Regulations have been approved by a Royal Decree-Act, which is the result of an agreement between the Government, business associations and majority trade unions, to establish the rules to govern Temporary Collective Dismissals (ERTEs – “Expedientes Temporales de Regulación de Empleo”) in May and June, when de-escalation from confinement is planned.

These regulations contain major new features, which will affect the operation and costs of all companies that have presented Temporary Collective Dismissals on the grounds of “force majeure” associated with the COVID-19 pandemic

Total and partial “force majeure”

Two instances of force majeure are regulated, depending on whether the activity continues to be interrupted (total force majeure) or may be recovered during de-escalation (partial force majeure).

Exemptions regarding Social Security

Total Force majeure. For companies that continue in this situation, it is expected that the current system of exemption from contribution will stay in place, i.e. 100% of the contribution for companies with a workforce of fewer than 50 workers, and 75% of the contribution for companies with a workforce of more than 50 workers.

Partial force majeure. For companies in this new situation, a system of exemptions is planned, which is summarised in the table below:

Type of worker Contribution exemption

Company < 50 employees

Contribution exemption

Company > 50 employees

Resuming activity May June May June
85% 70% 60% 45%
Suspended activity May June May June
60% 45% 45% 30%

Temporary Collective Dismissal on objective grounds

Temporary Collective Dismissals on objective grounds (Economic, Technical, Organizational or Production), have undergone a number of changes:

  • Negotiations may be started while a Temporary Collective Dismissal Process on the grounds of Force Majeure is in effect.
  • When the Temporary Collective Dismissal for objective reasons falls after the termination of the temporary Collective Dismissal on the grounds of Force Majeure, the effective date of the Temporary Collective Dismissal shall be the date of termination of the Temporary Collective Dismissal on the grounds of Force Majeure.
  • These new regulations do not apply to Temporary Collective Dismissals on objective grounds which are already in force when this regulation comes into effect.

Continuation of employment

Requirements for entitlement to exemptions from social security contributions.

This commitment shall be deemed to have been violated if any of the persons affected by these processes are dismissed or have their contracts terminated.

This undertaking shall not be considered to have been violated in cases of:

  • Termination of the work contract owing to disciplinary dismissal declared lawful.
  • The employee’s resignation, death, retirement, or total permanent disability, absolute or severe disability.
  • Neither shall it be applicable after the final call to work for persons under permanent-seasonal contracts, when such calls do not mean a dismissal but an interruption thereof.
  • In the case of temporary contracts, the commitment to hold employment shall not be deemed to have been violated when the contract is terminated due to expiry of the agreed term or the performance of the work or service it refers to, or when the activity referred in the contract cannot be performed immediately.

It shall be assessed considering the specific characteristics of each sector and the employment regulations applicable, especially taking into account the specific features of companies with high variability or seasonality of employment.

The commitment to maintain employment in such companies where there exists a risk of insolvency proceedings under the terms of Article 5.2 of Act 22/2003, of 9 July, regarding Insolvency, shall not be applicable. (Advisable to present notification of pre-insolvency proceedings pursuant to Article 5 (2) of the Bankruptcy Act). 

Procedural rules

The Royal Decree-Act lays down a number of rules for processing changes in Temporary Collective Dismissals with the employment and social security authorities.

These rules are of particular interest to the agencies responsible for the different procedures.

Tax havens

Companies domiciled in countries or territories classified as tax havens may not benefit from Temporary Collective Dismissals regulated by this rule.

Distribution of dividends

Companies that make use of Temporary Collective Dismissals due to Force Majeure may not distribute dividends during the business year corresponding to the Dismissal’s application, unless they return the part corresponding to the exemption applied in the distribution.

This limitation to dividend distribution shall normally affect the calendar year 2020, but there are special circumstances in foreign companies that may benefit from the calendar of a different business year.

This limitation shall have no effect on shareholders’ rights of separation pursuant to the current regulations.

Unemployment protection

It enforces the validity of extraordinary measures regarding unemployment protection (no requirement for a qualifying period, no calculation for subsequent benefits, etc.):

  • In general, Up to 30 June 2020.
  • Measures planned for permanent-seasonal workers, up to 31 December 2020.

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