Thresholds & Collective Dismissal: Workplace Reference Unit

COLLECTIVE DISMISSAL THRESHOLDS

We explain how and where prior and subsequent terminations are counted in a collective dismissal for the purposes of staying within the legal threshold. If you have any questions, feel free to get in touch.

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Josep Conesa. employment lawyer (Barcelona)

Written by Josep Conesa

Employment and insolvency lawyer

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Thresholds under Article 51 of the Workers' Statute:

Employment law sets limits requiring that terminations on economic, technical, organisational or production grounds be processed through the collective dismissal if, within any 90-day period, the number of dismissals exceeds the following figures. If these thresholds are exceeded, the dismissal will be deemed NULL AND VOID:

Ten employees, in companies with fewer than one hundred employees.
Ten per cent of the total workforce in companies employing between one hundred and three hundred employees.
Thirty employees in companies employing more than three hundred employees.

FIRST LIMIT: OBJECTIVE DISMISSALS WITHIN EACH 90-DAY PERIOD

Where, over successive 90-day periods and with the aim of circumventing the above thresholds, a company carries out objective dismissals in numbers below those thresholds, and without any new grounds arising, such further terminations will be deemed NULL AND VOID.

TERMINATIONS COUNTED TOWARDS THE COLLECTIVE DISMISSAL THRESHOLD:

That is: dismissals not attributable to the employee's personal conduct:

Disciplinary dismissals found to be unfair by a final ruling, whether upheld by a court or acknowledged by the employer.
Objective dismissals found to be unfair by a final ruling, whether upheld by a court or acknowledged by the employer.
The termination of fraudulent fixed-term contracts, whether by ruling, acknowledgement, or where irregularities can be established through circumstantial evidence.
Objective dismissals on ETOP grounds — i.e. economic, technical, organisational or production-related reasons — under Art. 52(c) of the Workers' Statute.
Indirect terminations arising from a substantial modification of working conditions (MSCT) or workplace transfers, under Arts. 41 and 40 of the Workers' Statute.
Contractual terminations initiated by the employee due to the employer's serious breaches under Art. 50 of the Workers' Statute, whether by ruling or conciliation.
The elimination of cover posts held pending a vacancy, and the termination of indefinite non-permanent employees in the public sector.
Certain voluntary resignations, insofar as they count towards the collective dismissal thresholds:

Voluntary resignations may, since the Supreme Court ruling No. 558/2023, of 19 September 2023, ECLI:ES:TS:2023:3812, be treated as dismissals and counted as such for the purposes of the thresholds, because — even though the employee acts of their own free will — such terminations originate from and are caused by the employer's initiative, in the context of a workforce reduction.

A further ruling confirming that certain resignations must be counted towards the collective dismissal thresholds is ruling of the National Court 54/2024, of 14 May 2024, which holds that the departures of employees who transfer to other companies within the same group must also be taken into account when calculating the collective dismissal threshold.

TERMINATIONS NOT COUNTED IN COLLECTIVE DISMISSALS:

Terminations of fixed-term contracts and contractual conditions of resolution where the termination is lawful.
Objective dismissals on grounds of supervening incapacity, failure to adapt, or absenteeism, where these are not challenged or are found to be fair, under Art. 52 of the Workers' Statute.
Disciplinary dismissals that are not challenged or are found to be fair.
Terminations during the probationary period.
Employee resignations and retirements.
Mutual termination agreements.

how the 90-DAY PERIOD is calculated in a collective dismissal:

Under Directive 98/59/EC on the approximation of laws relating to collective redundancies, the ruling of the Court of Justice of the EU (CJEU) of 11 November 2020, Case C‑300/19, UQ v Marclean Technologies, S.L.U., refined Spanish law by establishing that a dismissal will be null and void where the thresholds are breached during a period either before or after the dismissal in question.

In other words, to determine whether the threshold has been reached, it is necessary to assess whether 5 or more employees have been affected during the 90-day period before or after the dismissal, for reasons not inherent to the employee.

