5 things to know about Employment Law in Spain

In this series, Barry Stanton, Managing Partner, is talking to his European colleagues with whom he has worked on numerous projects about five things we should know about employment law in their country.

In this final episode, Barry is discussing Spanish employment law with guest Juan Carlos Lombardí from Bartolome & Briones.  Together, they unpack key legal issues affecting employers in Spain, providing invaluable insights for business owners and HR professionals alike. 

Some of the topics discussed include:

• Overtime Claims: A landmark Catalonian court case, where compensation was awarded for 1,250 overtime hours due to inadequate time registration systems, serves as a wake-up call for employers across the country. Learn how courts are shifting the burden of proof entirely onto businesses.
• Equality Plans: Companies with 50+ employees face complex obligations to develop equality plans, conduct salary audits, and address gender disparities all while navigating potential legal risks.
• Employer of Record Risks: Understand why this popular model for establishing a business presence in Spain could be deemed illegal employee leasing, carrying hefty penalties and liabilities.

From compliance pitfalls to significant financial exposure, these challenges are critical for companies of all sizes. Don't miss this episode, full of practical advice to help you protect your organisation and avoid costly mistakes in the ever-evolving landscape of Spanish labour regulations.

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Chapters

• 0:47 Working Time Registration Challenges
• 4:18 Mandatory Equality Plans
• 11:30 Whistleblowing Channels
• 16:05 Anti-Discrimination Protection
• 21:17 Employers of Record Risks

Transcript

Barry Stanton: 0:01 

Hello, my name is Barry Stanton, I'm the Managing Partner at Boyes Turner and I've also practiced as an employment lawyer for the past 25 years. In that time, I have seen the growing importance of a knowledge of European and international employment law. In this series, I'm talking to my European colleagues, with whom I have worked on numerous projects, about five things we should know about employment law in their country. 

Today, I'm joined by Juan Carlos Lombardía of Bartolome & Briones, in Barcelona and Madrid. 

Juan Carlos, Hello. 

Juan Carlos Lombardía: 0:32 

Hello Barry, Thank you for inviting me to this podcast. 

Barry Stanton: 0:35 

We're talking about five things for employers to know about employment law in Spain today, and I just wanted to touch on working time registration in Spain and the difficulties that's causing. 

Juan Carlos Lombardía: 0:47 

I mean, this is one of the main points that now are challenging for the companies here in Spain. I would say that this is an obligation that really came into force for companies in 2019. But the reality is that until now, there are a lot of companies that doesn't have a working time registration system in place. I want to point out that, apart from the administrative fines that companies put face in case of not implementing the working time registration, there is some judicial resolutions stating that in case that companies haven't had the working time registration system, the companies will be responsible of overtime. It is presumed that if the companies doesn't implement the working time registration, if an employee submits a claim of overtime before the labour court, the labour court will issue a judicial resolution stating that the employee is entitled to the overtime. Recently, we had a case here in Catalonia in which an employee was entitled to receive 1,250 hours as overtime, since the company had not implemented the working time registration. Then you can imagine the importance of having the working time registration in place. 

Barry Stanton: 2:20 

In that case, the court was placing the burden on the employer to prove that the employee hadn't done the overtime. 

Juan Carlos Lombardía: 2:51 

Yeah this is the key issue here. If the company can not show the working time registration, then the employee or it is accepted that the overtime claim by the employee no matter. The employee is not required to prove or to evidence that the overtime has been performed. It's only about saying hello, I have done this number of hours during this period of time and then, if the company cannot reject the claim, the labour court will accept the claim. I think that this is a very important point for the companies to take care and to look into that they have a good system in place. 

Barry Stanton: 3:21 

Is there any period of time over which the employee can go back and claim they've worked overtime? 

Juan Carlos Lombardía: 3:27 

Yes absolutely there is a statutory period of claim. In this case that we talked about the employee said that he was performing like two hours of overtime per day and this was accepted by the labor court. Then we are facing a very dangerous situation because, no matter if the employee can say one, two, three hours or four hours, this is something that is starting to be dangerous for the companies in this type of procedures. But for sure, with the limit of period of one year. 

Barry Stanton: 4:17 

That's very sobering thought. Moving on, then to look at the equality plan, which I understand became mandatory from March 2022 and applies to companies with 50 or more employees. 

