have a minimum duration of 30 days or fifteen in the case of companies of at least 50 workers and which is now established as the maximum duration in both cases. - The period of the labor authority in order to resolve a case of labor force adjustment plan is reduced from 15 to 7 days in the cases in which the consultation period concludes with an agreement. - The notice period for termination by the business due to objective causes is reduced from 30 to 15 days. - The termination decision is deemed unfair when the cause is not accredited or the formal requisites are not fulfilled. Nevertheless, the absence of notice or the excusable error in the calculation shall not give rise to the unfairness without prejudice to the duty to pay salaries corresponding to the notice period and correct indemnification. - Upon the termination of an indefinite contract if the duration thereto is greater than 1 year, the FOGASA shall pay 8 days of indemnification for the contracts executed subsequent to June 18, This indemnification shall be paid independently of the type of termination that is dealt with and its judicial or business qualification. Termination of the labor agreement due to lack of attendance - The percentage of the total absentee rate of the workforce of the work center necessary in order to justify an objective dismissal from 5% to 2.5%. - Absences due to paternity are included among absences that do not constitute absences. Contracts for encouraging indefinite hiring - Contracts for encouraging indefinite hiring shall be able to be Office between the ages of 16 and 30, women in certain situations, those who 2

3 are older than 45 years of age, the disabled, unemployed under certain circumstances or due to the transformation of contracts. - The contract shall be formalized in writing and for an indefinite duration. - If it is terminated due to objective causes and the dismissal is recognized or declared unfair, the indemnification shall be 33 days per year of service up to a maximum of 24 months. - If the worker alleges that the objective dismissal does not correspond to the right to be dealt with as a disciplinary dismissal, the burden of proof on this question corresponds to the worker. - Upon the termination of the contract if its duration is greater than 1 year, FOGASA shall pay 8 days indemnification whether or not the termination is determined to be fair or unfair. This is provided the contracts have been executed subsequent to June 18, This contract shall not be executed in companies which in the prior 6 months have terminated contracts with a ruling or recognition of their unfairness or that have proceeded to a workforce adjustment plan and seek to execute this contract in order to cover vacant posts. Means for favoring internal flexibility negotiated in companies and in order to encourage the use of the reduction of the workday as a temporary adjustment of employment Geographic Mobility - The duration of the consultation period with workers representatives shall not be greater than 15 days. - In the case that there were no legal representation of the workers the latter shall be able to attribute its representation to a commission designated for such purposes. - The possibility is introduced that the company and the workers legal representatives agree upon the substitution of the consultation period for a mediation or arbitration procedure of an equal duration. Substantial modifications of the working conditions - The distribution of the work time is added as a topic the modification of which is deemed substantial - These modifications shall be preceded by a consultation period not longer than 15 days. - Workers without legal representation shall be able to choose to attribute their legal representation to a commission designated for such purposes. - The consultation period may be substituted for a mediation or arbitration procedure by agreement between the workers representation and the company. - The modification of the conditions established in the collective bargaining conditions of the sector shall refer to all the substantial matters, except 3

4 for the work day. Its maximum period of effectiveness shall not be able to exceed the effectiveness of the collective bargaining agreement the modification of which is sought. Content of the collective bargaining agreements - It foresees possibility of the non-application salary regime provided by agreement due to the economic necessity of the company by agreement with the workers representatives, thereby determining the remuneration to be received. - This measure shall not be able to have a duration longer than the effectiveness of the agreement or three years. - In the cases of absence of legal representation of the workers the latter shall be able to attribute their representation to a commission designated for such purposes. - The determination of the procedure to which the parties shall submit themselves upon discrepancies in the negotiation of the non-application of the bargaining agreement salary regime is introduced as a minimum content of the agreement. Suspension of the contract or reductions of the working day due to economic, organizational or production reasons or arising from force majeure - The case of the reduction in the working day is expressly added. - The procedure for the suspension of the contract due to objective reasons shall apply regardless of the number of employees in the company and the number of those effected. - The authorization of the suspension measure does not produce the right to indemnification. - Likewise, the labor agreement may be suspended due to reasons of force majeure. - There exists a reduction of the working day due to objective causes when a reduction of the working day between 10 and 70% occurs. During the period of working day reductions overtime shall not be performed except with force majeure. Measures to support the reduction of the working day - It adds measures, which support the reduction of the working day, such as a discount on the business contribution to social security in the cases of temporary employment adjustment plans. In this sense, the company discount on the contribution is increased from 50 to 80% just as the right to unemployment benefits increases its maximum limit from 120 days to 180 days. 4

