Written by Josep Conesa
Employment and insolvency lawyer
We examine here a real case involving a benefit surcharge that closely resembles the silicosis cases currently emerging — one we believe is worth presenting in detail because of its particular features. It illustrates perfectly the controversial legal mechanism of the recargo de prestaciones (benefit surcharge): a financial penalty imposed on an employer as both a sanction and a form of compensation in cases of work-related accident or occupational illness where safety measures were lacking.
The case involves a client who came to us after being issued a €3,000 fine and a 30% benefit surcharge. He told us he had already paid the fine and had not challenged either decision.
We reviewed the work-related accident documentation and found that the employee in question had been taken on at a bakery — specifically in the production area — to assist with dough kneading.
The employee had been a baker since the age of 14, had worked in the trade his entire life, and had suffered from flour allergy since that same age — a condition more commonly known as "baker's asthma".
The employer was unaware of the employee's condition, and although he had arranged occupational health monitoring, the medical service did not schedule a health check until 24 November 2010 — two years after the employee had started work. On that very day, the employee went on sick leave and began proceedings before the National Social Security Institute (INSS) to obtain total permanent disability for his usual occupation, on the grounds of occupational illness.
Against this background, the employer came to our office a few days later, having received the capitalised figure for that 30% surcharge and unable to understand how the benefit surcharge could amount to no less than €126,787.21.
We explained the position to him: the surcharge essentially means that if, for example, the employee receives €1,000 per month in disability pension, the National Social Security Institute (INSS) applies the 30% surcharge, bringing the monthly amount to €1,300. That additional €300 is then multiplied by 12 months and by the number of years remaining until the employee reaches retirement age. This is how the pension is capitalised and the employer is required to pay the resulting sum, as a consequence of a work-related accident or occupational illness caused by a failure to implement adequate safety measures.
The employer, quite reasonably, pointed out that he could not understand why the administration had not quantified the surcharge beforehand, nor why he should bear 100% of it when he had only employed the worker for two years — representing just 7.03% of the worker's entire working life. In other words, if the worker had been a baker for multiple employers since the age of 14, all of them should logically share responsibility for part of that capitalised amount. Our client should not have to bear the full surcharge alone.
Our firm carried out a proportional calculation based on the various employers the worker had had, and found that, relative to the time worked for each, the surcharge attributable to our client should have been €8,915.41, with the remaining €117,871.80 attributable to the other companies where he had also been registered as a baker.
Although we were aware that the benefit surcharge notification had not been challenged in time, we took the view that the fact it had not been quantified beforehand represented too significant an aggravating factor to ignore — and that the constitutional validity of this legal mechanism was worth testing. We therefore initiated a new administrative procedure seeking a declaration of nullity of the surcharge imposed.
The administrative procedure ultimately gave rise to a claim before the employment tribunal, with the other former employers joined as co-defendants. However, the court ultimately held that, since the surcharge notification had not been challenged in time, jurisdiction lay with the administrative courts (contentious-administrative jurisdiction).
We do not know what would have happened before the administrative courts, as the employer chose to instruct us to pursue insolvency proceedings instead — proceedings that were ultimately declared fortuitous, meaning no personal liability attached to the director.
One of the grounds cited in the insolvency proceedings was that the bread-making sector had lost almost all its margins, with only highly industrialised or very small operations able to survive. Beyond that, it was argued as a primary cause that the surcharge had dealt a fatal blow to the company — and with it, 27 jobs.
As lawyers, we carefully examine the legality of the cases we defend, but we also consider whether they are just. On the issue of the benefit surcharge, we believe situations arise that are genuinely unfair, such as the one described here. While challenging this mechanism may seem unrealistic today, we believe the following legal arguments could be raised in support of a nullity challenge when such a penalty is imposed:
- Criminal law principles apply in the context of administrative sanctions:
It is settled doctrine in Spanish case law that criminal law principles must apply in the administrative sanctioning sphere, including the constitutional principles enshrined in Articles 9.3, 24.1 and 25.1 of the Spanish Constitution.
Article 9.3 enshrines the principle of legality; Article 24.1, the right to effective judicial protection; and Article 25.1, the principle of specificity of offences.
This is affirmed in the ruling of the Constitutional Court 100/2003, of 2 June, and in its ruling 54/2003, of 24 March 2003 (RTC 2003/54), which states:
"the established doctrine of this Court, since the ruling of the Constitutional Court 18/1981, of 8 June (Legal Ground 2), has declared not only the applicability to administrative sanctions of the substantive principles derived from Article 25.1 of the Constitution — holding that the principles underpinning criminal law apply, with certain qualifications, to administrative sanctioning law, given that both are manifestations of the State's punitive legal order — but has also extended to proceedings aimed at exercising the administration's sanctioning powers the procedural guarantees inherent in Article 24.2 of the Constitution, not through literal application, but to the extent necessary to preserve the essential values underlying that provision. This, as affirmed in STC 120/1996, of 8 July (Legal Ground 5), "constitutes long-established case law of this Court and is now a basic postulate of the administration's sanctioning activity in the social and democratic rule of law".
Accordingly, if the benefit surcharge is a sanction-compensation hybrid — and thus a sanction, applied as such — it must comply with the principles referred to above.
- Breach of the principle of non bis in idem:
In light of those principles, the administrative sanction under the LISOS (Law on Infringements and Sanctions in the Social Order) and the benefit surcharge are based on the same facts (recorded identically in a single inspection report); pursue the same objective (penalising the infringing company); and impose the penalty on the same party (the company found to have breached occupational health and safety regulations).
