MSCT, Collective Dispute and Strike Action Over a CBA Bonus Negotiation

We believe our clients and readers should understand what we do well, and in this case, we explain how we helped a company in the automotive sector, facing financial difficulties, to renegotiate a production bonus that had been set out in the collective bargaining agreement and detach it from that agreement. We notified the works committee of a workforce of 150 employees of a substantial change to working conditions, which ultimately led to a negotiation and agreement on the bonus in question, restructuring it around real targets or KPIs rather than a fixed percentage of the company's turnover, thereby introducing a genuine variable pay logic.

The bonus had ceased to reflect business reality, and the solution was not to eliminate it but to redesign it through negotiation, in an objective and sustainable way. This was particularly important given that it affected a significant proportion of the workforce. Once agreed, the process gave rise to a series of strikes and collective industrial action brought by the union, which ultimately concluded with an outcome highly favourable to the company's interests (and to those of the employees too… because without it, the company was not viable!).

What a company can do when the production bonus in its collective agreement has become unsustainable

Josep Conesa, an expert in employment law, speaks with Zaida Álvarez, a solicitor in the Conesa Legal employment team, about a recent advice involving collective bargaining. The company had been carrying a production bonus historically fixed at 5% of turnover, an unusual arrangement in that it was not linked to results or measurable targets. At the same time, the company needed to address a significant salary adjustment affecting a workforce of over 150 people. The strategy was not to abolish the variable pay element, but to restructure it, removing a rigid mechanism from the collective agreement text and replacing it with a negotiated, measurable variable pay framework.

Written by:

Zaida Álvarez

Employment lawyer

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Josep Conesa 

employment lawyer

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A variable pay element such as a production bonus can become a problem when it is no longer tied to actual productivity, profitability, business objectives, or the company's financial capacity.

This happens, for example, when the bonus is calculated on turnover rather than profit, when it is paid as a fixed amount despite being called "variable", when it stems from historical agreements that no longer reflect the current business, or when the company's collective bargaining agreement requires the simultaneous implementation of pay increases and allowances that the company can no longer sustain.

In such cases, the company must avoid two extremes: making a unilateral reduction without a legal basis, or indefinitely maintaining a system that threatens the company's financial viability and operational organisation.

The right approach begins with a thorough assessment: identifying the origin of the bonus, analysing the applicable collective bargaining agreement, establishing the grounds for change, drafting a reasonable proposal, and opening genuine negotiations with employee representatives.

What the company should review before modifying a production bonus

Before modifying a production bonus, the company must identify precisely where that entitlement originates. There is a significant legal difference between a bonus established under a collective bargaining agreement, one regulated by a company-level collective agreement, a more-favourable condition (condición más beneficiosa), an established business practice maintained over time, or a variable scheme communicated internally.

This distinction is decisive because it determines the applicable legal route. If the bonus is incorporated into a collective bargaining agreement, the company cannot treat it as an ordinary internal decision. If it stems from a collective agreement, its validity, content, and the parties who signed it must be reviewed. If it derives from a more-favourable condition, it will be necessary to assess whether the company demonstrated a clear and settled intention to grant that benefit on a permanent basis. And if it is part of an internal variable management scheme, it is worth verifying whether it actually operates as a variable element or whether, in practice, it has become a fixed supplement.

From a legal standpoint, four key references are worth bearing in mind. Article 26 of the Workers' Statute draws a distinction between base salary and salary supplements, including those linked to performance or the company's financial position. Article 41 governs the substantial modification of working conditions, expressly including the remuneration system and salary level. Article 82.3 provides, subject to certain requirements, for the non-application of collective bargaining agreement provisions, including those relating to pay. And Article 84 requires a careful analysis of the relationship between a company-level agreement and the relevant sectoral agreement before any remuneration system is redesigned.

