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The CJEU judgment of November 21, 2018 (Case C-619/17) has closed the latest chapter of the De Diego Porras saga. This saga will go into the CJEU’s history as a necessary call for attention to Spain’s current temporary hiring model, in addition to the loss of legal certainty created on the issue, which now seems to have been restored.

It all began when the CJEU was asked to rule on a question, also a complaint, regarding the abuses that could arise from multi-year temporary job contracts, particularly in state administrations. The Luxembourg court took an ill-advised position that it ultimately had to retreat from, although this does not eliminate the need to reconsider temporary job contracts in Spain and their likely imperfect design or misuse.

The conflict was raised by a temporary employee of the Spanish Ministry of Defense who was dismissed nine years later when the permanent employee returned and did not receive severance compensation. After hearing the case, the Madrid High Court of Justice asked the CJEU whether the exclusion from the right to compensation at the end of temporary job contracts established in article 49.1(c) of the Spanish Workers Statute should be subject to Directive 1999/70 on fixed-term work.

The CJEU’s response was of little help in its polemic first response: its judgement of September 14, 2016 (Case C-596/14), in which it declared, on no special grounds, that there were no objective reasons for the temporary employee to be treated differently by denying her the right to compensation upon the termination of her temporary contract, while “comparable permanent workers” were granted compensation at the end of their contracts, thus violating the principle of non-discrimination. The court thus recognized the right to compensation for termination of temporary job contracts comparable to the severance pay of permanent contracts on objective grounds, i.e., 20 days’ pay up to a maximum of 12 months.

The interpretive earthquake arising from this ruling led to a heated internal debate between labor courts, where the new standard was received with varying degrees of acceptance. The CJEU had to clarify its position, and it was requested to do so in various preliminary rulings on temporary job contracts.

Madrid Labor Court No. 33 referred to the CJEU in the case of another temporary public employee whose contract was terminated when the vacant post she had held was filled without her being paid compensation. The response to this preliminary ruling came first, in the CJEU (Grand Chamber) judgment of June 5, 2018 (Case C-677/16, in the matter of Montero Mateos) that—under the charge of a new rapporteur—ended the legal certainty that had been created and set the court’s previous decision right. More specifically, the court found that the purpose of the compensation established in article 49.1(c) and 53.1(b) Spanish Workers Statute respectively arose from contexts that were fundamentally different, thus providing objective grounds for the disputed difference in treatment. Therefore, Spanish law is not opposed to EU law. However, as the court was conscious of the risk of fraud in temporary job contracts, in section 64 of its judgment, it warned that “the court of instance must decide whether, in view of the unpredictability of the end of the contract and its unusually long duration, it should be reclassified as indefinite.

The fourth chamber of the Spanish Supreme Court also turned to the CJEU regarding the appeal to the Supreme Court for the unification of doctrine filed by the Ministry of Defense specifically against the Madrid High Court of Justice’s judgment in the De Diego Porras case. The EU court recently revealed its response in its judgment of November 21, 2018 (Case C-619/17).

This judgment once again upheld the ruling in the Montero Mateos case that there were objective grounds for the difference in treatment. More specifically, the court decided that the termination of Ms. De Diego Porras’ temporary contract due to the rehiring of the employee she replaced occurred in a substantially different context, from a factual and legal point of view, than that of the contract of a permanent employee whose contract was terminated based on some of the grounds in article 52 Spanish Workers Statute having been met: (i) in the case of a temporary contract that has ended due to the agreed temporary term ending, the parties are aware of the term or circumstances that will terminate the contract from the time it is signed; and (ii) in the case of a temporary contract that is terminated by the employer on any of the grounds established in article 52 Spanish Workers Statute, circumstances occur that were not established when the contract was signed and that entail a radical change in the normal course of the labor relationship.

However, the Supreme Court went even further and asked the CJEU whether mandatory payment of compensation is sufficient for preventing and—where applicable—penalizing abuses where successive contracts are used; it also asked whether EU law allows for some temporary contracts to require compensation for the employee upon termination while others do not.

The court’s answers to these questions provide a clear message to Spanish legislators that the Spanish legal regulations on temporary hiring in Spain need a major overhaul:

  • The court responded that compensation does not need to be paid when contracts end due to the conclusion of their term and that this is, therefore, not sufficient in itself for penalizing abuses of temporary contracts and for rectifying the consequences of the breach of EU law.
  • However, the court also noted that although the differentiated treatment of temporary contract types was lawful, the objective and effectiveness of the directive could be reduced if Spanish law does not provide other effective ways to prevent and penalize the abuse of employees with temporary contracts. The lower court would have to determine these circumstances.
  • Therefore, the CJEU has left the door open to further questions regarding how EU law applies to certain situations where temporary contracts are abused in Spain.

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