For example: if a company with fewer than 100 employees intends to carry out 5 objective dismissals, it will be required to follow the collective dismissal procedure if it has previously terminated 5 contracts for reasons not inherent to the employee — failing to do so could result in those dismissals being declared null and void.

Under the new case law established by the EU, a company must also monitor what happens after carrying out a termination for reasons not inherent to the individual employee — because if the threshold is exceeded within 90 days, that prior dismissal may also be declared null and void.

There is no doubt that this new approach to counting terminations — for the purposes of determining whether a collective dismissal should have been or should be initiated — will give rise to some highly significant legal claims.

second threshold: GROUNDS NOT INHERENT TO THE employee:

Account is taken, provided there are more than five terminations, of the total number of contract terminations of any kind carried out during the reference period at the employer's initiative, by virtue of grounds not inherent to the employee, other than those provided for in Article 49.1.c).

where...

WORKPLACE OR company IN A collective dismissal:

The Rabal Cañas ruling of the Court of Justice of the EU (Court of Justice of the EU (CJEU)), dated 13 May 2015, required Spain to comply with Directive 98/59, specifically by taking individual workplaces as the reference unit rather than the company as a whole (as literally stated in Article 51.1 of the Workers' Statute (ET)), where doing so affords greater protection to workers.

"A national provision which introduces the company as the sole reference unit — rather than the establishment — infringes Article 1(1) of Directive 98/59 where applying that criterion has the effect of impeding the information and consultation procedure established in Articles 2 to 4 of the Directive, in circumstances where, if the establishment were used as the reference unit, the dismissals in question would have to be classified as 'collective dismissal' within the meaning of the Directive (ex Art. 1(1), first paragraph, point (a)).

"Directive 98/59 requires that account be taken of the dismissals effected in each individual establishment." "Wilson" case, C-80/14.

THE ESTABLISHMENT AS REFERENCE UNIT ONLY WHERE AN AVERAGE OF 20 OR MORE WORKERS ARE EMPLOYED:

The establishment-based criterion applies only where it offers greater protection to workers, and only where the establishment habitually employs an average of at least 20 workers, as set out in the Directive:

"1. For the purposes of this Directive:
a) 'collective redundancies' means dismissals effected by an employer for one or more reasons not related to the individual workers concerned, where, according to the choice of the Member States, the number of redundancies is:
i) over a period of 30 days:
- at least 10 in establishments normally employing more than 20 and fewer than 100 workers,
- at least 10% of the number of workers, in establishments normally employing at least 100 and fewer than 300 workers,
- at least 30 in establishments normally employing 300 workers or more;
ii) or, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments affected;"

GREATER PROTECTION WHERE THE WORKPLACE IS TAKEN INTO ACCOUNT:

And only where this affords greater protection to employees:

"Replacing the term 'workplace' with 'company' can only be considered favourable to employees if that element constitutes an addition and does not entail the abandonment or reduction of the protection afforded to employees in cases where, had the concept of workplace been applied, the number of dismissals required by Article 1(1), first subparagraph, point (a) of Directive 98/59 to trigger the classification of 'collective dismissal' would have been reached."

This is confirmed by the ruling STS of 13 June 2017 (appeal no. 196/2016) which holds that:

"In the case before us, no one disputes that the affected workplace ordinarily employed more than 20 workers, or that at least 20 dismissals had taken place within a 90-day period. The only established fact is that, on the same date, the contracts of the 12 workers assigned to that workplace were terminated, meaning that none of the thresholds set out in Article 1(1)(a) of Directive 98/53 were met, nor were those established in Article 51(1) of the Workers' Statute (ET) exceeded, given that company Urbaser has a workforce of more than 20,000 employees. The court below was therefore correct to find that, for legal purposes, no collective dismissal had occurred in this case, applying both Article 51(1) ET and Directive 98/59/EC (…), with express and well-founded reference to the case law of the Court of Justice of the EU (CJEU) as set out in its ruling of 13 May 2015 (C-392/2013, 'Rabal Cañas' case). It should further be noted that, citing that same ruling, the same outcome is reached by applying the doctrine of the Full Chamber of the Social Division of the Supreme Court contained in the STS of 17 October 2016 (appeal no. 36/2016)."

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