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The new 2021 labor reform: same board, same pieces, but different rules of the game. First part

"A structural reform, by consensus and balanced, although not without complexity."

The Council of Ministers has approved a new labor reform with the publication in the BOE of RD Law 32/2021, of December 28. After nine months of negotiations, this rule represents the culmination of the labor reform process undertaken at the initiative of the Government and with the endorsement of the social dialogue and final agreement with CEOE-CEPYME and UGT and CCOO and represents important modifications in three areas: (i) labor hiring; (ii) collective bargaining and (iii) and new measures for internal flexibility and requalification of workers (ERTE and RED mechanism). No changes have been included in essential aspects of the 2012 labor reform referring to substantial modifications; functional and geographic mobility; off-hooks; and objective and collective dismissal. This reform is not therefore a labor counter-reform but a modernization of current labor regulations and may, due to its contents, deserve the qualification of structural reform and joins the 1984 reforms; 1994; and 2012 for the number and importance of pieces whose regulation has been altered. Most likely, it can go down in history as the reform of labor contracts and the new RED mechanism Although it will take at least two years to start evaluating its effects on the labor market.

Initially, on the methodology it is worthy of praise and an extraordinary asset (almost a black swan in our political life) for the becoming of a more effective application the existence of a final agreement of the Government with the social agents. The value of consensus has a strategic relevance beyond the legitimate statements of the parties in key political or union marketing. The reform by consensus and the virtuous balance achieved in its contents It is therefore good news for the economy and for employment.

The reform according to its Statement of Motives (15 pages long!) Tries to confront the unsustainability of the Spanish labor model and offer economic and labor operators a fairer and more efficient labor relations model and a horizon of legal certainty and trust with which to function with certainty to recover the quality of employment and dynamism in the productive fabric. The reform aims to complete the transition to a new model of labor relations that overcomes precariousness and social, territorial and gender gaps and contributes to sustainable and inclusive growth. Among its most ambitious objectives is to give checkmate temporality (at least the pathological or unjustified) and precariousness that has been generating notorious thresholds of inequality for young people and women in our labor market. In other words, it is intended to reduce the number and duration of temporary contracts (we are still in 2021 with a temporary rate of 25%); improve wages; eliminate salary dumping and unfair competition with the primacy of the sector agreement on wages and the provision of the applicable sector agreement in contracts; promote discontinuous fixed and training contracts and end up strengthening internal flexibility and programs for the requalification of workers with the new ERTE and the permanent RED mechanism.

The main pieces of the Spanish labor model and the essential changes of the new regulation are extracted below:

  1. The simplification and reordering of temporary hiring: the most valuable piece to reduce the duality of the labor market (arts. 9 and 15 ET; art. 151 of Law 8/2015; DA3 of Law 32/2006).

Basically, a new regulation is designed with the cancellation of the temporary work and service contract of uncertain duration with a maximum of 3 or by agreement 4 years which had already been condemned by the Supreme Court for contracts, subcontracts or administrative concessions (STS 1137/2020 of December 20).

The presumption in favor of the indefinite contract is reinforced and strictly the need for there to be a cause that justifies the contracting with a single modality of temporary contract that may be entered into by productive needs (old temporary contract) which may be due to the occasional and unpredictable increase and the fluctuations that generate a temporary mismatch between the stable employment available and the one required, or due to the coverage of occasional and foreseeable situations that have a limited and limited duration or by substitution of the worker (old interim contract) which includes the following four situations: fluctuations arising from annual leave; the suspensions of the contract with reservation of position; coverage of reduced hours due to legal or conventional reasons; and the coverage of vacancies during a selection process up to a maximum of 3 months or a conventional shorter term.

Is limited the duration of temporary contracts: 6 or 12 months for unforeseeable situations if the term is extended in a sector agreement and a maximum of 90 days - per company or per worker? in the calendar year but never continuously for foreseeable situations in occasional contracts.

The maximum time limit of chaining both referring to the successive temporary hiring with the same worker as to the same job position, which prevents rotations in the same position with recognition ex lege of the fixed condition (18 months in a period of 24).

It clarifies departure compensation in the event of termination of temporary contracts in 12 days for each year of service (which does not apply to training contracts and replacement contracts) and the legal consequence of the illegal temporality that will entail that the contracted persons will acquire ex lege the fixed condition.

Regarding the new causality of the permitted cases of temporary hiring, the indeterminate legal concepts included in the approved texts introduce complexity factors in business management and can generate corrective actions by the Labor Inspection or the Courts. Undoubtedly, the algorithms (which will arrive) and the anti-fraud tool (HLF) of the OEITSS and the crossing of data between the Bodies of the Ministry of Labor with the extended actions (informative letters) and the future automated minutes of the ITSS They will help in the control of the new temporary limits of the contracts but the intervention of the Inspectors will be necessary for the legal assessment of the certainty of the causes of the temporary contracts that are signed in accordance with the new regulations.

