Costs in Dismissal & Salary Claims Explained

A change in the rules of the game:

The recent publication of art. 104.21 of Royal Decree-Law 6/2023, of 19 December. Ref. Spanish Official Gazette (BOE)-A-2023-25758, changes the rules of the game at the CMAC (Barcelona's Mediation, Arbitration and Conciliation Centre).

This provision came into force on 20 March 2024, and amends Article 66.3 of the Labour Jurisdiction Act as follows:

"The ruling may, with stated reasons, impose a financial penalty — within the limits set out in paragraph 4 of Article 75 — on any litigant who failed, without justification, to attend the conciliation hearing before the relevant administrative service or mediation, in accordance with the provisions of Article 83.3, as well as on any litigant who acted in bad faith or recklessly. With stated reasons, the court MAY ALSO impose a financial penalty where the condemnatory ruling essentially coincides with the claim set out in the conciliation request or in the mediation application. In such cases, where the party ordered to pay is the employer, that party shall also be required to pay the legal fees of the other party's lawyers and accredited social-law graduates (graduados sociales) who intervened, up to a maximum of six hundred euros.

The imposition of the above measures shall be carried out at the request of a party or of the court's own motion, following a hearing at the oral proceedings of the parties in attendance. If the court is considering imposing a financial penalty of its own motion once the hearing has concluded, the parties shall be granted a period of two days in which to submit written submissions. In the event of non-attendance at conciliation or mediation hearings — including conciliation before the Court Clerk (Letrado/a de la Administración de Justicia) — without justified cause, the judge or court shall apply the measures set out in paragraph 3 of Article 66."

Reaching an agreement at the conciliation hearing or CMAC

Until now, the spirit of the law has been to encourage the parties to attempt to reach an agreement at the Mediation, Arbitration and Conciliation Service (SMAC) (SMAC) or CMAC. For this reason, a company that fails to appear at the conciliation hearing can still today be penalised with a fine of €600.

The law now goes a step further, empowering the Judge to impose a fine and award costs against the defendant (typically the company) where the claim is upheld in full by the ruling.

CONCLUSIONS:

The practice of making the employee wait to receive payment until a ruling is handed down can cost the company €600 in fines plus €600 in costs.

A Final Thought:

In our view, the right approach would have been for policymakers to invest in the justice system so that, as was once the case, rulings could be issued within four months — fully in keeping with the principle of procedural speed that underpins employment law, and with the well-known adage that justice delayed is justice denied. It has now become standard practice for a hearing on a wages claim to be listed a full year in advance.

Many of us remember when salary-in-lieu payments applied during proceedings: to prevent these from accumulating, employers would try to reach a settlement as quickly as possible, while employees had an incentive to prolong proceedings because the compensation was often modest and the accruing salary payments could amount to five times as much.

Today, the reverse may often be true: some employers feel no urgency to settle, leaving employees waiting until the ruling date to receive any payment. The backlog in the courts is, however, a political issue — and there is a fundamental difference between encouraging conciliation and compelling it.

OUR RECOMMENDATIONS FOR THE PRE-TRIAL CONCILIATION HEARING:

If the company has an offer to put forward, we strongly advise that it be placed on record at the conciliation hearing. A Judge is likely to look favourably upon the fact that the company made a genuine attempt to reach a settlement.