The full framework of the applicable collective agreement must also be reviewed. In many cases, the issue is not simply that a bonus is high, but that the longstanding balance between fixed and variable salary has broken down. This happens, for example, when the company must align its salary scales with more demanding sectoral benchmarks while simultaneously maintaining a rigid legacy bonus that no longer reflects the economic reality of the business.

For this reason, the right question is not always "can we remove this bonus?" but rather "how can we rebuild the remuneration system so that it is legally defensible, economically sustainable, and clearly understood by the workforce?"

What is the difference between a fixed bonus, a variable bonus, and a turnover-linked bonus?

A production bonus should follow a clear rationale: rewarding productivity, quality, efficiency, results, or the achievement of targets. Yet many companies carry bonuses that were introduced in a different context and that today function as structural costs, even if they are formally presented as variable pay.

The distinction matters:

The most sensitive case is typically the revenue-linked bonus. Higher sales do not necessarily mean higher profits. A company may increase its turnover and yet face reduced margins, rising costs, or losses in certain areas of the business.

When a bonus is calculated automatically on the basis of revenue, without accounting for profitability, productivity, or measurable objectives, it can create a significant distortion: the workforce receives a substantial sum even when the business is not generating the results needed to sustain it.

This does not mean that a production bonus tied to turnover is always wrong or unlawful. It means that it can be economically risky and legally difficult to revise if it has been rigidly embedded in a collective bargaining agreement or a company agreement. In such cases, the most robust strategy is generally not to eliminate the bonus altogether, but to redesign it as a genuine variable pay component, one linked to objective criteria, negotiated with employee representatives, and properly documented.

What legal routes EXIST for redesigning a production bonus

When a company wishes to revise a production bonus, there is no single approach. The right strategy will depend on the origin of the bonus, how it is regulated, the urgency of the situation, whether there are economic, technical, organisational or operational grounds for change, and the scope for negotiation with employee representatives.

In practice, the most common routes are: renegotiating the collective agreement or company-level agreement, making a substantial modification to working conditions, disapplying the collective agreement, and, where appropriate, working with the joint committee on a technical basis.

Renegotiating the collective agreement or company-level agreement

Renegotiation is the most stable route when the company and employee representatives both recognise that the existing scheme is no longer fit for purpose.

This option allows a rigid bonus to be replaced by a more flexible system, one with measurable criteria, regular review, and meaningful involvement of employee representatives. It also reduces the risk of the change being perceived as a unilateral imposition.

The key lies in how the negotiation is framed. There is a significant difference between saying "we want to cut the bonus" and saying "we want to maintain variable pay, but make it sustainable, objective, and aligned with real results".

The first framing generates immediate resistance. The second opens the door to a constructive, technical negotiation.

If the company's goal is not simply to cut costs, but to rationalise the variable pay budget and link it to genuine performance targets, this is typically the route with the greatest potential.

Substantial modification of collective working conditions

Where the change affects the pay structure or the level of remuneration, the company may consider a substantial modification of working conditions under Article 41 of the Workers' Statute.

This route requires demonstrable economic, technical, organisational or production-related grounds. Where the measure is collective in nature, a consultation period must be opened with the employees' legal representatives. During that period, it is not sufficient to communicate a decision already taken: the company must explain the grounds, provide adequate information and negotiate in good faith.

Where the measure is individual, the company must give the legally required advance notice and, in certain cases, the employee may opt to terminate their contract and claim compensation.

This route may therefore be appropriate when the company needs to restructure a pay system it can no longer sustain, but it demands a very rigorous documentary foundation.

When an opt-out from the collective agreement or wage derogation may be considered

Where economic, technical, organisational or production-related grounds exist, the company may also consider disapplying certain conditions of the collective bargaining agreement, pursuant to Article 82.3 of the Workers' Statute.

This route may affect, among other matters, the remuneration structure and salary levels. It requires a consultation period in the legally prescribed terms and, in principle, an agreement with the duly authorised employee representatives.

