Labor Reform By Royal Decree-Law 10/2010 of 16 June, on Urgent Measures for the Reform of Labor Market

The Government of Spain approved by Royal Decree-Law 10/2010 on urgent measures to reform the labor market, labor reform that was brewing for the past three years, in which the social partners, employers and trade unions had not been able to reach an agreement. Against this background and given the pressure from our neighbors in the Eurozone, the Government has been forced to impose a reform that has not liked neither one nor the other. Sign of the weakness of this reform is the fact that the Royal Decree is validated in Parliament more abstentions (173) that votes in favor (169, ie only PSOE).

This amendment entered into force on June 18, 2010, while a temporary reform, since, as we will address later, you will handle it as a bill before Parliament, which will occasion the parties represented there including amendments thereto, whichever subsequently revoke all items of the current reform that contradict the definitive reform. The final reform is expected to be ready, depending on whether amendments are included in the Senate or not, in late August or early September because it is in the process of emergency (derived from a Royal Decree-Law), which already in itself cut in half the time, plus it has enabled the months of July and August for all the meetings of the Committees or Plenary Lectures are necessary.

This recent reform has had one goal so genuine, that is none other than calm the increasingly switched from our European partners, who demanded a wide-ranging reform in Spain.

After this brief introduction, we will perform an analysis of the major changes that have been introduced through this latest reform, remember, provisional, and is in force since June 18, 2010.

First, and as a star, it generalizes the use of so-called 'contract of employment promotion', which to date only applied to people between 16 and 30 years and those older than 45 years, those who carry more than 6 months of unemployment (after the reform this requirement is set at three months), victims of domestic violence and people experiencing social exclusion. Well, after the reform of the Act, are also included in the scope of these contracts to persons between 31 and 44 years who have been fired in the two years preceding the reform, as well as those who have become a contract of indefinite duration or temporary before year-end or year-end 2011, depending on whether the original contracts were held before or after June 18, 2010 respectively.

The intent of this widespread promotion of employment contract is to promote permanent contracts by lowering firing costs that this entails. However, this generalization in no way affect those workers with permanent contracts signed prior to the entry into force of this reform, since they will still retain the right to 45 days per year worked in case of unfair dismissal.

In second place was expected to materialize in this reform objective causes that lead to dismissal compensation target of 20 days per year worked, firing in practice can not be applied to rely excessively, because of its inconcreción of the decision of a judge. This statement from the Ministry of Labour in the first place that companies could prove six months of losses might resort to firing target, sufficient in this case therefore an objective accreditation of those losses. But in the final text of the reform, rather than concrete is varied vagueness. The literal text of that from the entry into force of Royal Decree-Law shall be considered grounds for dismissal objective reads:

"It is understood that there are reasons economical when the results of the company reveals a negative economic situation. To this end, the company must prove the allegations and justify results of these minimally follows the reasonableness of the decision defunct".

As can be seen, far from concrete economic reasons, there is still vague, so that the decision on dismissal if applicable from 20 days of salary remains in the hands of the judiciary, with no overtones of the trend of Judges and Magistrates of the Social Order to qualify for unfair dismissal due to economic causes will vary.

Another stellar measure has been introduced in the labor reform is the 'state subsidy' of redundancies across the Wage Guarantee Fund, better known by FOGASA. From the entry into force of this Royal Decree-Law, "a part of the compensation due the employee will be paid directly by the social fund in an amount equivalent to eight days' salary per year worked", although this measure will only be applicable to those who have permanent contracts entered into after the entry into force of labor reform. But really this is a red herring, because the reality is that the social fund is nothing more than an administrative body financed by contributions from employers, ie a public piggy bank funded by companies, so it would not be unreasonable to think that, having to face more charges, fees have to increase, which can occur in companies that do not dismiss disadvantaged by this new regulation to see how to increase the fees they face.

