Despido

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The High Court of Justice of Catalonia, in its Labor Chamber Judgment of April 23, 2021 (5233/2020), accepted the possibility of supplementary compensation over the legal indemnity based on the regulatory framework of the ILO’s Convention 158 and article 24 of the European Social Charter (1996) in case compensation for unfair dismissal is exiguous and not a deterrent for the company, or it does not compensate workers sufficiently for losing their job.

In the case examined by the court, the worker had been working for the company since October 1, 2019 and was dismissed on April 2, 2020 based on objective causes associated to COVID-19. The employment relationship, therefore, lasted barely nine months. The claim against the company petitioned that the dismissal be ruled void and, on a secondary basis, unfair and, at trial, the worker also requested supplementary compensation equivalent to nine months’ salary, i.e., €60,000.

The Labor Court ruled that, under the ILO’s Convention 158 (interpreted in accordance with the European Social Charter of 1996), the legal compensation for unfair dismissal in this case was not enough of a deterrent; therefore, it recognized supplementary compensation for €60,000, on top of the sum already received, unless the worker was reinstated.

Both parties filed an appeal for reversal before the High Court of Justice of Catalonia: the worker requesting that the dismissal be ruled void, and the company challenging the amount of supplementary compensation based on the unfair dismissal ruling.

After ruling out the option of voiding the dismissal, as in the first-instance judgment and following the High Court of Justice of Catalonia’s Judgment of March 31, 2021 (3825/2020), the High Court of Justice of Catalonia dismissed the worker’s appeal and upheld the company’s, pointing out the following regarding the supplementary compensation:

  • As a rule, unlike in civil law, legally established compensation traditionally governs work contracts as a point of law. Therefore, when compensation is specifically provided in labor regulations, civil rules of the same common nature cannot be applied.

    However, there is an exception to this rule: when the employee has been dismissed on discriminatory grounds, or the dismissal infringes fundamental rights and other public freedoms (when there is no reinstatement obligation), as established under section 183 of the Spanish Labor Act in relation to section 53 of the Constitution.
  • Furthermore, in relation to the request to increase the legal compensation based on article 10 of the ILO’s Convention 158 and the European Social Charter (1996), the court argued that:

    Based on the established position of the Constitutional Court, judges and courts have competence to determine whether international regulations override Spanish law. The first-instance judgment, aware of that established position, ruled that the ILO’s Convention 158 took precedence. It is, therefore, perfectly possible and legal in some cases to review compliance in the terms of the lower court judgment.

    – In some exceptional cases, the legal compensation is not adequate and, therefore, it infringes article 10 of Convention 158. Two requirements must be met for this:

    · Clear and obvious insufficiency of the legally established compensation as it is evidently exiguous.

    · Clear and obvious illegality, circumvention of the law or abuse of rights in the company’s decision to terminate the contract.

    The lawmaker’s purpose is to allow the ordinary threshold to be raised, imposing a higher cap in reference to article 281.2 b) of the Labor Act, allowing the cap of article 58 of the Workers Statute to be increased by 15 days per year of service, with a maximum of 12 monthly payments, so this could be applied in these cases.

    We cannot rule out that adequate compensation will include other compensatory items when the termination by the employer causes the employee harm exceeding the mere loss of profit (e.g., consequential loss or moral damages).

    – To avoid any hint of arbitrariness or infringement of effective legal protection, the pleadings of the dismissed worker’s claim must specify the harm and losses, with proof of the amount.

It was based precisely on this last point that the court dismissed the worker’s supplementary compensation request, as the specific harm and losses were not claimed or proven.

We highlight that the solution offered by the High Court of Justice of Catalonia has been debated by other courts such as the High Court of Justice of Castile and León (Valladolid), in the Judgment of March 1, 2021 (103/2021), which recognized additional compensation, or the Judgments of the Court of Justice of Galicia, of March 23, 2021 (360/2021) and Madrid, of March 1 and 18, 2021, (596/2020 and 136/2021), which rejected paying additional compensation.

In conclusion, in this judgment, the High Court of Justice of Catalonia has again raised the interesting issue of adequacy of domestic law with respect to the ILO’s Convention 158 and the European Social Charter (1996). At the very least, it fails to offer any legal certainty, so the amount of additional compensation will be assessed at each court’s discretion. We will be on the look out for new rulings that could be swayed by Spain’s recent ratification of the European Social Charter in force since July 1, 2021.

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marc.paris@cuatrecasas.com

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david.montoro@cuatrecasas.com