Spain: Judicial control of grounds for dismissal (individual or collective)

In relation to judicial control over the grounds for dismissal, Labour Court 3 of Pamplona, in a decision rendered on 27 September 2012, rejected the claim submitted by two employees who were dismissed for objective reasons.

Indeed, Act 3/2012, following the criteria established by Royal Decree-Law 3/2012, introduces more flexible criteria to determine whether or not a company can claim economic causes as grounds for an objective dismissal. A company is no longer required to justify that the dismissal will contribute to improving its situation in the future or that the dismissal is reasonable with the aim of boosting its position in the market. The new wording clarifies the definition of negative economic situation; this is understood to exist, among other reasons, when there is evidence of a persistent decrease in ordinary income or sales. The decrease is understood to be persistent if it lasts for three consecutive quarters.

Although the new wording constricts judicial interpretation in this regard, the court has nevertheless determined that Act 3/2012 does not completely remove judicial control over the grounds for dismissal. The court's decision clarifies that, according to Spanish constitutional labour provisions and article 158 of the International Labour Organization, there must always be good grounds for dismissals and they must be subject to real judicial control. Therefore, although Act 3/2012 seems more permissive and clarifies when a negative situation may constitute sufficient economic grounds for dismissal, the courts may still use their judgement as to the reasonability of the dismissal. The dismissal cannot be left to the sole and unchecked discretion of the employer; the company's freedom to dismiss is not an absolute right and could constitute an abuse of law.

A decrease in sales or income for three consecutive quarters does not per se constitute an objective economic ground for dismissal; it must be combined with other evidence of a company's negative position. However, when there is sufficient evidence of a company's negative economic situation at the moment of the dismissal and the company has tried to implement other possible flexibility measures before resorting to the dismissal, the dismissal may be understood to be fair or for good cause – as was the case in the court's decision.