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In the framework of the market economy, decentralized manufacturing through the contracting of works or services is a recurrent form of organization of the manufacturing process. In this context, it is typical for contracts to undergo changes determined by the client company that can have a significant impact on the contractor company’s labor relations. Thus, the contractor company must be sufficiently flexible to adapt to the new contracting conditions, but always in compliance with the procedures legally established in the labor market.

One of the typical formulas of adaptation to a new reality is through the substantial modification of working conditions, a concept that, as the Supreme Court has established in many judgments, is highly controversial. In its recent judgment 865/2018 of September 26 (Rec.114/2017), the Supreme Court again ruled on the limits of this concept, resolving the following issue: Does changing the content of a management assignment (contracting) justify a unilateral modification of the working conditions by the company without following the channel established in article 41 of the Spanish Workers Statute?

This conflict arose in a state-owned company that is obliged to carry out the works commissioned by the regional government of Valencia through the management assignments. In this context, the regional government modified the content of one of the assignments, removing the motorized fire surveillance service. In certain periods of the year, the service is provided with ordinary prevention units (that is, without motorcycles). Therefore, the company decided to replace the specific salary supplement received by “motorists” (a total of 55 workers throughout the autonomous region of Valencia) with another workplace supplement of a lower amount.

Although the company had held two meetings with labor union representatives to address this issue, in which it had been agreed that the procedure should be carried out through a substantial modification of working conditions, in the end, the company directly communicated the decision to the affected workers. With a grievance procedure having been filed, the High Court of Justice of Valencia dismissed it because it understood that, when the company is limited to executing the conditions of the local government’s assignment, there is no substantial modification of the working conditions. It also did not consider the removal of the salary supplement to be relevant.

However, the Supreme Court upheld an appeal filed by the labor union, stating the following reasons:

  • The modification must be classified as substantial, given that the removal of a specific workplace salary supplement affects the overall remuneration system and, in addition, the business decision also involves a change in the work system, because those affected go from providing services in individualized work with a motorcycle to collective work with a group that uses a motor vehicle.
  • Also, while the company had already recognized the substantial nature of the change in the meetings with the labor union representation, the Supreme Court understands that this classification, although it does not bind the courts, does bind the company itself, which took on the commitment to negotiate the conditions of the modification and that should, therefore, meet this pact under article 1258 of the Spanish Civil Code (although this was not made mandatory by article 41 Spanish Workers Statute).
  • Lastly, and given the company’s argument that the adaptation to the assignment occurred through the novation of many temporary fixed-discontinuous contracts, the Supreme Court argues that the novation only affects the term of the contract and must not, in any case, affect the other conditions established in the contract.

Thus, the Supreme Court upholds the appeal and annuls the business decision, concluding that the company should not have carried out adaptation of the employment contracts to the new assignment unilaterally, but should have used the procedures established in article 41 Spanish Workers Statute.

It is, therefore, clear that changes to the contracting content do not justify companies taking unilateral decisions, and they must comply with the procedures stipulated in the Workers Statute for substantial modifications. Without doubt, when the contractor company knows of a potential contracting change, it must be anticipated and it must activate an adequate procedure as soon as possible to thus avoid any additional cost.



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