We analyse the ruling of the Supreme Court, Fourth Chamber (Social Division), 974/2024 of 3 July 2024, Appeal No. 174/2022, which sets out the requirements for changing the working conditions of a workforce, and examines the conditions that must be met for a substantial modification of working conditions to be declared justified.
Case study on substantial modification of working conditions:
This ruling concerns a collective dispute brought against Sociedad Estatal de Correos y Telégrafos, S.A. (public limited company) (hereinafter "CORREOS"), in which the workers' representatives sought a ruling declaring the nullity, or in the alternative the unjustified nature, of the company's decision to withdraw the subsidised transport service used to convey staff from the cities of Valencia and Alicante to the Automated Processing Centres (hereinafter "CTA"), as well as compensation for any loss and damage that may be caused by the contested measure during the period in which it remains in effect.
On 12 April 2022, a ruling was handed down by the Social Chamber of the High Court of Justice of the Valencian Community, which included the following operative ruling:
"We partially uphold the claim brought by the trade union confederation CC.OO. and UGT against CORREOS (...); and, accordingly, we declare UNJUSTIFIED the contested company decision to withdraw the subsidised transport service used to convey staff from the cities of Valencia and Alicante to the Automated Processing Centres, with effect from 01-12-2021, and order the respondent company to comply with this declaration by reinstating the transport service under the same conditions as those in place prior to the withdrawal. No order as to costs."
PROVEN FACTS:
The following facts were established as proven:
- In 1999, new Correos (Spanish postal service) facilities known as CTAs were created on industrial estates located in the town of Quart de Poblet, 8 km from Valencia, and in the town of Sant Vicent del Raspeig, 16 km from Alicante.
- From 1999 onwards, the company and trade unions reached agreements to put in place a company-provided transport service to take employees to these workplaces (Valencia and Sant Vicent del Raspeig). The service arose as a consequence of the forced relocation suffered by many employees, who were notified on 4 June 1999 that they could choose between using the bus provided by the company (with the 15-minute journey time at both the start and end of the working day counted as working time at the company's expense) or receiving 12,000 pesetas per month.
- These agreements were confirmed in 2003. Over the years, employees who had been granted the right to use these routes have gradually retired or left their posts. Currently, only 5 people remain covered by the 1999 agreement. The service consisted of one bus per work shift (morning, afternoon and night) departing from the two provincial capitals.
- Correos sent a letter dated 14 October 2021 to the trade union representatives, informing them of its intention to discontinue the staff transport routes for the morning and afternoon shifts at the Valencia and Alicante CTAs, citing ORGANISATIONAL REASONS ("ongoing and significant underuse over recent years" — low uptake of the transport service among affected staff) and ECONOMIC REASONS ("we are faced with an excessive cost for a service used by only 5–10 people"). The letter states that "over the years, the transport services have been consistently underused, with uptake not exceeding, in the best of cases, 15% of the workforce." It further notes, with regard to Valencia: "This facility is served by public transport links." And with regard to Alicante: "This facility is served by public transport links that are accessible and viable for all employees throughout the day."
The Correos Group recorded a consolidated profit of €4.7 million in the first quarter of 2021, compared to losses of €30.3 million in the same period of 2020. Despite this, the financial position remains negative. Early 2022 forecasts indicated that losses for 2021 would reach €150 million. Correos carries a significant structural deficit that has forced it to seek lines of credit.
The employee representatives argued that:
- they did not accept the grounds put forward, either with regard to costs or to underutilisation.
- They disputed the claim that adequate public transport existed in Valencia to reach the workplace, given that the nearest stop is 1.5 km away, in an isolated area that is poorly lit, unsafe, inaccessible, and offers no shelter.
- It was stated that the proposal should include a cost study for a minibus service.
- In Alicante, it was noted that the current location of the CTA presents serious difficulties — not only due to the complete absence of any viable municipal public transport alternative, but also because the potential pedestrian route is entirely impassable and dangerous.
- The only bus route that comes anywhere near the area (L7) does not represent a viable alternative, either in terms of its timetable or its frequency (every 80 minutes).