Juan Carlos Lombardía: 4:19 

I would say, just to add the one point to the to the other point regarding the working time registration, I  want to add that this, this obligation is for all companies, no matter the, the size or no matter the number of employees, because this for the equality plan, as you say, this is for companies with 50 or more employees and this is mandatory for the companies to negotiate an equality plan with the workers' legal representative for preventing and correcting potential differences, as you know, between men and women in the company. 

Barry Stanton: 5:09 

All right, and does that relate to pay or treatment? 

Juan Carlos Lombardía: 5:15 

Yeah, I mean. Regarding the equality plan, it's linked with the audit salary that is also mandatory for companies and this equality plan requires to do an analysis and diagnosis in the company about differences on salary, on job positions, on the task performed by men and women. Really, it requires to do a very high analysis of all the structure of the company. But one of the most controversial matters related with the equality plan is one of the most frequently asked questions, I would say here in Spain what happens if there is no workers' legal representative in the company for negotiating the equality plan? Because at the end of the day, this is a long period of negotiation, I would say, for having an equality plan in place. And in cases for companies that don't have workers' legal representatives, it's important to say that it is required to negotiate with the major trade unions here in Spain. The company cannot negotiate unilaterally, I would say, the equality plan. 

Barry Stanton: 6:49 

And how long are those negotiations taking? 

Juan Carlos Lombardía: 6:53 

I have to say that the law establishes that the maximum term is one year, but this one year of maximum period of negotiation for the equality plan could be extended between agreement between the company and the major trade unions or the workers' legal representative. But I have to say that in our experience it would take between three six months. This is the most standard and common period of time for the companies to start with the analysis of the documentation and to have the final approval and registration, because it really is not only about the negotiation of the equality plan. This requires also a registration of the equality plan before the labour authorities. That also implies time to make the registration because in this case labour authorities there is a special authority controlling all the equality plans and they take a lot of time checking that the negotiation has taken place, that all the requirements have been compliant. 

Barry Stanton: 8:13 

And then, having negotiated the plan and done a salary audit, how often then do you have to revisit that? 

Juan Carlos Lombardía: 8:21 

Yes, this is really a good question, Barry. I mean, the validity of the plan usually is about four years, but if there are some substantial changes in the company, I mean if there is a merge, if there is a dismissal or a collective dismissal in the company, you are obliged to make a new analysis of the situation. 

Barry Stanton: 

And I'm assuming that the plan is a snapshot in time and it will show a progression towards equality if you don't have equality at that point. 

Juan Carlos Lombardía: 8:59 

Yes, I mean one of the main parts and important parts of the equality plan is an action plan for implementing all the actions that the company needs to carry it out, for making for adjusting all the subjects that could be identified in the company as an action. 

Barry Stanton: 9:22 

And just a final question if you create a plan demonstrating you don't have equality between the sexes, does that create a jeopardy for the company that individuals can then say I'm not being treated equally regarding how to manage the potential differences in the indices. 

Juan Carlos Lombardía: 9:54 

I would say one of the most important topics to review and to analyse prior to enter is to negotiate the equality plan, because sometimes there could be same positions but with different functions, but are under the scope of the same professional group and this could lead to the employees to say that I am being treated different to other, to other employees. Then it's really important to identify the functions of each of the employees. At the end of the day, when you, enter into the negotiation of the consultation period, you don't identify each employee because, for data protection, you are not providing the salary information of the employees. But you need to take, you need to be careful about selecting some groups. I mean, if maybe in one group there is only one employee, I would suggest not to include in the equality plan because, at the end of the day, I am giving the information regarding the salary of this employee and this is something that is very challenging when entering into a negotiation of the consultation period. But nowadays, regarding the equality plans, I would say that all the companies are reaching agreements. 

Barry Stanton: 11:20 

And then moving on to talk about whistleblowing, which, I understand, again applies to those businesses with 50 employees or more, and that was a recent introduction in December 2023. 

Juan Carlos Lombardía: 11:32 

This was really a consequence of the European directive regarding the protection of the whistleblowers and all the regulations regarding the whistleblowers. The law was approved in February 2023, but the law came into force in December 2023. I would say that some of the companies comply with this obligation because, if you were complying with the compliance system that a lot of companies had in place regarding the mechanism for controlling potential criminal officers, the whistleblowing channel was also implemented. But for those companies that haven't had a compliance system in place, because in Spain it is not mandatory to have a compliance system, this is not as in the US or UK. I mean, I think that this is mandatory for companies to have the compliance system In Spain. This is something that is recommendable, but it's not mandatory. 

