The Spanish Supreme Court issues a new judgment interpreting the criteria for calculating the thresholds for collective dismissals

Written on 27 Jul 2017

On 13 June 2017 the Supreme Court issued a new judgment in which it clarifies that the closure of a workplace cannot automatically be classified as a business closure for the purposes of applying the collective redundancy procedure.

National legislation requires collective redundancies to be carried out when the number of employees affected by dismissals for economic, technical, organisational or production reasons exceeds certain numerical thresholds depending on the size of each company. We must take into consideration that, according to the Workers’ Statute and the interpretation given up until October 2016 by the Supreme Court, it was established that the reference to be taken into account when calculating these thresholds was the company – and not the workplace-. Although Directive 98/59 refers to the workforce of the workplace for these purposes, the Spanish legislator considered that taking into account the entire workforce of the company was an additional protection for the employees as it was a much broader reference.

However, the Judgment of the Supreme Court of 17 October 2016, pursuant to various judgments of the Court of Justice of the European Union (CJEU) of 2015, among others the judgment of 13/5/2015 in the “Rabal Cañas” case, partially modified this criteria establishing the obligation for the company to make a double count of the number of terminations to be carried out. Firstly, it must be assessed as to whether the thresholds are exceeded at a company level, because if this is the case, the collective redundancy procedure should be initiated. Secondly, if they are not exceeded, the same analysis should be carried out at a workplace level, provided that there are at least 20 employees formally employed in the said workplace. If they are exceeded at a workplace level, it would also be necessary to initiate the collective dismissal procedure.

This new interpretation has been consolidated in subsequent judgments, and the only matter outstanding, what the Supreme Court has dealt with in the judgment commented herein, was whether the closure of a work centre can be classified as a business closure for the purposes of article 51 of the Workers Statute. We should recall that article 51 of the Workers’ Statute establishes the obligation for companies to carry out a collective dismissal when the termination of the employment contracts affects the entire workforce of the company, provided that it affects more than five employees, when it occurs as a result of the total cessation of its business activity.

In the case analysed in the judgment, 12 employees were dismissed that were assigned to the same work centre in a company with 20,000 employees and the work centre was closed. The Supreme Court considered that it was not possible to refer to it as a collective dismissal, first of all, because none of the thresholds established in European or Spanish legislation had been exceeded. The Court also added that the fact that the work centre had been closed and all the employees assigned to it (more than five) had been dismissed does not mean that the collective redundancy procedure should be applied on the grounds that a business closure has taken place, given that the aforementioned paragraph of article 51 only applies to cases when there is a total cessation of business activity and not just that of a specific work centre. The Court reaches this conclusion on the grounds that this provision of the Workers’ Statute is a concept of domestic law which improves the provisions of Directive 98/59 and it is, therefore, applicable on its own terms. In summary, the EU concept of “work centre” does not apply when the internal regulations expressly refer to the company and provided that the dismissals determine the total cessation of the business activity and not just the closure of a specific work centre.