Collective bargaining agreement in Spain, is this an usefull tool? One of the most important changes in Spanish labour law included in the former reform in 2012 was the concept referring to “applicable priority of the company’s collective bargaining agreement compared with the agreement applied in the sector.

In 2012 the legislator considered that placing the negotiation procedure in the company’s hands, and hence also the workers’, would allow the company to be able to tackle the considerable challenges that were implied by the economic crisis that existed at that time. It therefore allowed the employer and the workers’ representatives in each organisation to determine by mutual agreement the rules and conditions that would govern them, regardless of what could have been considered appropriate in the sector.

As many authors and court judgements have recalled, since 2012 there have been quite a few collective agreements that have been dishonestly negotiated between employers and a fictitious workers’ representative or a very small number of them within the scope of this regulation for the sole purpose of contributing to lowering staff costs. Many of them however have actually been revoked by the courts over time thanks to a union policy of systematically reporting these irregularities.

Collective bargaining agreement in Spain: a way of limiting salary devaluation

Legislative Royal Decree 32 of 28 December 2021 on labour reform, as we all know, amended Article 84.2 of the Spanish Labour Relations Act (hereinafter referred to by its initials in Spanish “ET”) to eliminate the aspect related to remuneration items in the agreement from the various aspects for which the company’s agreement has priority over the sector collective bargaining agreement.

The obvious and stipulated purpose of this amendment, solely related to the applicable priority of the company’s agreement, which otherwise remains the same, is to avoid lower economic conditions being negotiated within the company than those stipulated for the sector.

It is presumed that the objective will generally be achieved even if the tool of non-application of the agreement remains intact, as a legal formula to achieve the same objective by the company that needs it.

However the question is to what extent will this change in the regulations now result in the company’s agreement becoming a useless or unnecessary tool for companies or, in other words, whether or not companies negotiating their own agreements will continue being useful for them.

What does a company gain by having a collective bargaining agreement in Spain? 

To answer this question we must first ask why is a company agreement useful. Moreover, it should not be overlooked that there were many organisations that negotiated their own agreements a long time before the concept of applicable priority was included in labour regulations, when companies still needed to observe the salaries in sector collective bargaining agreements.

A company’s own agreement is a key factor to guarantee that its rules are adapted to its operational and business needs. The organisation of employees, rules for working hours, the system for breaks, timetables, working systems, use of certain types of temporary contracts and other relevant issues that the general regulations allow the company’s agreement to determine, performance systems and, in general terms, the organisation of the activity performed by the employees who work in the company are sufficiently important aspects to justify a company applying its own collective agreement.

Does the sector collective bargaining agreement in Spain always prevail over the company agreement regarding salaries? 

It is also worthwhile dealing with this question because a situation could arise in which a company has been negotiating its own agreement for many years, even before 2012, and it wonders to what extent the change in the labour regulations could affect it, for example, if the company’s salaries, over time, have become out-dated compared with the sector collective bargaining agreement.

The answer can be found in recalling that the amendment made in the reform of December 2021 only affects the contents of Article 84.2 of the ET, but not the first point in such article.

This provision (Article 84.1 of the ET) determines what is technically called a general rule of concurrence of collective agreements and states that, during its valid term a collective bargaining agreement cannot be changed for another with a different scope (except in cases obviously in which the company’s agreement has applicable priority, in other words, according to the provisions in Article 84.2 of the ET).

In practice, this means that if a company has its own valid collective agreement, negotiated when there was no other sector agreement or, if one existed, when such collective bargaining agreement is in a situation of expiry (in other words, once reported), the company’s agreement would take priority over the sector agreement negotiated afterwards and the latter cannot affect the company.

In these cases, of which there are quite a few, it would be perfectly legal for the company’s salaries to be lower than those in the sector by applying its salary tables to the employees instead of those of the sector.

It could be somewhat complicated and certainly will lead to many disputes, but the real situation is that there are many cases when the company’s negotiation units could take priority over the sector ones and conducting a study of this issue could be extremely important for an organisation since salary costs are always a key factor to ensure a company is competitive on the market.

When and how must the company make the change to its conditions if the regulatory amendment is applicable to it?

The last of the key questions on this matter is what happens if a company is affected by the regulatory amendment and is forced to modify the salaries it pays to adapt them to the higher ones stipulated in the sector collective bargaining agreement.

In this case, the executive legislator has taken into account that this amendment could have a huge impact on companies that have been paying lower salaries, due to them being determined in their own agreements, and their needing to adapt them to those of the sector.

For such purpose, by means of a transitory provision, the valid date for this amendment to come into force has been extended for at least one year in cases of company collective bargaining agreements in force. Once such one year period has elapsed, the regulation grants the companies a further six months to adapt the agreement to the new situation.

These two terms have led to real disputes, but it would seem the intention is that, during the first term (up to 12 months), the agreement would remain in force and hence there would not be an overly drastic change and, during the second term (6 months), the companies and workers’ representatives will have time to rebalance the benefits of each party based on the agreements reached when negotiating the collective agreement.

One would think that the first 12-month term should actually act as a forewarning so that the organisation can take the relevant steps but it seems clear that two different terms are actually granted.

Moreover, regardng the collective bargaining agreement in Spain, it should not be overlooked that, if a company’s agreement was already reported before 31-12-21, the aforementioned transitory provision would not be applicable; therefore the doubt arises as to whether the company would have needed to pay at least the same amounts as in the sector directly valid as of 1-12-22 or whether it would be granted a minimum 6-month term to adapt the text of its agreement to the new situation.

In our opinion, it would be reasonable to think that such 6-month term would be a minimum term for adaptation to the change; however the current situation means we will need to wait and see how the courts finally rule on this issue.

What are the practical conclusions we can draw about collective bargaining agreement in Spain:

With no doubt at all, the first conclusion is that it is worthwhile examining whether or not it is appropriate for the company to have its own agreement, if there are workers’ representatives in the organisation. 

This is regardless of whether or not the company must observe the minimum salaries in the sector. 

If it is a new collective agreement, the company must always do so, unless the sector collective bargaining agreement has been reported and is in a situation of expiry. In such case, please take note, a company could have the chance to “take over” and determine its own salaries.

The second conclusion is that, if the company has had its own agreement for many years, before updating the salary tables and adapting them to the sector, we should study where its negotiating unit stems from and whether it existed before or after the one used in the sector, hence avoiding the need to update the salaries if the company is not legally obliged to do so.

The third conclusion is that, if they need to be held, negotiations should begin as soon as possible to ensure that the company can attempt to compensate the additional amount it needs to pay in order to adapt to the sector with a reduction or renegotiation of other rights that could be included in the company’s agreement that had been determined in the past to improve the workers’ conditions in order to pay lower salaries.

In order to study all these issues obviously the best thing would be to obtain the best labour advice possible; for such purpose RSM remains at your entire disposal for any assistance you may require!