- They indicated that the company cannot, on the one hand, relocate a workplace to an industrial estate at a lower cost than maintaining it in an urban area, whilst at the same time refusing to cover staff travel costs to that location.
- They requested that the company put forward an alternative proposal.
Case law on ETOP grounds (economic, technical, organisational and production-related reasons):
The Supreme Court doctrine on judicial review of employer decisions, as summarised in Supreme Court Judgment No. 330/2021, of 17 March, appeal 14/2021, pursuant to which, since the Supreme Court Judgment of 27 January 2014 (Full Chamber, appeal 100/2013, Cortefiel), we have consistently recalled and applied the following doctrine to cases such as the present one. Additionally, the Constitutional Court Judgment 8/2015 of 22 January, when examining the constitutionality of the provisions on corporate restructuring, established a doctrine frequently taken into account by our judgments on non-extinctive contractual variations (material amendments, suspensions, non-application of collective agreements), as required, and which it is worth recalling:
requirements for a collective material amendment of working conditions (MSCT) to be valid:
THE AMENDMENT MUST BE REASONABLY APPROPRIATE:
"[...] although it is not for the Court to make judgments of "expediency" — which, now as before the reform, unquestionably fall within the scope of management prerogative — the referral that the statutory provision makes to judicial proceedings, and the mandatory protection this entails [ art. 24.1 of the Spanish Constitution ], means that access to the courts must be understood as conferring on judicial bodies competence not only to carry out a legality review of the stated grounds, but also to assess the reasonable appropriateness of the relationship between the established grounds and the agreed amendment; apart, of course, from the Court's ability to identify — where present — any potential infringement of fundamental rights, given that the measure must be plausible or reasonable in terms of BUSINESS MANAGEMENT.That it meets the standard of a prudent businessperson:
The Supreme Court ruling of 26 January 2016 (case no. 144/2015) summarises the applicable doctrine by stating that it is for the court to verify not only whether the grounds invoked are genuine, but also whether they are of sufficient substance to justify the decision to terminate employment, and furthermore whether the measure is reasonable in terms of business management — that is, whether it meets or falls short of the standard of a prudent businessperson, as had been held prior to the 2012 reform.
THE MEASURE MUST BE SUITABLE:
By Reasonableness is not meant that the measure adopted must be the optimal one for achieving the objective pursued — that is a matter reserved for management discretion, as already stated — but rather that it must also be appropriately suited to that objective [suitability review]. This excludes, in all cases, the possibility of reaching — even through a degradation of working conditions — what has been termed social "dumping"; for whilst any wage reduction entails greater competitiveness, it cannot simply be accepted on any terms, as a matter of basic fairness. All the more so given that Article 151 of the Treaty on the Functioning of the EU establishes, as an objective of the Union and its Member States, "the improvement of ... working conditions", to which even "the need to maintain the competitiveness of the Union economy" is subordinated. Nor can the primacy of EU law be overlooked, nor the obligation to interpret national law pro communitate, which is held to apply even with respect to the Spanish Constitution itself, pursuant to Article 10.2 CE."The grounds must be of sufficient substance:
As a general matter, we have already noted that judicial scrutiny cannot be limited to verifying whether the invoked grounds actually exist; a full and effective reasonableness review of the termination measure is also required, examining whether the grounds invoked and proven — in addition to being genuine — are of sufficient substance to justify the decision to terminate employment.A lower standard of scrutiny applies to Substantial Changes to Working Conditions than to Dismissals:
Indeed, the Constitutional Court holds that in interpreting the provision in question — Art. 41.1 of the Workers' Statute, as worded by Art. 12.1 of Law 3/2012 — "account may be taken of the definition of 'economic, technical, organisational and production grounds' set out in other provisions of the Workers' Statute …, namely: Art. 47 (on suspension of contract or reduction of working hours), Art. 51 (on collective dismissal), and Art. 82.3 (on the non-application of working conditions agreed under a collective bargaining agreement). In this way, the legislature has not only provided sufficient guidance for those applying the law, but has also supplied sufficient evaluative criteria to enable full and effective judicial review of its application" (Constitutional Court Judgment 8/2015, of 22 January, Legal Ground 4.b, in fine). In taking this approach, the supreme interpreter of the Constitution — reading the provision in a manner consistent with the right to effective judicial protection — appears to suggest, in the context of substantial changes to working conditions (MSCT), that the same thresholds of "losses", "decline in revenue" and "changes" [in means or instruments of production, systems and working methods; and claim of products or services] referred to in Arts. 47, 51 and 82.3 of the Workers' Statute are required; although — in our view — the standard of proof cannot be equally demanding in cases of substantial changes to working conditions as in those other scenarios, both because the Constitutional Court treats the cross-referenced provisions as merely indicative, and out of basic respect for the plain wording of Art. 41.1 of the Workers' Statute, which qualifies as sufficient grounds — economic, technical, organisational or production-related — those "connected with the competitiveness, productivity or technical or work organisation of the company".It is not merely a tool to increase company profits:
In short, following the constitutional interpretation of the provision examined, we must understand that a substantial change to working conditions (MSCT) is not simply a means of increasing company profits, but rather a rational measure to CORRECT DEFICIENCIES across the various dimensions — ECONOMIC, TECHNICAL, PRODUCTIVE and organisational — contemplated by Art. 41.1 of the Workers' Statute.