Juan Carlos Lombardía: 12:43 

More and more companies are becoming conscious of the importance of having the compliance system. Going into the whistleblowing channel for me is that the companies with 50 or more employees have to implement an internal channel for allowing the whistleblowers to submit complaints and report irregularities, and it's important that this complex you need to allow the whistleblowers to do in confidential and anonymous way. This is really one of the important points for the companies when implementing a whistleblower channel. It's mandatory that one employee or someone of the board of directors is appointed as controlling of the whistleblower channel. But you can outsource the management of the whistleblower channel, but it's important that someone of the employee takes care of controlling and being the key contact for a project in the company. 

Barry Stanton: 13:59 

An interesting point for me is whether, if you have a Europe-wide group, let's say with a subsidiary in Spain, do you have to blow the whistle to somebody in Spain, or could the person you blow the whistle to be in another country? 

Juan Carlos Lombardía: 14:16 

Yes, this is also a very good question, because this has been very controversial and discussed here in Spain. At the end of the day, it has been accepted and admitted that in case of multinational companies, the whistleblower channel would be in the parent company and not in the Spanish company. But it's important to inform the employees in the Spanish company that this whistleblower channel exists, which is the person of contact in case that someone of the Spanish, company, wants to contact this, this key, this key person. But I would add that, for the validity of this procedure, it's important to sign, like an, a document by the board of directors saying that the Spanish company is under the umbrella of the whistleblower channel that is in the parent company. This is really important in case that there is like an inspection or certain controls by the neighbour authorities here in Spain. 

Barry Stanton: 15:31 

And that parent company could be within the EU or perhaps outside the EU. 

Juan Carlos Lombardía: 15:36 

Yeah, this could lead to other discussions regarding data protection regulation if the whistleblower channel is outside the European Union. But I mean there is no problem if the whistleblower channel is located in the European Union or the United States. 

Barry Stanton: 15:57 

And then moving on anti-discrimination protection, I understand there's been some recent legislation in Spain. 

Juan Carlos Lombardía: 16:05 

Yeah, I mean I think that this is something that is generally going to all the European countries to protect, to regulate all the situations that could be considered as discriminatory. 

Juan Carlos Lombardía: 16:20 

I have to say that we have recent regulations. 

Juan Carlos Lombardía: 16:23 

One is related with 2022, stating some objective situations that could be considered as discriminatory, and one of the most controversial is related that if you dismiss someone that is in short term sickness leave, we are not talking about an employee that has been during a long time in sick leave. 

Juan Carlos Lombardía: 16:46 

We are talking like if one employee takes a sick leave for three days and I decided and I decided to dismiss this guy. It's very likely that if the employee elects this law of 2022, the Labour Court would consider the dismissal as null and void. This is something that has complicated a bit the determinations in cases that the employee takes short-term sick leave. In cases that the employee takes short-term sick leave, there's been like a way there's been interpretations by some labor courts saying that this is not the purpose of the law to protect these employees, that they maybe are picking days. One month I pick one day of sick leave. The other month I am two days off the company, but we have this situation that creates some uncertainty for the companies when facing termination in cases of employees that have been through sick leave procedures. 

Barry Stanton: 17:53 

So that's interesting because presumably, if the determination is being declared null and void, that's not going to happen for some considerable time and then the employee would be entitled to their pay in that period when they haven't been working. 

Juan Carlos Lombardía: 18:08 

Yes, I mean this is creating a situation in which the employees know that even maybe they don't have high seniority in the company, because sometimes we are facing cases in which the employee is six months of seniority in the company and then you receive a dismissal claim saying that the determination is null and void due to the fact that the determination was for the different six leaves that he took during this period of time. 

Juan Carlos Lombardía: 18:40 

But it's not only about to reinstate the employee and paying the salaries, Barry that this is a substantial consequence. It's also about that in this type of claims, they are also added a compensation for damages and the labour card is admitted. The compensation for damages and it's very frequent an amount between 6,000 euros to 12,000 euros and at the end of the day, this creates a compensation with the lawyer or the employee about, which is the amount of compensation that you want for terminating and for settling the procedure and avoid this reinstatement. This is something that I really believe, and my personal opinion is that we need to have a judicial resolution by the Supreme Court saying that this is not the purpose of the law. This is why we also recommend to prepare a very good letter of dismissal identifying the reasons and avoiding this kind of letter of dismissal that does not have any type of content at the end of the day. 

