The promise of ‘extra’ severance pay increases legal uncertainty in employment matters, according to Borja González Elejabarrieta | El Economista

In 2024 dismissal claims have skyrocketed, reaching the volume of the financial crisis, surprising in a context of economic growth.

Borja González Elejabarrieta, Employment Counsel at Gómez-Acebo & Pombo, pointed out in El Economista that ‘Nowadays it is rare to find a dismissal in which the worker does not challenge the dismissal on the grounds of nullity, regardless of whether this is more or less solid’.

We are facing a new situation of legal insecurity in employment matters. Some professionals argue that this is due to the fact that the latest legal changes have led to rulings declaring more dismissals to be null and void and setting extra indemnities that exceed the current ceilings. A scenario of uncertainty that is not slowing down dismissals, but threatens to overload hiring.

The latest data from the General Council of the Judiciary (CGPJ) show that in the second quarter of 2024, 41,616 dismissal lawsuits were registered, 22% more than in 2022, and 48% more than in the second quarter of 2019, the last comparable year prior to the reform because it was not affected by the health crisis. This is the highest figure since the first quarter of 2013, when 41,878 cases were filed in the labour courts.

On the other hand, the Social Security metrics confirm an upturn in dismissals, although the figures for deregistrations are much higher than those for open court proceedings. In the first six months of the year they accumulated a total of 521,891 deregistrations due to a cause classified as dismissal. In August they reached 698,091, 83.9% more than in 2019. Although many dismissals do not go to trial, the number of open legal proceedings is notably high, especially in situations of disciplinary dismissals that do not entail compensation.

The increase in labour litigation is partly a consequence of new social laws, such as Law 15/2022 on equal treatment and non-discrimination, which introduced more grounds for nullity of dismissal, including the protection of workers in situations of illness or those requesting adaptations of working hours. This legislation has created a more favourable framework for workers to challenge dismissals, although challenges are not always strong.

Moreover, government mistakes, such as the accidental repeal of certain dismissal nullities with the Parity Law; or the recent ruling by the European Committee of Social Rights, which has ruled that the regulation of compensation for unfair dismissal in Spain contravenes the European Social Charter; have generated even more confusion.

In the meantime, the courts are issuing contradictory rulings. If there is no legal change before then, it will be the Supreme Court that will establish jurisprudence, and precedents suggest that it will endorse the validity of what the Workers’ Statute now states.

González Elejabarrieta also warns that, although some rulings have imposed additional or reparatory compensation, these cases are few and far between and limited to very specific situations. However, labour lawyers are already detecting an increase in claims seeking additional compensation, even in cases of workers with little seniority. This increases uncertainty for companies, which cannot clearly foresee the total cost of a dismissal or its possible legal consequences.

Lawyers warn that this legal uncertainty and the increase in labour disputes can have negative effects on the creation of stable employment, as companies are reluctant to hire new employees. In addition, they warn that the increase in legal costs and the possibility of lengthy legal disputes mean that companies prefer to avoid dismissals or even pay higher compensation to avoid reinstatement of workers when dismissals are declared null and void.

For all these reasons, the current situation of legal uncertainty, arising from increasing litigation and the lack of clarity in the application of new regulations, is causing companies to be more cautious when hiring, and the courts to face a flood of dismissal claims. According to González Elejabarrieta, ‘there is likely to be greater awareness of the valuable impact of having good redundancy advice, especially given the negative consequences of not having it’.

Read full article here