This is not a straightforward option and should not be treated as an automatic first resort. However, it can be a relevant tool when the structure of the applicable collective agreement has become incompatible with the company's actual situation.

What role does the joint committee play in calculating the variable bonus?

Where the collective agreement or prior arrangements provide for a joint committee (comisión paritaria), it may play an essential role in interpreting, monitoring or determining the specific terms of the bonus.

In variable pay systems, the joint committee can help establish criteria, review data, resolve disputes and bring stability to the annual bonus calculation. It can also serve to demonstrate that genuine dialogue took place between the company and employee representatives, particularly if a dispute later arises as to whether there was good faith or a breach of agreed terms.

For this to work effectively, however, the company must ensure the committee is not merely a procedural formality. There must be data, minutes, a schedule, explanations and a clear calculation methodology.

What documentation does the company need to justify a change to a bonus scheme?

In a complex collective bargaining process such as the one we were facing, the company cannot come to the table with opinions alone. It needs evidence.

Documentation is what demonstrates that a change is not an arbitrary decision, but rather a response to a genuine and justified business need. It is also what will allow the company to defend its position should the employee representatives later allege bad faith, insufficient information, or breach of agreed terms.

At a minimum, the following should be prepared:

• an explanatory report setting out the situation;
• economic and operational data;
• payroll cost trends;
• the impact of the bonus on total personnel costs;
• a comparison between fixed salary, variable pay, and the applicable sector-level collective bargaining agreement;
• internal or expert reports, where the case requires them;
• an alternative variable pay scheme proposal;
• the calculation criteria for the new bonus;
• an implementation timetable;
• minutes of meetings;
• communications with the works council or employee representatives;
• documentation provided during the consultation period;
• post-agreement monitoring records.

In practice, many companies lose ground not because their economic rationale is unsound, but because they cannot clearly demonstrate how they arrived at the measure, what information they shared, and how the negotiation was conducted.

That is why traceability is not an administrative formality. It is a central element of the legal strategy.

How to redesign a KPI-based variable bonus to make it sustainable and legally defensible

A well-designed bonus restructuring should not simply mean cutting a percentage. The sensible approach is to answer four questions. What total pay budget can the company realistically sustain? What proportion of that budget should be collective, and what proportion should reward individual performance? Which indicators will be measured? And how frequently will the data be reviewed? In the case described, the key was not "saving money", it was rationalising the available pay budget, preserving the appeal of variable pay, and tying it to mutually agreed KPIs.

From a practical standpoint, companies that handle this type of negotiation most effectively tend to introduce criteria such as productivity, quality, efficiency, achievement of team objectives, or verifiable individual indicators. The goal is not to turn salary into an opaque formula, but into a transparent and auditable system. If a company aims to reward talent and effort, variable pay must genuinely be variable in its underlying logic, not just in name.

What mistakes turn a pay negotiation into a collective dispute

The first mistake is trying to resolve through a unilateral decision what is, in reality, a structural overhaul of the remuneration system. The second is entering negotiations without a solid economic rationale. The third is attempting to preserve the comfort of an old fixed system by simply relabelling it "variable". And the fourth is forgetting that, if the negotiating or joint committee is genuinely involved, it will be far harder afterwards to argue that no information was shared or dialogue took place.

It is also advisable to avoid legally weak hybrid solutions. When a company or the employees themselves attempt to cherry-pick provisions from different collective agreements, selecting only what suits them (a practice known as "cherry-picking"), they enter a high-risk zone. Legal certainty requires clearly identifying the applicable collective bargaining agreement and the correct procedure for modifying terms and conditions, rather than improvising a bespoke arrangement without adequate legal grounding. In this area, legal technique matters just as much as negotiating strategy. Having a clear grasp of employment law concepts is essential.

Checklist for companies before renegotiating a production bonus under a collective agreement

At Conesa Legal, before opening negotiations, the company must do its homework: everything must be in order so that clear explanations can be provided to employees.