One of the points on which there was some expectation and that this reform is passed along virtually collective bargaining. It had been much speculation exists the possibility that a reform of collective bargaining. Well, the "reform" has been the introduction of the possibility, not an obligation, as originally proposed, to go to voluntary arbitration if the company wants to proceed with the so-called 'lift wages'. The text of the amendment defines wages as derogating pick, after a period of consultation with employee representatives, the "wage system under the higher-level collective agreements to the company, when the economic situation and prospects of this could be damaged as a result of such application, affecting the chances of maintaining employment in the same. "

Finally, remember that you have been talking a lot about the implementation in Spain of a Capitalization Fund, or whatever it is, the implementation in our country the so-called "Austrian model". Well, the labor reform has been limited to allow a period of one year to the Government to introduce a bill through that, "no increase in employer contributions, regulate the formation of a capital fund for workers maintained throughout his working life in an amount equivalent to a number of days of salary per year of service to determine. " The Austrian model implies the creation of a fund for each worker who will act as the 'piggy bank' which will be increased with the contributions to this fund will be doing over the working life of each worker. The idea is that this fund is not lost by the mere fact that the worker changes jobs and that it can use its 'savings' in case of redundancy, geographic mobility, development of training activities or when retirement, if you have a positive balance in their 'special fund'. The reference in the rule itself will not be able to increase the quotas of companies suggests that either this fund will be used for all or of the contributions that have been made today by the company to FOGASA, or that these contributions will be distributed between the company and the worker.

In any case, the Royal Decree-Law has imposed a deadline for the operation of this fund January 1, 2012.

As we mentioned at the beginning, we have a provisional reform at every point. In fact, the opposition party in May (PP), in the words of its President, and has announced that an amendment to the "substantially all" of the reform currently in effect, since the PP understands that the current reform is not should be clear and understandable and not subject to differing interpretations, since, among other things, and as mentioned above, the objective dismissals continue to rely on the judge's shift, which was intended to avoid objectifying the causes and has not been achieved, having maintained a vague wording, ambiguous and confusing, which promotes judicial interpretation of its contents. But not only the PP said it will propose amendments to the reform. Also games or PNV CiU have already warned that they disagree with the resulting model of the labor reform and have already announced they will present amendments throughout the parliamentary process should be completed later this year 2010. In fact, CiU has already warned that only support the final text if included therein, as amended. Employers' associations also are in contact with political parties so that, through these, to have a voice in the parliamentary debate.

From their point of view, one of the most important reform is the issue of grounds for the dismissal objectives, remains crucial that the final decision rests not in the interpretation of the judge, but these are clear and concise, so that opens the door to dismissal compensation target of 20 days.

As everyone agrees, political parties and social organizations, including the ruling party itself, the architect of the reform, which has missed the goal of reform, it is estimated that it will not create jobs. This is mainly due to two issues. On one side is the fact that the current reform has been made, as mentioned above and to say colloquially, "the overnight", burdened as it was the Government to submit 'any' reform in the European Council held few days after the approval thereof and the farewell of Spain assumed the Presidency of the Union. And on the other we have the fact that Spain is not enough to reform the labor market. This in effect, it was necessary for some time and may arrive very late, but reform can not stay here and we must encourage job creation not only from the perspective of lowering of dismissal, but must also encourage, example, active policies for employment creation, either from the Autonomous Communities or from the central government.

The deadline for tabling amendments ended on July 5, although it had planned two extensions, which were willingly accepted by the parties. Thus, the July 14, 2010 is the deadline for amendments to the whole and the deadline is extended until July 21, 2010 for partial amendments. The terms on which we work include plenary debate of the standard, then passing the stage of presentation, which will be introduced amendments agreed by the majority of the parliamentary groups. The report of the Paper is expected to be completed in late July 2010, it is estimated that before the month of August may keep the discussion in the Working Committee. Because it is an organic standard, this project could be resolved in the bosom of this Commission, but in the event of a parliamentary group so requests, may be held a plenary session for approval of the text which is then forwarded the Senate. The Joint Working Group, at the request of several parties have already prepared the application to be carried out this last plenary discussion.

In any case, once approved the text, either within the Commission or a Plenary, it shall be referred to the Senate, pending in the Senate groups may include amendments. They will try to expedite the process and ensure that the groups did not introduce amendments to the text, so it does not have to be returned to the House and Senate approval of the legislative text is final and may be published in the BOE. Should not introduce amendments in the Senate, the reform could be ready for publication in mid-August and, otherwise, it is estimated that the final reform is ready the September 9, 2010.

As we have seen, this is a purely temporary labor reform, which is why we will not see its effects until the final reform enters into force, because until that moment was not able to assess the true dimension of the relations work in this new law, which may abrogate issues that have been approved in this reform of June 16.

Antonio TorralbaMariscal & Associates, Eurojuris AbogadosMiembro of Spain

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