Commentary on the Supreme Court Plenary Judgment of 29 December 2020, which amends its previous doctrine on temporary contracts, linked to the duration of commercial contracts

Written on 29 Jan 2021

The High Court has modified what has been its reiterated criteria since late 1990s, ending with the legality of the business practice of concluding temporary employment contracts for specific work or services, the duration of which is linked to the duration of commercial contracts entered into with third companies.

The Judgment of the Plenary of the Fourth Chamber of the Supreme Court of 29 December 2020 corrected what had until now been its established doctrine on temporary contracts for a specific work or service.

The case law on Article 15.1.a) of the Workers' Statute has held that, in order for a fixed-term employment contract for a specific work or service to be in accordance with the law, all the following requirements must be met:

1.-That the work or service that constitutes the object of the employment contract has its own autonomy and substantivity within the company's work activity;

2.-That its execution is in principle of uncertain duration, albeit it is limited in time;

3.-That the contract specifies and identifies the work or service with precision and clarity; and

4.-That the employee is normally engaged in the performance of the work or service and not in different work assignments.

The main point analysed in the High Court's ruling, and on which it essentially bases the correction of its previous doctrine, is the interpretation of the first requirement (i.e. the concept of "substantivity and autonomy" that the work or service that constitutes the object of the employment contract must have). The traditional doctrine of the Fourth Chamber had understood this concept to include activities or services that the employer contracts with a third-party company for a specific period. Consequently, it was generally accepted the lawfulness of fixed-term employment contracts for specific works or services entered into with the employees assigned to the provision of these services, the term of which was linked to the validity of the commercial contracts or concessions with client companies.

In its judgment, the Chamber rectified its previous doctrine stating that companies whose activity consists of offering services to third parties necessarily carry out their essential, ordinary and regular activity by concluding contracts with their clients. Consequently, in these cases it seems illogical to maintain that the main part of that activity has the exceptional and substantive character required for the valid conclusion of a temporary contract for work or service. In other words, it is difficult to defend that this type of company can base the essence of its activity on a fundamentally temporary workforce.

For this reason, the Chamber has opted to rectify its previous doctrine and reject the lawfulness of the practice of companies whose main activity consists of providing services to third party companies, in addition to resorting to work or service contracts linked to the duration of the service provision contracts entered into with their clients. This is because in these cases there is no substantivity and autonomy as required by Article 15.1.a) of the Workers' Statute, and the longer or shorter duration of the client's order is not sufficient to justify recourse to fixed-term employment contracts.

Without prejudice to the fact that the judgment analyzed has been described as the most relevant labour doctrine of 2020, it remains to be seen what its effects will be in practice. In other words, whether the auxiliary services companies will moderate their recourse to temporary hiring in the terms indicated by the High Court's ruling, or whether, on the contrary, they will be reluctant to comply with the change in criteria, hoping not to be sued by the employees affected or sanctioned by the Labour Inspectorate.