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On 12 December, Law 45/2002 partially amended the recent reform of unemployment benefits introduced on 24 May 2002 (Law 5/2002), which came into force on 14 December 2002. The amendments are numerous; the most significant are summarised below.
Written by Josep Conesa
Employment and insolvency lawyer
The law sets out the following objectives in its explanatory memorandum:
1.- Improving employment opportunities: by encouraging the active search for new employment through an activity commitment, refining the concept of suitable placement, promoting the geographical mobility of unemployed persons, and expanding the circumstances under which benefits may be capitalised as a lump-sum payment.
2.- Providing greater legal safeguards for unemployed persons: regarding suitable placement, the key principle is that, without prejudice to general guidelines, the Public Employment Services should be able to assess suitability on the basis of each individual's personal and professional circumstances and the practicality of commuting to the workplace.
3.- Improving the functioning of the labour market, through measures such as allowing unemployment benefit to commence from the date of dismissal (regardless of whether it is being challenged), thereby ensuring an income from the point of dismissal through to conciliation or ruling.
4.- Correcting anomalies in the benefits system: to this end, the subsidy scheme for returning emigrants is reorganised, the concept of income is clarified for the purposes of meeting the eligibility requirements for means-tested subsidy, and it is specified that entitlement to benefits arises after any outstanding paid holiday that was not taken has been accounted for.
5.- Extending protection to groups currently without coverage: casual and agricultural workers, unemployed persons over 45 who have been out of work for more than 12 months, unemployed persons of any age with a disability, returning emigrants, and victims of domestic violence.
AMENDMENTS TO UNEMPLOYMENT PROTECTION:
Following this latest reform, the requirements for accessing unemployment benefit are:
a) Being registered with Social Security and in a situation of active registration or equivalent in cases determined by regulation.
b) Having completed the minimum contribution period within the six years prior to the legal situation of unemployment or to the moment when the obligation to contribute ceased.
c) Being in a legal situation of unemployment, demonstrating active availability to seek employment and to accept suitable placement, through the signing of an activity commitment.
d) Not having reached the standard retirement age required in each case to qualify for a contributory retirement pension, unless the employee has not accrued the required contribution period for that purpose, or the case involves suspension of employment relationships or working-hours reductions authorised by an administrative decision.
Legal situation of unemployment:
One of the most significant changes introduced by this counter-reform is that it no longer distinguishes between fair dismissal or unfair dismissal, and it is no longer required that, in the case of fair dismissal, a ruling from the employment jurisdiction be obtained. Now, in the event of dismissal or termination of the employment relationship, the employer's decision to terminate that relationship shall be understood, in and of itself and without the need for any legal challenge, as giving rise to a legal situation of unemployment. A conciliation record is therefore no longer required in order to be considered to be in this legal situation for the purposes of accessing unemployment benefit.
Accordingly, workers who fall within any of the following circumstances shall be considered to be in a legal situation of unemployment:
1.- Where their employment relationship is terminated:
a) by virtue of a collective redundancy procedure.
b) Due to the death, retirement or incapacity of a sole trader employer, where this results in termination of the employment contract.
c) By dismissal.
d) By dismissal based on objective grounds.
e) By voluntary termination by the employee, but only in certain circumstances: a substantial change in working conditions that is detrimental to the employee's professional development or that undermines their dignity; failure to pay or persistent delays in the payment of the agreed salary; any other serious breach of the employer's obligations; and in cases of geographical relocation.
f) Upon expiry of the agreed term or completion of the work or service that is the subject of the contract.
g) By termination of the employment relationship during the probationary period, at the employer's initiative, provided that the termination of the previous employment relationship was due to one of the circumstances set out in this section, or that a period of three months has elapsed since that termination.
2.- When their employment relationship is suspended by virtue of a workforce adjustment procedure (expediente de regulación de empleo).
3.- When working hours are reduced by at least one third, under the terms to be established by regulation.
4.- Workers on permanent seasonal contracts (trabajadores fijos discontinuos) are likewise considered to be in a legal situation of unemployment during periods of productive inactivity.
5.- When workers return to Spain following the termination of their employment in a foreign country, provided they are not entitled to unemployment benefit in that country and can demonstrate sufficient contributions made prior to leaving Spain.
Situations not qualifying as legal unemployment:
The following situations are not considered to constitute legal unemployment:
1.- Voluntary resignation, except in the cases referred to above that do give rise to legal unemployment status.
2.- Where a person is in a legal situation of unemployment but cannot demonstrate active availability to seek employment and to accept suitable job offers, as required under the activity commitment.
3.- Where, following a final ruling declaring the dismissal unfair or null and void and upon notification by the employer of the date for reinstatement, the employee does not exercise that right.
4.- Where the employee has not applied for reinstatement to their post within the timeframes and under the conditions set out in current legislation.
Evidencing legal unemployment status following dismissal:
Legal unemployment status is evidenced by means of the dismissal letter or written notification through which the company communicates the dismissal in writing.
In the absence of such notification, that is, where the dismissal is communicated verbally, it shall be evidenced by means of the administrative or judicial conciliation record or the final judicial decision
declaring the dismissal fair or unfair. In the event of a finding of unfair dismissal, it must also be demonstrated that the employer, or the employee where they act as a workers' legal representative, has not opted for reinstatement.
It may also be evidenced, where applicable, by a company certificate or an inspection report from the Labour Inspectorate and Social Security, confirming the involuntary cessation of employment and its effective date.
An administrative conciliation record showing that the employee is challenging the dismissal and the employer failed to appear also constitutes evidence of a legal unemployment situation.
dismissal on objective grounds may be evidenced by the written notice provided to the employee in the terms set out in the Workers' Statute for such cases, or by the administrative or judicial conciliation record, or by a final judicial decision as described above.
Unemployment benefit claim and deadline:
Those who meet the requirements for unemployment benefit must apply to the competent managing body for recognition of their entitlement. The benefit will take effect from the date on which the legal unemployment situation arises, provided the application is submitted within the following fifteen days.
The application requires registration as a jobseeker, if this has not already been done. In addition, at the time of application, the claimant must sign an activity commitment.
Tax implications of dismissal:
Compensation payments arising from dismissal or termination of the employee's employment are treated as income exempt from tax, up to the amount established as mandatory by law, amounts set by virtue of a collective agreement, pact, or contract do not qualify for this exemption.
The key compensation amounts to bear in mind are:
· For unfair dismissal: 45 days' salary per year of service, up to a maximum of 42 monthly payments.
· For stable employment promotion contracts: 33 days' salary per year of service, up to a maximum of 24 monthly payments.
Where the employment contract is terminated prior to the conciliation hearing, compensation payments for dismissal are exempt provided they do not exceed the amount that would have been due had the dismissal been declared unfair, and provided the termination does not form part of a mutual agreement within a collective voluntary redundancy scheme.
Unused holiday entitlement: the legal unemployment situation and the right to benefits will arise once the period of unused holiday has elapsed, and that period will be counted as a contribution period for the purposes of determining benefit duration.