Barry Stanton: 19:52 

And that's suggesting that the burden of proof again is on the employer to prove the reason. You don't want a simple letter. You want a long, well-drafted letter setting out all of the bad things the employee has done or all the reasons why. 

Juan Carlos Lombardía: 20:03 

Absolutely, and I mean related with that. It's also applicable to termination during property non-interior that this was something that I mean. At the beginning of my career 20 years ago, there was no discussion that the company has the decision to terminate an employee during a probationary period. But in the last year there's been some judicial resolutions saying that, although the company is not obliged to provide any type of justification in case of termination during a probationary period, if the employee alleges that maybe his termination has been or is due to the fact that he's superior or has some problems with the superior and so on, in these cases we also recommend, when the company decides to terminate a contract during a probatory period, to explain some reasons in the letter, because this is starting to be also a challenging situation here in Spain. 

Barry Stanton: 21:17 

And I just want to move on to the last area for us to talk about, which is employers of record and professional employer organizations. 

I know you and I have spoken about the challenges that exist in Spain with these organizations, but perhaps you could elaborate on that for our listeners. 

Juan Carlos Lombardía: 21:25 

This is something that has started, or has been more significant, since the pandemic, I would say, because the employer of record before these dates here in Spain was not really known. 

Juan Carlos Lombardía: 21:39 

But in the last years there are a lot of employer records operating here in Spain and this has created some judicial procedures because really this figure of the employer of records is not regulated here in the Spanish workers statute and I have to say, or I would say, that this figure or the activity carried out by these companies could not be allowed or are not allowed under the provision 43 of the Spanish workers statute that says that this transfer or this list of employees between the employer of record to the client could be considered as an illegal lease of employees, because to the eyes of the law here in Spain, the only companies that can lease employees are the temporary agencies, that they have an administrative authorization. 

Juan Carlos Lombardía: 22:38 

But we are not thinking about this new model of employer of record and the judicial resolutions not talking about employer of record and the judicial, the resolutions not talking about employer of record, because the reality is that nowadays we don't have any judicial resolution managing the case of an employer of record. Both companies, meaning the client and the employer of record would be jointly and separately responsible for liabilities. In Spain I would say salaries, compensations of dismissal. But it's not only about this. It's about a fine that would be imposed to the client and to the employer of report. That would be up to €245,000. 

Barry Stanton: 23:28 

Per person. 

Juan Carlos Lombardía: 23:30 

No, it's not per person. It's like a general but in this case the criteria of the labour inspection that is becoming. I have to say that for type B, the labour inspection has not started with inspections for this particular type of activity the employer of record. But this is becoming a spotlight for the labour inspection because there are a lot of employees that are performing services in Spain through the employer of records, through the employer of records, and I would recommend to check which is the current situation for these international companies acting or operating through employer of records in Spain. 

Barry Stanton: 24:18 

So what advice would you give to international companies that are looking to go into Spain with perhaps one or two employees and are considering using the employer of record model? What are they best doing? 

Juan Carlos Lombardía: 24:28 

It's better to manage to open. It's not necessary for having employees here in Spain to have a legal entity as an international company. You can open a position in the tax authorities and in the social security and then you can manage the payroll. So a labour advisor, a labour consultant, and you are avoiding this risk of illegal transfer of employees. But not only illegal transfer of employees, because recently we have heard about some cases in which the employer record could terminate the letter of dismissal. The letter of dismissal has not been well prepared, as we discussed in the last topic, and at the end of the day they are facing a potential liability For sure. This also depends and I have to say that this also depends on the commercial contract between the client and the employer on record. That for sure. I would recommend to review the provisions of the commercial contract in case that one client decides to operate through an employer on record, to have this security about how the activity is being performed in Spain and that no consequences would be for the territory. 

Barry Stanton: 25:50 

Juan Carlos, thank you very much. That was a very interesting and immense amount of food for thought for us and for our listeners. 

Juan Carlos Lombardía: 25:56 

Thank you, Barry, for inviting, and I hope this is useful for the listeners. 

Barry Stanton: 26:02 

Thank you for joining us today. I hope you've enjoyed our conversation. If you want to listen to more episodes in this series, you can follow or subscribe to our podcast. Goodbye.