in accordance with Article 52(c) of the Workers' Statute, and in accordance with the thresholds set out in Article 51(1) of the Workers' Statute, a company may terminate an employment contract where there are grounds relating to the company's operations or financial viability.
Among other requirements, the company must demonstrate that the dismissal is justified by economic, technical, organisational or production-related grounds. Contact our specialist dismissal lawyers here.
Written by Cyrielle Agut
Employment and tax lawyer
In this article, we examine the characteristics and requirements of individual objective dismissal.
What is an individual objective dismissal?
It is a procedure that allows a company to terminate the employment contract with one of its employees.
An individual objective dismissal applies where the number of employees affected falls below the following thresholds:
- Ten employees, in companies with fewer than one hundred employees.
- Ten per cent of the total workforce, in companies employing between one hundred and three hundred employees.
- Thirty employees, in companies with more than three hundred employees.
How is an individual objective dismissal justified?
The company must demonstrate that one or more of the following grounds apply:
- Economic grounds.
Economic grounds exist where the company's results show a negative financial situation, or a sustained decline in its ordinary revenue or sales over three consecutive quarters, whereby the ordinary revenue or sales in each quarter are lower than those recorded in the same quarter of the previous year.
- Technical grounds.
Technical grounds exist where changes occur in the means or instruments of production used by the business.
- Organisational grounds.
Organisational grounds exist where it becomes necessary to modify the working methods or systems of staff, or the organisation of personnel within the production process.
- Production-related grounds.
Production-related grounds exist where there are changes in the demand for the products or services offered by the company.
What are the essential requirements for an individual objective dismissal?
As set out in Article 53.1 of the Workers' Statute, the company must:
- Notify the employee of the decision to terminate the contract in writing, stating the grounds for dismissal.
- Make available to the employee, together with the written notice, a severance payment of 20 days' pay per year of service, with periods of less than one year prorated by month, up to a maximum of 12 monthly payments.
- A notice period of 15 days, calculated from the date the dismissal letter is handed to the employee until the termination of the contract.
Economic expert assessment
What can I do if I disagree with the company's decision?
A properly justified individual objective dismissal entitles the employee to a severance payment of 20 days' salary per year of service.
However, if the dismissal is not sufficiently justified, or you believe the company's decision is incorrect, you may challenge it and seek a declaration of unfair dismissal. If upheld, this would entitle you to a higher severance payment equivalent to 33 days' salary per year of service.
FORMALITIES THE company MUST OBSERVE:
When drafting and issuing a dismissal letter on economic grounds, the company must be properly advised, as there are a number of formal requirements that must be met:
- The dismissal letter must be handed to the employee simultaneously with the statutory severance payment of 20 days, as required by law. Failure to do so will render the dismissal unfair. Payment may be made by cheque or bank transfer (the latter may be made on the same day as the dismissal letter is delivered, in accordance with the ruling of the Supreme Court dated 12 January 2022).
- The dismissal letter must set out all the grounds for dismissal in full. Any grounds not stated in the letter cannot subsequently be relied upon in legal proceedings.
- A notice period of 15 days must be granted, which may be replaced by a payment in lieu (failure to comply with this requirement does not in itself render the dismissal unfair).
- The number of dismissals must not exceed the thresholds established for collective dismissal within any 90-day period. Exceeding these thresholds may result in the dismissals being declared null and void.
Calculate the severance pay for a dismissal on economic grounds as of today:
Can an individual objective dismissal be carried out after applying for a Temporary Layoff Procedure (ERTE) on force majeure grounds?
The answer is yes.
The sixth additional provision of Royal Decree-Law 8/2020 establishes an employment safeguard for Temporary Layoff Procedure (ERTE) based on Covid-19 force majeure — but NOT for Temporary Layoff Procedure (ERTE) on ETOP grounds related to Covid-19 (the safeguard was originally intended to apply to both types of Temporary Layoff Procedure (ERTE)).
Accordingly, for Temporary Layoff Procedure (ERTE) based on force majeure, there is an obligation to maintain employment levels for 6 months FOR THOSE EMPLOYEES COVERED BY THE Temporary Layoff Procedure (ERTE) (only those directly affected). As a result, any dismissal will be PENALISED by the loss of Social Security contribution rebates. You can find more information in our article on loss of Social Security rebates.
If you have any questions — whether you are an employer or an employee — please feel free to contact our specialists by clicking on their photos. They will assess your case and prepare a financial report.
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