The substantive reason for treating modification decisions and termination decisions differently under the law lies in the fact that the interests at stake are not the same when a business decision results in job losses ["external flexibility" or "workforce adjustment"] as when it merely changes the manner or circumstances in which work is performed ["internal flexibility" or "adjustment of working conditions"]. This different weighing of interests explains why the power to manage the organisation of work through internal flexibility — which is an expression of "freedom of company" and "defence of productivity" as recognised in Article 38 of the Spanish Constitution — is afforded to employers with considerably wider margins than the power of external flexibility or "workforce restructuring". The latter must strike an appropriate balance between "freedom of company" and the "right to work" of dismissed employees, as recognised in Article 35 of the same constitutional text.
The employer's power is not absolute or unlimited:
In Supreme Court judgment of 24 November 2015 (appeal no. 1681/2014, Full Chamber; King Regal, SA), no. 422/2016 of 12 May (appeal no. 3222/2014; Eurest Colectividades, S.L.) and no. 1016/2016 of 30 November (appeal no. 868/2015; Hearst Magazines, SL), the Court added the following:
The employer's discretion — as distinct from arbitrariness — in managing measures in response to a crisis situation is expressly recognised by law. However, this does not mean that the employer's power is absolute or unlimited:
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- There is a significant difference between allowing an employer broad latitude to manage crises by adopting whatever decisions it considers most appropriate for its needs — including choosing the type of intervention and its scope — and
- conferring upon that employer an absolute power to intervene in employees' working conditions and in the very continuation of their contractual relationships.
The measure must be proportionate:
Consideration must be given to whether the decision meets the requirements of proportionality — that is, the employer's decision must be APPROPRIATE to the causal circumstances at hand, with emphasis placed on the reality of the cause and its effects on employment contracts; with subsequent judicial review limited to assessing whether the reduction in the workforce is commensurate with the situation resulting from the established cause, such that the economic, technical, organisational or production-related grounds operate on the workforce by creating a genuine need to reduce headcount.
A production-related cause is a reduction in the volume of contracted output:
The Supreme Court rulings of 30 June 2015 (appeal no. 2769/2014) and ruling no. 361/2016 of 3 May (appeal no. 3040/2014) compile extensive case law and conclude that: the loss or reduction of business orders must be considered by its origin a production-related cause, as it represents a reduction in the volume of contracted output.
An organisational cause is one that affects working methods and the distribution of workload:
By the sphere in which it manifests, an organisational cause is one that affects working methods and the distribution of workload among employees.
Any adverse economic situation, in itself, is not sufficient:
It falls to the courts not only to make a legal assessment as to whether the stated grounds actually exist, but also to determine whether there is a reasonable proportionality between the established cause and the measure adopted. Any adverse economic situation, in and of itself, is not sufficient to justify the dismissal of any number of employees.
