Regarding employment contracts signed before the Labor Reform came into effect, the Supreme Court denies the existence of the 720-day salary cap on severance pay when the compensation accrued as of February 12, 2012, is less than 42 months' salary.
Since the Labor Reform came into effect on February 12, 2012, severance pay for unfair dismissal was reduced from 45 to 33 days' salary per year of service. And with regard to employment contracts signed prior to its entry into force, the literal wording of the rule (Transitional Provision 5, section 2, of Law 3/2012) establishes that “the compensation for unfair dismissal of contracts formalized prior to February 12, 2012, will be calculated at a rate of 45 days of salary per year of service for the time of service prior to that date, (...), and at a rate of 33 days of salary per year of service for the time of service after that date, (...). The resulting compensation amount may not exceed 720 days of salary, unless the calculation of the compensation for the period prior to February 12, 2012 results in a higher number of days, in which case this will be applied as the maximum compensation amount, without said amount being able to exceed 42 monthly payments, in any case.”
Well, although the wording of the regulation is clear and its interpretation to date had been entirely consistent, the Supreme Court ruling issued on September 29, 2014, to unify legal doctrine—the full text of which has recently been made public—has surprisingly adopted a completely different interpretation of the regulation, generating considerable controversy among labor relations professionals.
According to the wording of the aforementioned transitional provision, it was clear that workers who, prior to February 12, 2012, had already accrued severance pay exceeding 720 days' salary but less than 42 months' salary, would no longer accrue further severance pay for the period worked after February 12, 2012. Therefore, their compensation for unfair dismissal was capped at 720 days' salary.
However, the aforementioned Supreme Court ruling denies the existence of such a compensation cap, even if the employee had already exceeded 720 days' salary by February 12, 2012. Therefore, compensation continues to accrue until it no longer exceeds 42 monthly payments, this being the only compensation cap it recognizes.
It should be noted that, despite being a Supreme Court ruling aimed at unifying legal doctrine, given its unique nature and the absence of any other ruling regulating this issue in the same way, it does not yet constitute "established case law."
Therefore, controversy is brewing, as from now on, lawyers and advisors for employees will begin to invoke this ruling, while—logically—lawyers and advisors for companies will maintain the interpretation of the Fifth Transitional Provision of Law 3/2012, of July 6. This will force the Supreme Court, when it receives a similar case again, to issue a new ruling – this time in a General Chamber, meaning that all the Magistrates of the Social Chamber of the Supreme Court must resolve it – in order to definitively unify criteria.
Do you have any questions about this topic?
Our team of expert advisors will help you resolve any issues related to our services.
Contact us now
A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
Latest entries from MGI Àmbit
(see all)
Related