In the construction sector, the fixed work contract disappears designed by the conventions of the sector and a new indefinite contract attached to work with its own termination rules and with the business obligation of, once the work is finished, offer a proposal for repositioning the worker, prior development, if necessary, of a training process in charge of the company, although the contracts may be terminated for reasons inherent to the working person with compensation of 7% of salary. It is a pioneering model as a result of the sectoral agreement between employers and unions that may be a source of inspiration for other sectors in the future.

It also includes a work malus with penalty of very short-term contracts since temporary contracts of less than 30 days will have an additional Social Security contribution of 26 euros when they are canceled to prevent rotation of registrations from Monday to Friday and cancellations at the weekend.

Finally, Law 20/2021, of December 28, will also have a relevant impact on the reduction of temporary employment in public employment.

With these developments, an important transfer of eventual old contracts and work or service contracts to fixed discontinuous contracts that together with the new scenario of fixed work contracts in the construction sector and the control of labor fraud by the ITSS through the HLF for non-compliance with the maximum terms can gradually reduce the current temporary rate of 26% in 2021 to figures close to 15% in 2023 or 2024.

  1. The promotion of discontinuous fixed contracts (art. 16 ET).

In the first place, the distinction of legal regime between fixed periodic and fixed discontinuous contracts disappears and, in the cases included in this modality, a hierarchy or preference relationship of the discontinuous fixed with respect to contracts for unforeseeable production circumstances.

The norm establishes that these contracts must be concluded for jobs of a seasonal nature or seasonal productive activities, as well as those that do not have this nature but that, being of intermittent provision, have certain, determined or indeterminate periods of execution. It is also added that they may be arranged for the execution of commercial or administrative contracts that, being foreseeable, they form part of the ordinary activity of the company and temporary work companies are allowed to enter into fixed discontinuous contracts to cover contracts made available linked to temporary needs of various user companies. The sectorial collective bargaining is called to complete the legal regulation in discontinuous fixed in important matters (among others, annual census; maximum periods of inactivity between contracts with, failing that, 3 months; the order of the call; the call period; the amounts for end of call; etc.).

In this new scenario, the discontinuous permanent contract is strengthened in a perhaps excessive way, which is going to grow in volume (more than 1 million discontinuous permanent workers can be estimated at the end of 2022) absorbing part of the temporary contracts and part of the contracts of specific work or service, especially those referring to contracts, subcontracts or administrative concessions, although as an exceptional rule the signing of unforeseeable occasional contracts is allowed through the back door if the contracts or concessions are not the ordinary activity of the company. In the new regulation, there is a significant improvement in the labor rights of permanent discontinuous workers since it is consolidated in the norm the fiction of recognizing the antiquity of periods of non-activity (except objective and reasonable justification) but without impact for compensation purposes but with impact on unemployment benefits. It remains to be seen whether the new discontinuous fixed lines end up generating a new form of precariousness if the periods of non-activity per year are long and the annual cost of unemployment benefits.

  1. The modernization of training contracts and dual training (art. 11 ET and DA43 LGSS).  

A single training contract is envisaged with two differentiated objects: (i) the alternation training with paid work for others and (ii) the obtaining professional practice appropriate to the level of studies.

The contract in alternation training (which follows the path of dual training in Germany) reinforces its training character with the legal obligation of two tutors (one from the training center and the other from the company); It has a minimum duration of 3 months and a maximum duration of 2 years but linked to each training program; It can be signed by people of any age unless they apply certificates of professionalism in which the 30-year limit applies; they will have a working day of no more than 65% the first year and no more than 85% the second, and they may not have a salary of less than 60% of the conventional allowance in the first year and 75% in the second year.

The contract for the obtaining professional practice For people with professional or university training or a certificate of professionalism without professional experience or training activity in the company, it may be held up to a maximum of 3 years after obtaining the degree (or 5 years in the case of people with disabilities) and the duration It is reduced since it cannot be less than 6 months nor more than 1 year.

  1. The modernization of the outsourcing of business activities (art. 42.6 ET).  

The collective agreement applicable to the contractor and subcontractor company will be that of the sector of the activity carried out in the contract or subcontract, unless there is another applicable sector agreement. However, when the contractor or subcontractor has its own agreement, it will apply, in the terms that result from article 84 ET.

  1. The recovery of indefinite ultra-activity and the limitation of the priority of company agreements (art. 84.2 and 86.3 ET).

The limitation to 1 year of the ultra-active period of the denounced agreements is eliminated. After 1 year from the denunciation of the agreement, the parties must submit to mediation or arbitration procedures. If a solution is not reached, the agreement will remain in force indefinitely, unless otherwise agreed. In addition, the priority of company agreements has been eliminated with respect to the amount of the base salary and salary supplements, returning the centrality of sectorial bargaining to salaries, which overcomes certain dysfunctions derived from the negotiation by companies of business agreements of Disengagement (especially in multi-service company contracts) with the application of lower salary thresholds than the sector, which led to a situation of social dumping and unfair competition between operators and a devaluation of salary conditions for the affected workers. However, the priority of the company agreement is maintained in the rest of the non-salary matters included in art. 84.2 ET.

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About the Author

Carlos de la Torre Garcia

Carlos de la Torre Garcia

Attorney Of Counsel of the Labor Department of Baker & Mckenzie. Specialist in labor and Social Security advice for national and international clients.

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