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Today, the Official State Gazette published the new Spanish Public Procurement Act (Ley de Contratos del Sector Público), which transposes EU Directives 2014/23/EU and 2014/24/EU, of 26 February 2014. This regulation, which brings significant changes to current regulation in force, contains an important set of employment measures, which means that it must be studied beyond its purely administrative scope, reaching a wide range of labor matters. With some exception, the Act will come into force four months after its publication in the Official Gazette, i.e., March 9, 2018.

Fundamentally, the new Spanish Public Procurement Act introduces the following new features:

  • It fosters the incorporation of employment criteria into public contracting:
    • 1. Cross-cutting and mandatory employment criteria will be incorporated into all public procurement when they relate to the object of the contract.
    • 2. Best value for money will govern the core criteria of public contract awarding, replacing the “economically most advantageous offer” (despite this being the benchmark criterion of Directive 2014/24/EU), which will be evaluated according to employment considerations.
    • 3. These employment criteria must be related in all cases to the object of the contract. Until now, that link had to be direct. The new Spanish Public Procurement Act adds flexibility to that requirement by understanding as related any criterion referring to or including the provisions that must be made under the contract, in any of its aspects and at any stage in its life cycle. The definition of direct relation, which has now been nuanced, recently led the Madrid High Court, in its Judgment of July 7, 2017, to annul an employment criterion in the specifications of a public contract intended to reward the application of the state collective bargaining agreement, precisely because it did “not have a direct relationship to the object of the contract,” leading the Court to describe it as “undue interference in the regulation of the workers’ salary.” It remains to be seen what criterion the court will now adopt; foreseeably, it will differ from that judgment, in view of the new law.
    • 4. Special labels may be demanded to prove that the awardee meets the required employment characteristics (e.g., other than gender equality).
    • 5. In the absence of express provision, employment criteria will be applied to ties between two or more tenders, in order of the higher percentage of (a) workers with a disability or in a situation of social exclusion, (b) temporary workers, or (c) women.
    • 6. Likewise, social or labor conditions can be established in relation to the performance of the contract, provided they are related to its object. We highlight that the Spanish Public Procurement Act includes guaranteeing respect for basic labor rights through the production chain—a duty that does not exist in our legal system yet but which is already a requirement in neighboring countries (France and the United Kingdom), and which the WTO and the European Parliament claim should be generalized.
  • It promotes and partially imposes the application of the sectoral collective bargaining agreement, contrary to the principle of prioritizing application of the company collective bargaining agreement:
    • 7. The tender budget (i.e., the maximum expenditure) must itemize the estimated salary costs based on the sector’s collective bargaining agreement, and the particular administrative clauses of the specifications must always include the obligation of the contract awardee to fulfill salary conditions in accordance with the sectoral agreement.
    • 8. Abnormally low tenders that violate social or labor obligations, including breach of sector collective bargaining agreements, will be excluded from the tender process.
    • 9. The special performance conditions that can be established include compliance with sector collective bargaining agreements, whose violation could carry fines or even contract termination.
  • There is a new contracting prohibition with the state:
    • 10. Companies with more than 250 workers that do not comply with the obligation of establishing a gender equality plan cannot be contracted. Thus, what until recently was considered by the Court of Auditors as an invalid awarding criterion for allegedly “not affecting the provision that is the object of the contract,” now becomes a sine qua non condition to enter into contracts with the state, in the case of legally obliged companies.
  • It includes a new regulation on subrogation of workers.
    • 11. When the state assumes, through its own resources, a service that had been provided by personnel with a subrogation obligation under statutory or collective bargaining rules, it will be subrogated in the condition of employer.
    • 12. Penalties can be imposed on the outgoing contractor that breaches the obligation to report on subrogation conditions. The incoming contractor will have a new recourse to claim if labor costs were higher than anticipated from the information provided and, in any event, it will be exempt from liability for unpaid salaries and social security obligations with respect to affected workers.

We will monitor its implementation closely and its interpretation in our administrative and labor bodies.

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alejandro.garciaesteban@cuatrecasas.com

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