Temporary suspension of employment contracts or reduction of working time procedures due to force majeure can be extended until 30 June 2020

Written on 22 May 2020

Royal Decree-Law 18/2020 allows temporary suspension of employment contracts or reduction of working time procedures (“ERTE”) due to force majeure to be extended until 30 June 2020. This regulation also clarifies the content of job retention clauses and provides for the extension of the exemption from social security contributions.

Here we highlight the main employment measures:

1. It is extended the duration of the ERTE due to force majeure, for as long as the causes that originated them persist, in whole or in part, until 30 June 2020.

2. Force majeure arising from COVID-19 will be partial from when the causes allow partial recovery of their operations, until 30 June 2020, at the latest. The employees included in these ERTE will return to work to the extent necessary to keep companies operating, and adjustments involving reduced hours must be given priority.

During this situation, companies in a situation of partial force majeure maintain exemptions from Social Security contributions, which will be governed by the following rules:

  • For those employees returning to work, from the date of the partial withdrawal from the ERTE and for the period or percentage of services rendered, the exoneration will apply:

a) 85% in May and 70% in June if the company has less than 50 employees.

b) 60% in May, and 45% in June, if the company has 50 or more employees.

  • For the personnel that does not return to work, and from the date of the partial withdrawal from the ERTE and for the period or percentage of suspension or reduction, the exoneration will reach:

a) 60% in May and 45% in June if the company has less than 50 employees.

b) 45% in May, and 30% in June, if the company has 50 or more employees.

3. Where there is complete force majeure (i.e. companies with an ERTE and affected by such causes that prevent the resumption of their activity, for the duration of such causes and in no case beyond 30 June 2020), relief from contributions, otherwise payable in May and June 2020, will be:

a) 100% for any companies, which as of 29 February 2020 had fewer than 50 employees.

b) 75% for companies that had 50 or more employees.

4. Certain communication obligations are laid down for companies:

  • To the labour authority, the total resignation, if applicable, to the authorised ERTE, within 15 days from the date of effect of the latter.
  • To the SEPE, prior to its effectiveness, of the variations in the data contained in the initial collective request for access to unemployment protection, which refer to the ERTE resignation in respect of all or part of the persons affected, either in the number of these or in the percentage of part-time activity in their individual working day.
  • To the TGSS, for each contribution account code, by means of a responsible declaration regarding the situation of complete or partial force majeure, with identification of the employees affected and the period of the suspension or reduction of the working day, prior to the request for the calculation of the corresponding contribution settlement, through the “Sistema RED”.

5. The extraordinary measures relating to unemployment protection defined in Royal Decree-Law 8/2020 are extended until 30 June 2020, except for those relating to employees with permanent contracts for intermittent work, or carrying out specific and periodical work that repeatedly needs to be performed on certain dates, which will apply until 31 December 2020.

6. The obligation to retain jobs for 6 months is clarified as follows:

  • It is only associated with ERTE procedures due to force majeure.
  • The 6 months will start to run from date of the actual return to work of individuals included in the ERTE procedure, even if the return to work is partial or only relates to part of the workforce.
  • It will be held breached if any of the individuals included in those procedures are dismissed or have their contracts terminated. It will not be held breached where the employment contract is terminated on disciplinary grounds and the termination is held justified, or terminated by reason of resignation, death, retirement or total or absolute permanent incapacity, or severe disability of the worker, or terminated on reaching the end of the work periods of workers under permanent contracts for intermittent work, or where a temporary contract is terminated at the end of the covenanted term or due to the completion of the project or service forming its subject-matter, or where the contracted work cannot be performed immediately.
  • The obligation to retain jobs will be assessed by reference to the specific characteristics of the various sectors.
  • It will not apply at companies where the risk of an insolvency proceeding exists as defined in article 5.2 of Insolvency Law 22/2003, of July 9, 2003.
  • Any companies that fail to comply with that obligation will have to refund the whole amount of all relief claimed in respect of contributions, with the relevant surcharge and late-payment interest.

7. Also remaining in effect until 30 June 2020 is the absence of justification for any dismissal made on grounds related to COVID-19 and the interruption of the term of temporary contracts affected by an ERTE.

The increase in regulations, together with the lack of certainty about the evolution of the pandemic, underline the importance of closely monitoring the latest developments in the field of employment relations.