That said, as has been consistently held, it is not for the courts to determine the "optimal" measure, nor to second-guess its "appropriateness" from a business management perspective — for example, by reducing the number of employees affected. Where a measure is found to be disproportionate, judicial review — which the courts cannot abdicate — must be confined to assessing the appropriateness of the dismissal carried out within the terms set out above.
The company must act with respect for all rights and interests at stake:
Supreme Court Judgment STS 841/2018 of 18 September (rcud. 3451/2016) reviews the established body of doctrine and concludes that judicial scrutiny in the classification of dismissal must necessarily include an assessment of whether a genuine and plausible cause exists. The grounds relied upon must be real, current, and proportionate. The company does not have absolute discretion to determine the size of its workforce; it must act with respect for all rights and interests at stake.
Application of the doctrine to cases involving substantial modification of working conditions:
Drawing on that doctrine, the Supreme Court assesses whether the ruling under appeal has respected the test of reasonableness and proportionality by weighing the economic and organisational grounds relied upon against the substantial modification being challenged.
- On the one hand, the grounds are both economic (the excessive cost of a transport service used by very few employees, amounting to €123,295.24 over the last two financial years — Finding of Fact 5) and organisational (the persistent and conspicuous underuse of the company's transport service in recent years). The company reported a turnover of €1,872,243,000 for 2021, an increase of 324 units over 2020 (Finding of Fact 6). The Correos Group recorded a consolidated profit of €4.7 million in the first quarter of 2021, compared with losses of €30.3 million in the same period of 2020. At the start of 2022, projections indicated that losses for 2021 would reach €150 million. Correos carries a structural deficit that has forced it to seek lines of credit.
- On the other hand, the proposed substantial modification of working conditions (MSCT) would generate annual savings of €61,647.62 and consists of:
- In Valencia: cancellation of the bus routes connecting Valencia city centre with the CTA (Customs and Tax Administration centre) in Quart de Poblet, scheduled for the morning and afternoon shifts, retaining only the night-time service.
- In Alicante: cancellation of the bus routes connecting the city centre with the CTA located at C/ d'Ocaña 72, 03006 Alicante, scheduled for the morning and afternoon shifts, retaining only the night-time service.
This change potentially affects employees working the morning and afternoon shifts (the latter ending at 22:00). Usage of the shuttle buses at the Valencia CTA during the period from 1 to 17 November, across all three shifts, was approximately 20 to 26 people per day. At the Alicante CTA, during the same period and counting arrivals, the figure was around 25 employees (Proven Fact 14th).
The Valencia CTA is situated in an industrial estate far from the urban area and close to a motorway. Pedestrian access is unsafe: there are no pavements, lighting is inadequate, and there are no sheltered waiting areas. From Carrer Riu Vinalopó to Pueblo Bonaire is 2.3 km on foot, a walk of approximately 29 minutes. The Alicante CTA is closer to public bus services, but access remains inadequate. From C/ d'Ocaña 53 (Mercalicante) to Correos Alicante is 450 metres on foot, roughly a 6-minute walk. The bus frequency is every 80 minutes.
In light of all the above, the ruling under appeal does not infringe either Article 41 of the Workers' Statute or the case law invoked, given that the change affects 20–25 employees in Valencia and 25 in Alicante, who have no viable public transport alternatives, due to the infrequent bus service and, in the case of Valencia, the remoteness of the CTA, which forces employees to travel through areas that are unsafe and poorly lit. In the case of afternoon-shift workers, it should also be noted that their shift ends at 22:00, and the company itself has acknowledged that cancelling the shuttle service for night-shift workers would be unreasonable.
Weighed against the significant harm caused to the affected employees, the cost saving for the company does not appear proportionate or reasonable, as the appealed ruling rightly held, given that this was a single, isolated, one-off decision that cannot be seen as part of a broader package of measures which, taken as a whole, might represent a meaningful reduction in costs with a minimally relevant impact on improving the competitiveness, productivity or technical or operational organisation of a company with an annual turnover of €1.872 billion — which is precisely what Article 41.1 of the Workers' Statute requires in order to justify any substantial modification of working conditions.
On all of the above grounds, the Supreme Court confirms that the measure introduced by Correos (the Spanish postal service) was unjustified.
