Irregular Reinstatement in unfair dismissal and null and void dismissal

Can I refuse to reinstate an employee?

There are two types of reinstatement: one arising from an unfair dismissal where the employer has opted to reinstate the employee, and one arising as a consequence of a null and void dismissal.

Irregular reinstatement following a null and void dismissal:

The law does not permit a company to refuse reinstatement where a null and void dismissal has been declared:

Article 284 of the Social Jurisdiction Act (Ley de la Jurisdicción Social) provides that the consequences of an employer's failure to reinstate shall be:

1. The employee continues to receive their salary at the same frequency and amount as declared in the ruling.
2. The employee remains registered and contributing to Social Security.
   

Furthermore, if the employee is a staff delegate, a member of the works council, or a trade union delegate, they shall continue to carry out the functions and activities associated with their role.

IRREGULAR REINSTATEMENT FOLLOWING AN unfair dismissal:

1. Declare the employment relationship terminated as of the date of that decision.
2. Order that the employee be paid the dismissal compensation.
3. May award an additional compensation of up to fifteen days' salary per year of service, up to a maximum of twelve monthly payments. 
4. Order the employer to pay the wages lost from the date on which the ruling first declaring the dismissal unfair was notified until the date of the aforementioned resolution.

Are interim wages subject to Social Security contributions in an unfair dismissal or null and void dismissal where reinstatement follows?

A question frequently raised by employment lawyers and companies alike is whether the interim wages (salarios de tramitación) calculated by the court should be treated as gross salary or net salary.

Written by Albert Perez 

Employment Law Adviser

Learn more 

Under Article 6 of Royal Decree 2064/1995, and Article 101 of Law 35/2006, employment income is subject to tax. Accordingly, established case law holds that the employer must pay the employee the net amount — meaning the company is required to apply Personal Income Tax (IRPF) withholdings and must make Social Security contributions on those interim wages.

Case law firmly supports the company's right to apply withholdings. This is set out, among other decisions, in the ruling of the High Court of Justice of Valencia, No. 2834/2004 (Social Division, Section 1), of 30 September, which states that "any withholding applied by the company to amounts of a salary nature received by employees, provided it remains within the legal limits and is not abusive, must be respected and, where disputed, challenged before the competent jurisdiction."

The ruling of the High Court of Justice of the Canary Islands, Las Palmas, No. 610/2001 (Social Division), of 25 July further clarifies that "the party required to make payment does not fail to comply with its obligation to enforce the ruling by virtue of having applied the withholdings to which it is legally bound, provided it has remitted the withheld amounts to the relevant tax collection authority in respect of such withholding" (…) "if the party subject to enforcement can demonstrate that it has remitted to the Public Spanish Tax Authority or to Social Security the withholdings corresponding to the payment it is obliged to make by virtue of the enforcement order, then the judgment must be deemed to have been satisfied in respect of those withheld amounts, and the Court has no jurisdiction — this matter falling outside the competence of the Social Division — to rule on the correctness or otherwise of such withholding as regards its basis or amount".

Finally, it should also be noted that Section 2 of the Administrative Chamber of the High Court of Justice of Andalusia, in its ruling of 28 April 2000, states that "… as declared by the ruling of the Social Chamber of this Supreme Court of 7 July 1994 (RJ 1994, 6351), interim wages are subject to Social Security contributions, a fact which reaffirms their nature as salary rather than compensation, in accordance with Articles 64, 70 and 73 of the General Social Security Act (RCL 1974, 1482 and NDL 27361) and the related provisions governing employee registrations and de-registrations with companies. Indeed, a literal reading of the applicable legislation leads to the conclusion that these accruals are salary in nature, as follows from Article 55.4 of the Workers' Statute, which places on the employer the obligation to pay 'wages left unearned' in the event of a declaration of null and void dismissal, and from Article 56.1(b) of the same statute, which states that the employer's obligation amounts to a sum equivalent to the wages left unearned in cases of unfair dismissal, abandoning the expression 'supplementary compensation' used in earlier legislation. Article 33.1 likewise affirms the salary nature of such accruals by establishing the obligation of the Wage Guarantee Fund (Fogasa) to pay outstanding wages and, to that end, provides that the 'supplementary compensation for interim wages' is to be regarded as salary. The clarity with which the Supreme Court has expressed itself requires no further comment. In the present case, once the employment relationship and unfair dismissal had been declared, payment was due for the wages covering the period during which the employment relationship remained in force following the dismissal that was declared unfair; such payment does not substitute anything — it merely compensates for work that the employee was unable to perform through no fault of their own, but solely due to the employer's conduct."

