Will the severance pay in Spanish for unfair dismissal that has been applicable up to now … no longer be deemed “sufficient”?

Almost on the anniversary of the ratification by the Spanish State of the revised European Social Charter (hereinafter referred to as the “rESC” or the “Charter”), the Spanish General Workers Trade Union (UGT) launched a legal battle against Spanish labour law, specifically against Article 56 of the Spanish Labour Relations Act, claiming to the European Committee of Social Rights that the severance pay in Spanish for unfair dismissal in Spain violates both Article 24 of the revised European Social Charter and Article 10 of Convention 158 of the International Labour Organisation (ILO).

In the opinion of the plaintiff trade unions, the – assessed – severance pay in Spanish determined in Article 56 of the Spanish Labour Relations Act for unfair dismissal is neither sufficient to remedy the damage caused nor sufficient to dissuade the employer from carrying out other unjustified dismissals in the future and hence it is against the rESC.

rESC and the ILO statements about the severance pay in Spanish 

However… what does the rESC and Convention 158 of the International Labour Organisation (ILO) actually say?

Article 24 of the rESC states “the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief”, on the other hand, Articles 10 and 12 of Convention 158 of the International Labour Organisation (ILO) specify that, in cases of unfair dismissals, the company must “order payment of adequate compensation or such other relief as may be deemed appropriate”.

It is obvious that both regulations agree that “adequate” compensation must be determined, but what is adequate compensation apart from an obviously undetermined and diffused legal concept that prevents, or at least hinders, State laws –whatever they may be – being in accordance with the contents of the Charter?

In spite of the interpretation of such articles in the report proposed to the European Committee of Social Rights (“ECSR”), if we bear in mind the verbatim text of Article 24, we can see that it does not determine (i) either an obligation for full reinstatement; (ii) nor, much less so, the need for the compensation to have a dissuasive effect for the employer.

Therefore, pursuant to the verbatim text of the aforementioned provisions and according to the contents of Annex II of the Charter, which directly refers to national law as an instrument for determining adequate compensation, it can be perfectly understood that the assessed compensation in the Spanish system is in accordance with and adapted to the specifications in the rRESC.

Spanish system for compensation 

So what is the problem with the Spanish system for compensation?

Doubts have been raised based on the decisions of the ECSR that, when analysing the legal systems in other States, among them, the Italian one, has “abstractly” concluded the assessed compensation systems that do not take into account the damage individually caused to each worker and are not sufficiently dissuasive are not in accordance with the Charter.

This therefore leads to the question we raise first of all about whether or not the assessed compensation, as we know it, does not already have this dissuasive component that the social party has been claiming.

In the case of Spain, where severance pay in Spanish has been set as 33 days per year worked with a cap of 24 monthly payments, only for unfair dismissal, prior to the ratification of the rESC, the Supreme Court has already considered that the Spanish compensation system, in spite of being assessed, did indeed include this dissuasive nature, stipulating that “the fact that it is unnecessary to prove the damage caused to the dismissed worker who, in some cases, could be working in another company from the day after being dismissed; hence without suffering any economic harm”, in some way implies that the employer is being punished, which must pay the legally assessed severance pay regardless of whether the worker has been caused any damage or has proven it.

Nevertheless, it seems that the plaintiff trade union does not agree with this “compensating” component in the current severance pay, sustaining that the Spanish compensation system was not adequate even before 2012 and much less so after the labour reform that took place in that year, which was ignored by the legislator in 2021 that, at that time, could have remedied the “defects” in the Spanish compensation system but neither took a step forward in adapting the system to the contents of the European treaties.

In this context of uncertainty and ambiguity of the Charter and the supreme interpreter thereof, the European Committee of Social Rights, the following important question arises …

So what could be considered adequate and compensating severance pay in Spanish that would be sufficiently dissuasive?

The answer to this question, for which there is still no reply and no opinion has been provided by the European Committee of Social Rights to the claim filed by the UGT, would require that other questions must also be answered:

1. Could a higher amount of severance pay be considered more in accordance with the Charter, for example, 45 days, as was determined prior to the 2012 reform?

Personally, bearing in mind what has been specified by the Committee, I deem that generally increasing the severance pay would neither be valid for the European Committee because, in spite of being “more dissuasive”, in the same way as occurs at present, the severance pay in Spanish would neither take into account the individual situation of each worker.

2. In line with that specified by the plaintiff trade union, would payment of the salary while the proceedings are in process, which was eliminated by virtue of the 2012 reform, if severance pay is chosen, function to make the current severance pay adequate?

Similarly, in my opinion, the formula for salaries might neither be in accordance with the provisions in the rESC because it would depend to a large extent, not on the personal situation of the workers, but rather the speed in which the court rules a judgement, which would neither be in accordance with that specified by the Committee.

Due to the lack of replies and assessed methods that could be “adequate”, for several months different courts have been making us think that the future of severance pay in Spanish is little by little resulting in the written rules becoming inapplicable and their being replaced perhaps for greater judicial discretion when determining the amount of the severance pay.

Not having clear references is not a good solution, because the only definite effect of a situation like this is greater legal uncertainty and more disputes being submitted to the courts.