segunda, 27 maio 2019

Labour group of companies, unfair objective dismissals and joint liability

VolverAt the BELZUZ ABOGADOS Labour Law Department we take the opportunity to duly explain in this article the concept of “labour group of companies”, as called by the jurisprudence, due to the absence of a legal definition to that regard, and the importance of its existence and validation in legal proceedings regarding objective dismissals.

Objective dismissals for economic reasons, generally based on business losses accounted for in the P&L account of the company, carry a payment of 20 days per year of service and are capped at twelve monthly payments, which obviously means significant corporate savings when compared to the compensation for an unfair dismissal.

Since the labour reform established by Law 3/2012, there has been a significant increase in objective dismissals in companies, due mainly to the new statutory regulation which assumes that the economic cause is met when a negative economic situation is shown in the company’s profit and loss, in such cases as current losses, and the courts should only confirm said cause (economic losses) without going into value judgments or criteria of reasonableness and opportunity judgments concerning business management as it happened before the legal reform, which made for this kind of objective dismissals almost unfeasible to thrive legally.

While the Courts have modulated the labour reform, in the sense that there should be a proper alignment between the alleged cause and the dismissal, in accordance with the applicable International Labour Organization Convention No. 158, reality is that if the company proves that there are actual losses and absence of fraud, the judicial category of the dismissal is fair, with the minimum severance payment as mentioned above.

As lawyers with expertise in legal proceedings related to objective dismissals, in the legal challenge of this kind of dismissals is essential to take into account (both from the business point of view when approaching these dismissals and from the worker’s point of view before their legal challenge) the potential existence of the so-called “labour group of companies.”

The trading group of companies is a completely legal figure, ruled by the Spanish Commercial Code and by the Spanish Corporation Law (article 18 of the Royal Legislative Decree 1/2010), under which the legal status of each company is completely independent and, in the event of dismissal, the worker may only sue their formal employer, unless the elements for the categorization of labour group of companies exist.

Case law has defined these additional elements that may be outlined as:

 • To provide, simultaneously or successively, common work, for several group companies.

 • To create companies apparently without an actual base, a fraud against workers.

 • To mix up staff, assets, the external appearance of the business unit and management unit.

In the event of confirming the existence of a labour group of companies, the essential consequence is the joint liability of all of them with regards to the sentence, assuming, therefore, the position of a sole employer, and while exploring the alleged economic cause (losses), the economic status of the group as a whole should be assessed (Supreme Court judgment of 3 December 2012) and, therefore, the overall profit and loss of the labour group should be assessed as well, not only those of the employing company that carries out the dismissal.

Needless to say, often companies omit the existence of a labour group of companies and resort to objective dismissals in those group entities where there are losses. However, if in a court the constituent components of a labour group are proved, together with not having actually a negative economic situation, the legal categorization of the dismissal unfairness shall be determined, with a compensation obviously higher than the one established by law.

To sum up, on the one hand, it is essential for the companies to take into account the potential existence of a labour group and the related risks in order to legally and properly approach collective or objective dismissals that should be carried out, and, on the other hand, with regards to the workers affected by an objective dismissal, it is extremely important to prove a labour group of companies, because the dismissal shall be categorised as unfair and it will lead to a higher severance payment.

As stated in the abstract of this article, following the results of Spain’s general elections of last 28 April, it is foreseeable that the regime of objective dismissals for economic reasons will be legally tightened up, so at the BELZUZ ABOGADOS S.L.P. Labour Law Department, we foresee an increased use of the legal form of objective dismissal in the next months, being available for companies to properly apply it and for workers to legally challenge in the event of a labour group of companies.

Pedro-Gomez-Rivera  Pedro Gómez Rivera

Diretor do Departamento Direito laboral | Madrid (Espanha)

 

Belzuz Abogados SLP

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