In the present case, the company came prepared to answer the following questions clearly:

• Where is the bonus regulated?
• Is it covered by a collective bargaining agreement, a company-level agreement, an individual contract, or internal practice?
• Is the bonus genuinely variable, or does it function as a fixed element?
• Is it linked to turnover, profits, productivity, or targets?
• What is the cost as a proportion of the total wage bill?
• What is the impact of maintaining the current terms?
• Are there economic, technical, organisational or production-related grounds?
• Which sector-level collective bargaining agreement applies?
• Have the salary scales been correctly updated?
• What financial documentation can be provided?
• What alternative is the company proposing?
• Which KPIs will be used?
• How will results be reviewed?
• What role will the joint committee play?
• How will meetings be documented?
• What is the projected outcome if no agreement is reached?
• Is there a risk of mediation, collective dispute or strike action?

What happens when negotiations escalate to mediation, collective dispute or strike action

When employee representatives refused to accept the outcome of a renegotiated bonus, the dispute moved beyond the negotiating table. It entered a more delicate phase: mediation, collective dispute and, potentially, strike action.

This can happen even when the company believes it has honoured its commitments. In many cases, the disagreement is not about whether an agreement existed, but about how that agreement is interpreted, how the bonus has been calculated, and whether the information provided throughout the process has been adequate.

In these situations, the company must act with particular care. Simply asserting that "the agreement has been fulfilled" is not enough. You need to be able to prove it, with minutes, emails, reports, calculations, documentation handed to the joint committee, and a clear audit trail of every meeting held.

Labour mediation: an opportunity to bring structure to the dispute

Labour mediation, in this case conducted before the Labour Tribunal of Catalonia (Tribunal Laboral de Catalunya), can be an opportunity to clarify precisely what the employee representatives are claiming. In disputes over production bonuses, the points typically at issue are whether the company has applied the KPIs correctly, whether it has respected the agreement reached, whether it has provided sufficient information, and whether the revised bonus figure genuinely reflects what was agreed.

The company must enter mediation with a clear position, but also with solid documentation. In matters of this kind, the best defence is not a general declaration of good faith, but a well-constructed case file.

Collective dispute: when the disagreement goes beyond the individual

If the disagreement affects a group of employees or concerns the interpretation of a collectively agreed condition, a collective dispute may be raised. In that case, the company must clearly identify the true subject matter of the dispute: whether it relates to the validity of the agreement, the interpretation of a clause, the calculation of the bonus, the information provided, or a claim to revert to a previous pay structure.

This distinction matters, because not all claims call for the same legal response. There is a difference between arguing that the company has breached an agreement and a situation where employee representatives are simply dissatisfied with the financial outcome of a variable formula that was previously negotiated and agreed.

Unlawful strike action: what the company needs to review

A dispute such as the one over a production bonus can escalate into a strike call, as indeed happened in this case. The right to strike is a fundamental right, so the company must avoid hasty responses or actions that could be construed as an infringement of that right.

That said, the fact that striking is a fundamental right does not mean that every strike call is properly constituted. A strike may be declared unlawful in the following circumstances:

On the basis of its purpose or objective, where it constitutes a:

• Political strike (i.e. not related to employment matters)
• Solidarity or sympathy strike, unless the workers involved have a direct professional interest
• Novatory strike: raising demands during the term of a collective bargaining agreement that would modify what has already been agreed (this is directly relevant to your second question)
• Abusive strike: involving occupation of premises, disruption of the production process, or any form of coercion

On the basis of its form or manner, where it constitutes a:

• Rotating strike (conducted in shifts or by coordinated groups to maximise disruption)
• Strategic strike (targeting key areas of the company in a concerted manner)
• Work-to-rule or go-slow strike

Consequences of an unlawful strike:

The effects may include a formal declaration of unlawfulness by the employment jurisdiction (typically the National Court or the High Court of Justice (TSJ)), employees who join the strike may be subject to disciplinary sanctions or dismissal, and dismissal of an employee who participates in an unlawful strike may be deemed fair

Consequences of formal defects in a strike notice:

The company must review whether the formal notice requirements have been met, whether the company and the labour authority were properly informed, and whether the strike's objectives, affected workplaces, planned work stoppages or gatherings, and the composition of the strike committee have all been clearly identified.

