The impact of the ruling of the Court of Justice of the European Union providing interim and indefinite employees compensatory rights in the first judgments handed down by the national courts

Written on 27 Dec 2016

The first rulings of the Spanish courts and tribunals following the judgment of the Court of Justice of the European Union (CJEU) of 14 September, 2016 that declared the right of a temporary employee of the Public Administration to compensation of 20 days of salary per year worked for the legal termination of their contract, embrace a large part of the EU criteria and extend it to all other temporary contracts. The discrepancies arise around the possibility of direct application of these EU criteria to the private sector without first modifying the national legislation.

The starting point of the controversy is the judgment handed down by the CJEU on 14 September 2016 in response to the preliminary question raised in the case of De Diego Porras by the High Court (TSJ) of Madrid. In these proceedings, both the CJEU and later the TSJ of Madrid, in a ruling of 5 October 2016, declare the right of a interim employee of the Administration, whose contract was legally extinguished due to the reinstatement of the substituted employee, to receive the same compensation that would be paid to a comparable permanent worker for the termination of their contract for objective reasons. That is, 20 days of salary per year of service with a maximum of one year’s salary.

The interim contract is the temporary employment model used for the replacement of employees entitled to the reservation of their post/position (for example during periods of temporary incapacity or maternity leave), or the temporary cover of a post during the selection or promotion process for its definitive coverage. The Workers´ Statute does not provide for legal compensation for the termination of interim contracts, unlike the situation for a temporary contract due to production overload and contracts for a specific job or service, which have legal compensation of 12 days per year worked.

The aforementioned judgments equate certain legal grounds for the termination of temporary contracts to the objective causes for the termination of indefinite contracts with the right to compensation of 20 days being provided for in article 52 of the Workers´ Statute. It is considered that, in both cases, these are causes neither blameworthy on the part of the employee nor dependent on the mere will of the employer, but linked to objective facts such as the disappearance of the productive need that justified the hiring. On the basis of this premise, contrary to Directive 1999/70/CE, they consider it discriminatory that the national legislation treats indefinite and temporary workers differently when calculating the compensation corresponding to termination for objective reasons, the type of contract not being a circumstance that can reasonably and objectively justify such a difference in treatment.

The first rulings of national courts on this matter, fundamentally those of the TSJ of the Basque Country and Andalucía, have assumed the European doctrine and extended it to other temporary contracts models, specifically the contract for a specific job or service and the temporary contract due to production overload. The compensation provided for in article 49.1.c) of the Workers´ Statute for the termination of this type of contract, 12 days per year worked, is increased to the 20 days per year worked that a comparable permanent worker would receive in the case of the objective termination of their contract.

The discrepancies arise when assessing whether the European doctrine, handed down in a case of temporary hiring by a Public Administration, is directly applicable to the private sector without firstly needing to modify the national legislation. The question arises because the European directives lack horizontal direct effect, or between individuals, except in cases which develop anti-discrimination rules. In this sense, private companies are considered to be private individuals.

The TSJ of the Basque Country is in favour of the direct application of the European criteria to private companies, without the need to modify article 49.1.c) of the Workers´ Statute beforehand. It considers that Clause 4 of the Framework Agreement regarding a temporary contract, derived from Directive 1999/70/CE, is a materialisation of the principle of non-discrimination which is considered to be a fundamental right and, therefore, a general principle of European social law which must be effective not only vertically but also horizontally, or between individuals. Consequently, in its judgments of 2016/2016 of 18 October and 2279/2016 of 15 November 2016, it sentences two private companies to paying 20 days of compensation per year for the termination of temporary contracts.

The TSJ of Andalucía, in judgment 1798/2016, of 16 November, considers the opposite. It holds that, in accordance with the Treaties of the European Union, the difference in treatment between permanent and temporary workers cannot be regarded as discrimination in its proper sense. Therefore, contrary to what was stated by the TSJ in the Basque Country, it holds that the European criterion is not directly applicable in cases in which the employer is a private company. Consequently, it considers that the conduct of the company, which paid compensation of 12 days per year for the termination of a contract for a specific job or service, was adjusted to the provisions of article 49.1.c) of the Workers´ Statute, an article that cannot be interpreted by the courts according to the European doctrine because its terms are so clear and conclusive that they leave no room for doubts or interpretations as to their content. The above is understood without prejudice to the right of the worker to claim the difference between the compensation received and that corresponding to 20 days per year worked against the State on the basis of the incorrect transposition of Directive 1999/70 into domestic law.

This discrepancy between criteria must be resolved by the Supreme Court through unification of doctrine. Although much has been written on the judgment handed down by the High Court on 7 November 2016, nothing has been resolved on this issue, it stating literally that it was not the moment to rule on the effects of the De Diego Porras judgment as the case analysed did not question the amount of compensation to be received.

Finally, it is noteworthy that in November, a committee of experts proposed by the government and the most important trade union and business organisations was set up, tasked with issuing a report-proposal on the scope and possible legal changes that may derive from the European approach, where appropriate, as soon as possible.

Consequently, and as long as there are no significant changes in either of the roads indicated (judicial and/or legislative) to address the legal uncertainty caused, our recommendation is to maintain the usual procedures for the termination of fixed-term contracts with the payment of compensation set out, where appropriate, for each contractual model in the Workers´ Statute.