5 Measures favoring the employment of young people and the unemployed Contribution discounts for indefinite hiring It establishes indefinite hiring discounts for unemployed workers between 16 and 30 years with special problems insofar as hiring as well as for unemployed workers who are older than 45 years of age. - Likewise, discounts are established for companies who either convert training contracts and those contracts for substitutions arising from early retirements into indefinite contracts or in those where so called indefinite business entities are established. - It is an essential requisite that new hiring or transformations involve an increase in the level of the company s permanent hiring. - The breach on the part of the company of their obligations shall give rise to the repayment of the discounts of the effected contracts due to the decrease in the level of permanent staff that was reached with that hiring. - The effected groups shall have priority with respect to the measures of the active employment policy that are developed. Discounts on the contributions for training contracts - Discount of 100% of the company social security contributions due to common contingencies, labor accidents, professional illnesses, unemployment, FOGASA and professional training due to training agreements executed with unemployed workers. - It is an essential requisite in order to be able to enjoy the discounts that the hiring for training involve an increase in the level of permanent company staff. - The groups effected shall have priority with respect to the measures of the active employment policy that are developed. Training Contracts 1. Internship Contracts - Those who have professional certificates are included in the scope of application. - The possibility of concluding a training contract with a disabled worker is increased to 7 years from possession of degree. - Situations involving temporary disability, risk during pregnancy, maternity, adoption, fostering, risk during breast-feeding and paternity shall interrupt the calculation of the duration of the contract. - One shall not be able to be hired for training in the same company for the same post for a time longer than 2 years, even thought it deals with a 5

6 different degree. - Undergraduate, masters and doctorate degrees are not deemed the same title, except if upon hiring for training for the first time, the worker had a higher degree than that which it concerns. - Insofar as the maximum duration of the trial period for workers with a medium degree it has added workers with a professional certification level of 1 or 2 and will be 2 months for workers in possession of a higher degree and for workers with a professional certification level of Training Contracts - In contracts concluded with the unemployed who are hired as studentworkers for public programs on employment training the maximum age level will be that which is established in their provisions in the case of the unemployed who are enrolled in a training cycle for professional training at an intermediate level. The maximum level shall be 24 years of age. - The maximum level shall not apply when the contract is concluded with disabled persons. - Situations involving temporary disability, risk during pregnancy, maternity, adoption or fostering, risk during breast-feeding and paternity shall be excluded from the calculation of the duration of the contract. - During the second year of the contract, the remuneration shall be that established in the collective bargaining agreement without it being able to be lower than the minimum fixed inter-professional wage. Social Security protection shall encompass all those contingencies, protective situations and benefits, thereby adding the contingency of unemployment. Measures for the improvement of the labor intermediation and on the actions of the temporary employment companies Public employment services - The Government is authorized in order to approve a new extension until December 31, 2012, of the Extraordinary Plan on orientation, professional training and labor insertion measures by Ministerial Council Agreement on April 18, Employment Policies and Placement Agencies - The new Law considers labor intermediation as a public service the activity of which is aimed at the placement of workers eliminated in business restructuring processes when it has been agreed to with workers and their representatives in business plans and reinsertion programs. - Placement and rehiring agencies perform labor intermediation activities and for that obtaining authorization from the Pubic Employment Office is necessary. 6

7 - Likewise, there is an adaptation of labor legislation, Social Security Legislation and social order legislation on infractions and fines to the regulation on placement agencies. Temporary Employment Companies - When the worker supplied has executed a contract for a certain time they shall receive an indemnification upon the termination of the contract of 12 days for each year of service. - The user company will be secondarily liable for the economic indemnification arising from the termination of the employment agreement. - The user company must inform the workers transferred of the existence of employment vacancies. - Jobs concerning activities with a special danger are set forth for which contracts that make workers available cannot be executed. - An adaptation of the legislation on infractions and fines in the social legal order to the regulation of temporary employment agencies is performed. Non-discrimination measures - Modifications in order to prevent discrimination within the scope of labor relationships are introduced as in the system of professional classification, promotions and professional training at work, promotions, etc. Duration of the economic benefits due to the termination of activity of self-employed workers - On August 6, 2010, the Law 32/2010 of August 5 was published by which a specific system on protection for the termination of the activity of selfemployed workers was established and which will enter into effect on November 6, By means of this law, self-employed workers, who meet a series of requisites such as being affiliated and in currently enrolled, covering professional contingencies, and being up-to-date with the payment of Social Security contributions, found in a legal situation of the temporary or definitive termination and have met the minimum 12 month enrollment period for termination of activity, shall have the right to protection due to the termination of activity, that consists of economic benefits, the payment of the Social security contributions due to common contingencies, in addition to training measures, professional orientation and promotion of entrepreneur activity. Law 35/2010 modifies the period of time that has transpired in order for the 7

8 self-employed worker to be able to once again request a new recognition of the benefit due to termination of activity, which will increase from 12 months from the termination of the previous right to 18 months from the recognition of the last right to the benefit. ******* This report is designed in order to provide a summary of the topics that are dealt with therein. This document does not seek to be a thorough analysis of such topics nor to substitute for specialized legal counseling. If you wish more information please contact our firm. 8