The triple identity required is present in all its dimensions: subjective, objective and causal. Subjective, because the party affected is the same regardless of the nature or identity of the judicial or administrative authority adjudicating. Objective, because the facts being sanctioned are identical before both the employment and administrative jurisdictions, meaning a single course of conduct is sanctioned twice. Causal, because the same harmful consequences arising from that same conduct are being adjudicated upon twice.
Where a penalty has already been imposed on the infringing employer, the principle of res judicata may be raised as a defence, flowing from the non bis in idem principle, which must be treated as implicitly included in Article 25 of the Constitution as being intrinsically linked to the principles of legality and specificity of offences (as established in the ruling of the Constitutional Court 3154/90, of 14 October).
These principles are recognised as fundamental rights.
As legal practitioners, we consider that the non bis in idem principle has not yet been constitutionally examined in relation to the coexistence of the administrative sanction and the benefit surcharge.
The ruling of the Constitutional Court 158/1985, of 26 November, read carefully, addresses the non bis in idem perspective from the standpoint of the division of jurisdiction between the administrative courts and the employment courts, explaining that this division is largely the product of historical factors. However, it does not directly address whether the nature and structure of the benefit surcharge is itself constitutional.
Whilst it is true that the ruling of the Supreme Court of 2 October 2000 held that the capitalised amount of the benefit surcharge cannot be deducted from the damages award, it is equally true that that ruling attracted seven dissenting opinions arguing that, if no deduction is permitted from the damages award, the benefit surcharge violates the non bis in idem principle.
Notwithstanding these two rulings, we believe a fresh appeal before the Constitutional Court would be warranted, since in the field of sanctions there should be no room for hybrid mechanisms that are simultaneously — and ambiguously — both a sanction and a form of compensation.
In our view, from the moment the employee gained the right to claim damages, it became constitutionally unjustifiable for the administrative sanction and the benefit surcharge to coexist. It does not appear constitutional for the administration to pursue breaches of occupational health and safety legislation both through the administrative sanction under the LISOS and simultaneously through the benefit surcharge sanction.
If the legislator's intention is to treat negligence in occupational health and safety matters more seriously, the answer lies in calibrating sanctions to reflect the gravity of the accident — not in perpetuating this relic of the previous century that continues to impose a "sanction-compensation percentage applied to future benefits".
- Breach of the principle of legality:
We consider that the benefit surcharge fails to comply with the principle of legality, in that the person sanctioned has no way of knowing in advance what they will ultimately be ordered to pay. In the present case, the surcharge was quantified long after the notification had become final, with our client being held liable for 100% of the 30% imposed — covering the employee's entire working life, not merely the years he had been employed by our client. He had no opportunity to know the actual amount of the surcharge until long after the 30% rate had been set.
This case thus illustrates clearly why imposing a percentage of financial benefits arising from a work-related accident or occupational illness cannot be lawful if the actual amount of the penalty is unknown at the time it is imposed. This directly undermines the principle of legality. The person sanctioned cannot meaningfully decide whether to appeal without knowing the financial impact and scope of the surcharge, since the penalty is only quantified after the event.
Furthermore, the quantification of the benefit surcharge is carried out using actuarial methods — which by definition involve mathematical assessment of probabilities and are calculated on the basis of uncertain future events.
- Breach of the principle of proportionality:
The particular structure of the benefit surcharge also means that a very serious infringement of occupational health and safety regulations may result in a very low surcharge — or conversely, a very minor infringement may give rise to a very high one.
Specifically, a very serious occupational health and safety (OHS) infringement might generate a very low surcharge if the only consequence was a brief period of sick leave. Equally, a very minor OHS infringement might generate a very high surcharge — as we believe occurred in the present case: failure to carry out a routine medical check-up resulted in a €3,000 fine and a benefit surcharge of €126,787.21.
In this case, the amount of the surcharge-sanction appears plainly disproportionate to the temporary lapse in health monitoring. To our knowledge, only football clubs routinely conduct medical examinations before taking someone on.
By the same token, the particular structure of the benefit surcharge means that workers with very minor after-effects may have a capitalised surcharge calculated at a very large amount, whilst others — by reason of their age or salary level — may have a capitalised surcharge of very low value despite having suffered serious harm.
In this respect, we consider the benefit surcharge to be arbitrary, and a sanction cannot be arbitrary. We also consider it discriminatory that a employee may receive a higher or lower amount depending on their salary level or age.
This disconnection between the safety breach, its consequences, and the amount of the surcharge imposed constitutes, in our view, a violation of the principle of proportionality — which is also enshrined in Article 49.3 of the Charter of Fundamental Rights of the European Union, incorporated into EU law by the Treaty of Lisbon, which provides that "the severity of penalties must not be disproportionate to the criminal offence".
- Breach of the principle of legal certainty (taxativity):
The requirement for clearly defined offences set out in law extends to administrative sanctioning law (ruling of the Constitutional Court 100/2003, of 2 June), and must equally apply to the benefit surcharge, given that case law has characterised it as a sanction-compensation hybrid. The principle of legal certainty (taxativity) prohibits the use of "blank penal norms" — that is, sanctions that refer to administrative regulations to complete their factual basis. In this regard, the benefit surcharge requires reference to a Ministerial Order (Orden TAS) in order to quantify the penalty.
Notwithstanding all of the above, our position is not that workers should be stripped of their entitlements, but rather that compensation and sanctions should be brought into line with reality. What seems truly untenable is that, across the whole of Europe, this mechanism exists only in Spain and Portugal. We therefore consider that a constitutional review of Article 123 of the General Social Security Act, under which the benefit surcharge is imposed, is necessary — as is a legislative overhaul of the rules governing compensation and sanctions when a work-related accident occurs as a result of inadequate safety measures.
For the reasons set out above, we are confident that time — or more precisely, the courts — will ultimately vindicate this position. Until then, we must wait.