Claiming interim wages from the State:

Consult our employment lawyer if you need assistance with an irregular reinstatement procedure or if you need to claim interim wages from the State.

irregular reinstatement incident and appeal for reconsideration by our employment lawyer:

CASE REF. X/XX - X

TO employment tribunal NO. X

OF X (NUMBER AND LOCATION OF THE COMPETENT COURT)

 COMPANY NAME, represented by its lawyer LAWYER'S NAME as duly recorded in the above-referenced case file, acting as the defendant in the proceedings brought by CLAIMANT, in a matter concerning dismissal, hereby appears before this Court and respectfully submits the following,

 S T A T E S :

 That on X [DATE], the defendant received a Court Order dated X [DATE], whereby the defendant is ordered to pay the sum of X euros by way of compensation for termination of the employment relationship, plus the sum of X euros by way of procedural-period wages (salarios de tramitación). On the basis that procedural-period wages must be paid net of deductions, the defendant hereby lodges an appeal FOR RECONSIDERATION on grounds of infringement of Article 6 of Royal Decree 2064/1995, of 22 December, approving the General Regulations on Contributions and Settlement of other Social Security Rights, as well as Article 101 of Law 35/2006, of 28 November, on Personal Income Tax and partial amendment of the laws governing Corporate Income Tax, Non-Resident Income Tax and Wealth Tax. This appeal is based on the following grounds: 

SUBMISSIONS: 

• That by order dated X of X of X (DATE), the outstanding interim wages pending payment were quantified at the sum of X.

• That the aforementioned order does not specify whether said amount is net or gross; this party understands the amount to be gross and that it is therefore required to apply the applicable tax withholdings, in accordance with the following rulings:

Case law confirms that it is lawful for the company to apply tax withholdings. This is established, among others, by the ruling of the High Court of Justice of Valencia, No. 2834/2004 (Social Division, Section 1), of 30 September, which provides that "withholdings applied by the company on amounts of a salary nature received by employees, provided they remain within the legal limits and are not abusive, must be respected and, where applicable, challenged before the competent jurisdiction."

The ruling of the High Court of Justice of the Canary Islands, Las Palmas, No. 610/2001 (Social Division), of 25 July, which provides that: "the party required to make payment does not fail to comply with its obligation to enforce the ruling by virtue of having applied the withholdings to which it is obliged, provided that the amounts withheld have been remitted to the relevant tax collection authority and recorded as such" (…) "if the party against whom enforcement is sought demonstrates that it has paid to the Spanish Tax Authority or to Social Security the withholdings corresponding to the payment required by virtue of the enforcement order, the judgment must be considered satisfied in respect of the amounts so withheld, and the Court may not rule on the correctness or otherwise of said withholding as regards its basis or amount, as this falls outside the jurisdiction of the Social Courts".

• That, in light of the foregoing, this party is paying the net amount of X €

In view of the foregoing, the party respectfully requests that the Court:

P R A Y S:

That this appeal for Reconsideration be admitted, and that, on the merits of its content, the net amount of X be recorded as received and the company be deemed to have fulfilled the obligation set out in the referenced court order.

FURTHER SUBMITS:

That in accordance with point 4 of the fifteenth additional provision of the Organic Law of the Judiciary, the party hereby provides proof of payment of the €25 deposit required to lodge this appeal.

In X, on  X [day] of X [month] of X (DATE)