Employer and Trade Union Agreement on Collective Bargaining and Employment

The agreement signed by employers' associations CEOE and CEPYME and trade unions CCOO and UGT comes at a time when the latest unemployment rate recorded by the Ministry of Economy stands at 18.83%, with the number of unemployed persons reaching 4,166,413 according to data from the Ministry of Labour.

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While various indicators point to a modest recovery in the global economy, these figures offer little cause for optimism in Spain's case, as a further decline in GDP is forecast for the current year, one that is expected to push the unemployment rate above 19%.

Spain's situation has a number of distinctive features that are likely to make its recovery slower than that of its main competitors:

• High unemployment is causing consumers to hold back on spending.
• Business investment will not recover until sales expectations improve.
• Financial costs have increased.
• Financial institutions have drastically reduced lending to both businesses and households.
• The collapse of the property sector, which had until recently been Spain's primary engine of economic growth, has left a gap that, due to poor forward planning, cannot at this stage be filled by other sectors.

Against this backdrop, the Agreement aims to boost employment and competitiveness and to restore consumer and investor confidence.

To achieve this, businesses and workers must share the burden of adjustment, agreeing on measures that address wage policy, productive reinvestment, employment recovery and unjustified use of temporary contracts. Collective bargaining is the most effective tool available for this purpose.

The Agreement sets out lines of action to guide collective bargaining and creates binding obligations for the signatory parties.

The first area focuses on hiring and highlights the need to promote permanent employment, given that Spain has an excessively high divide between permanent and temporary workers.

Collective agreements must ensure the appropriate use of the various types of employment contracts available, including training contracts for the recruitment of young people, permanent part-time contracts as an alternative to temporary hiring, and partial retirement arrangements and replacement contracts to preserve jobs and rejuvenate workforces.

Another particularly important aspect for improving competitiveness is the promotion of training and proper professional classification. Collective bargaining agreements must define coherent training pathways tailored to the needs of each sector, and it is equally important to facilitate the application of training subsidies for companies and Individual Training Permits.

With regard to workforce restructuring, the Agreement highlights the need to treat collective extinction procedures (EREs) as a last resort, requiring companies to first consider internal restructuring measures. This calls for flexibility to enable functional modifications, the use of flexible working-hours arrangements, and redeployment.

From a professional standpoint, as employment lawyers we strongly believe that labour law specialists should always consider all possible alternative measures and provide their clients with all the information they need to preserve jobs.

Equally, in cases where external restructuring is unavoidable, collective bargaining agreements must include measures to explain and justify the changes, creating a constructive environment for subsequent discussions with employees, prioritising suspension and temporary working-hours reduction procedures (EREs) over collective extinction procedures wherever possible.

A further chapter is devoted to criteria for determining pay increases: for 2010, an increase of up to 1% was set; for 2011, between 1% and 2%; and for 2012, between 1.5% and 2.5%.

Collective bargaining agreements must include a wage review clause, benchmarked against the pay increase agreed in the agreement and actual inflation over the relevant period, to be adjusted in line with what is negotiated.

Provision is also made for a non-application clause for companies that can demonstrate that their financial position would be adversely affected by applying the agreed pay increases.

The content of this agreement is binding on the signatories, and a Monitoring Committee has been established, comprising three representatives from each of the participating organisations (CEOE, CEPYME, CCOO, and UGT), to oversee compliance with the agreed terms. The agreement has a three-year duration.

This law firm specialising in employment law, which regularly participates in collective bargaining negotiations, is at your disposal for any queries you may have regarding the options available under employment legislation, as well as to advise you on the various alternatives that can improve your company's situation without necessarily having to make redundancies.