How compensation is calculated in a Temporary Regulation of Employment Procedure

I have been affected by a Temporary Regulation of Employment Procedure of reduced working hours. If I am fired, is the termination indemnity calculated on the full-time or reduced-time salary?

 (In Spain a Temporary Regulation of Employment Procedure is known as “ERTE” from Expediente de Regulación Temporal de Empleo) 

On June 27, 2018, the Supreme Court issued Sentence No. 678/2018, which provides that according to the usual doctrine of the Chamber, the salary to be considered for the calculation of the compensation for dismissal and the salaries for processing must be the last one received or current at the time of the termination of the employment contract, except for special circumstances. 

The Court maintains that it has been stated that the salary that must regulate the compensation for dismissal is that received in the last month, pro rata with the extraordinary payments, except in special circumstances, including among such special circumstances the oscillation of irregular income or the unjustified loss, fraud, of a non-occasional or occasional salary. 

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In this sense, it has been maintained that the salary that regulates compensation for dismissal is that of the worker at the time of the dismissal and not one that is arbitrarily paid by the company; that the amount of overtime should be included in the salary, if instead of occasionally  an unusually high number of occasional hours have been made, the premium for a life and accident insurance paid by the company should be also included, among others. 

 In cases of reduced working hours, the same solution been reached in cases where the reduction had its cause in a   worker’s initiative, as for instance in the case of reduced working hours for reasons of legal custody, which was initially being argued on the grounds that it was a temporary alteration of the relationship, but subsequently became justified by the final application of all the legislative measures aimed at facilitating the reconciliation of work and family life, and finally, it has become so following an explicit legal mandate. 

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Dismissal Null, Dismissal Unfair and Dismissal Proceeding: Differences

How to proceed? 

The same solution was understood to be justified for those cases, absolutely diverse, in which the reduction is attributable to an exclusive business decision, which unilaterally reduces the working day and salary by 50% one month before the dismissal, reasoning to the effect that it would be contrary to the principle of good faith to accept the action of the company that unilaterally reduces the salary to harm the worker not only in his retributions, but even in the amount of the compensation for termination of the labor relationship. 

This same criterion must be followed in the case of a reduction in the working day as a result of an ERTE, whether or not the collective measure has been agreed upon: (i) the measure is a result of the initiative and primary interest of the company, (ii) the reduction is of a transitory nature in view of the indefinite nature of the relationship that the dismissal frustrates, (iii) admitting as a salary the remuneration corresponding to the reduced working day undeniably leads to fraud of the law, insofar as it would consent to the instrumentation of the reduction of the working day as a prelude to making the dismissal cheaper, and (iv) the material justice of the preceding solution is evident in the cases in which it is a question of a dismissal declared unjustified, since the illegitimacy of this measure would come to affect the patrimony of a worker previously affected with the measure, adjusted to the law, but undeniably burdensome, of the reduction operated by the ERTE, in such a way that it does not appear reasonable that after the sacrifice of the salary reduction the worker would be harmed, in addition, with the subsequent indemnity reduction. 

In addition to the foregoing, the Chamber argues that in this case, since the dismissal took place on January 14, 2014, and the worker had recovered his full-time status, since the reduced working day was to end on December 31, 2013, his last salary earned, day by day, was that which corresponded to the full working day, from January 1 to 14, 2014, adding that from the almost 22 years of seniority of the worker, 21, took place on a full-time basis. 

If this article has been of interest, we also suggest you to read the following article published on our website:

Dismissal Null, Dismissal Unfair and Dismissal Proceeding: Differences 

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