Royal Decree-Law 17/1977 on labour relations remains a key piece of legislation for analysing strike notice and conduct. Article 3 requires that notice of the strike be given to the affected employer and to the labour authority, while Article 5 governs the composition of the strike committee.

That said, the company must assess any such defects with caution. In strike matters, the courts tend to give considerable weight to the fundamental nature of the right to strike. Before pursuing a strategy based on the potential unlawfulness of the strike notice, it is therefore advisable to consider whether the formal defect caused genuine prejudice to the company, or whether, notwithstanding the defect, the company had sufficient knowledge of the strike and how it was to be carried out.

The most effective strategy is not always to pursue immediate legal action. In many cases, the most robust approach is to document the defects, engage in mediation, maintain a consistent negotiating position, and build the legal defence on a thorough record of the process to date.

Frequently asked questions on production bonuses, collective bargaining agreement and strike action

Can a company remove a bonus provided for in a collective bargaining agreement?

It should not be approached as a straightforward "removal". The first step is to identify the legal basis of the bonus, then choose the appropriate legal route: renegotiation, collective substantial modification, or, where applicable, non-application of the agreement.

Can a bonus be changed from one linked to turnover to one linked to targets?

Yes, a redesign is possible so that the variable component is tied to measurable objectives and criteria, but this must be done with proper legal backing and genuine negotiation, particularly where the previous clause was set out in a collective bargaining agreement or collective agreement.

What happens if the company's own collective agreement has fallen below the sector-level agreement on fixed salary?

This situation requires a very careful review of the pay structure, because the general priority of the company-level collective agreement no longer extends, as a general rule, to salary amounts in the same way it did prior to the labour reform.

Is it mandatory to inform the works council or employee representatives?

Yes. Article 64 of the Workers' Statute grants rights to information and consultation where decisions may affect the workforce, and in collective measures the quality of that information is decisive for the validity and defensibility of the process.

Can a production bonus give rise to strike action?

Yes. A collective dispute over the calculation, modification or application of a production bonus can escalate to mediation, a collective labour dispute, or strike action if employee representatives consider that agreed terms have been breached or that collective rights are affected.

What should the company do upon receiving a strike notice?

It should review the notice received, the stated objectives of the strike, the workplaces affected, the composition of the strike committee, and the prior documentation of the negotiation process. It should also consider whether there are any procedural defects, but with caution, the right to strike is a fundamental right.

Can the company argue that a strike is unlawful on procedural grounds?

There may be grounds to challenge the process legally if the notice fails to meet the statutory requirements for communication or conduct. However, not every procedural defect justifies a strategy of unlawfulness. The company must assess whether the defect has caused genuine prejudice and whether mediation or a negotiated solution is available.

How Conesa Legal can assist with collective bargaining on bonuses, company company agreements, employment mediation, extra-statutory agreements, and strike situations

In this case, reviewing a production bonus required a thorough preliminary analysis: the origin of the entitlement, the applicable collective agreement, the justification for the measure, the available financial documentation, the scope for negotiation, and the potential conflict scenarios.

At Conesa Legal, we advise companies on collective bargaining processes, substantial modifications to working conditions, non-application of collective agreements, restructuring of pay systems, and the management of disputes with employee representatives. Our approach combines legal analysis, negotiation strategy, and documentary preparation, enabling the company to make informed decisions and defend its position should the process escalate to mediation, collective dispute, or strike action.

If your company needs to review a production bonus or adapt its pay structure to current business realities, our employment law team can help you define the right strategy before entering into negotiations.

Get in touch with our team if you need advice: