The case of the yacht Fortuna reveals how procedural errors and unlawful secondment of workers can lead to multi-million-euro compensation awards. This ruling implicates not only a private company but also Spain's own National Heritage body (Patrimonio Nacional).
Written by Josep Conesa
Employment and insolvency lawyer
The former crew of the yacht Fortuna have good reason to celebrate: ten individuals are set to share €1,235,441 between them.
Whether that is a large or modest sum is a matter of perspective, but as an employment lawyer and taxpayer, I am far more interested in understanding why the dismissals were declared unfair, and why Patrimonio Nacional (the public body responsible for State-owned assets derived from the legacy of the Spanish Crown) has also been held jointly and severally liable for that compensation, alongside the company that employed them directly (the shipping company Unión Naval Valencia, S.A. (public limited company)).
The first question is why the High Court of Justice of the Balearic Islands in Palma de Mallorca, in its ruling of 24 October 2013 (No. 470/2013), found the dismissals to be unfair.
Two reasons are given: that there had been an unlawful secondment of workers, and that the statutory severance payment had not been made available to the employees as required by law, a failure that renders an objective dismissal automatically unfair.
On the requirement to make the severance payment available, the position is set out clearly in Article 51.4 read together with Article 53.1(b) of the Workers' Statute in relation to collective dismissals. For this type of dismissal, the process is now considerably clearer and less risky than it was before the labour reform. Where objective grounds (economic, technical, organisational or production-related, whether one or several) exist, are substantiated, and the formal requirements are met, the applicable severance payment is 20 days' salary per year of service, capped at 12 monthly payments, not the 45 or 33 days that apply in cases of unfair dismissal.
In the case under discussion, Unión Naval Valencia initiated the statutory consultation period, but when that negotiation window closed and the company decided to terminate the contracts, it failed to comply with the legal requirement to make the 20-days-capped-at-12 severance payment available to the workers (approximately €600,000 in this instance).
Unless Unión Naval Valencia lacked sufficient liquidity at the time it communicated the termination of contracts, the law does allow for deferred payment in such circumstances, it is difficult to believe that a significant company such as Unión Naval Valencia, itself part of the major maritime group Grupo Boluda, could simply overlook the requirement to make that 20-day severance payment available (and more so given that this point was not even mentioned in the dismissal letter). Either the company received very poor legal advice, or it received very good advice if the ruling it ultimately obtained was precisely what it was seeking.
As a result of this procedural failure, the dismissals were declared unfair and the total compensation award rose to €1,235,441.
The second and harder issue to understand is why the court found that an unlawful secondment of workers had taken place, and concluded that Unión Naval was no more than a "nominal employer". This finding meant that Patrimonio Nacional was required to meet that liability jointly and severally with Unión Naval Valencia, on the basis that an unlawful secondment had occurred.
Unión Naval Valencia had signed a maintenance contract for the yacht Fortuna with Patrimonio Nacional in 2011, and carried out that work using its own workforce.
The High Court of Justice of the Balearic Islands held in its ruling that an unlawful secondment of workers had taken place, and that the "real employer" was Patrimonio Nacional. In effect, this meant treating the shipping company Unión Naval Valencia as a mere "nominal employer", a shell company with no genuine structure of its own, whose only function was to employ workers and profit by seconding them to Patrimonio Nacional, the "real" employer, which was the entity that actually organised the maintenance work, decided how repairs to the Fortuna were to be carried out, issued instructions and general orders throughout the year, set the workers' schedules, provided the tools needed for repairs, and so on.
It is hard to believe that a conclusion as far-reaching as identifying Patrimonio Nacional as the real employer could rest on the two weeks per year during which the King ordered the yacht to drop anchor.
It is hard to believe that the State's own legal counsel (Abogado del Estado) was unable to demonstrate that Unión Naval Valencia had more than sufficient structure, organisation and productive resources to be regarded as the genuine employer, especially given that it formed part of a major maritime group.
It is hard to believe that a trial of this significance lasted just four minutes and ten seconds.
Reading the trial record and the ruling, it is hard to believe that the lawyers involved, including the State's own counsel, came so close to simply conceding the claim, with little to suggest that any meaningful defence of the "companies" was mounted of the kind one sees pursued every day before employment tribunals.
It is hard to believe that the "companies" were not properly advised.
It really is hard to believe.
