Employment Termination: Regulations and Procedures

Posted on Feb 23, 2025 in Business Administration and Innovation Management

Regulation of Employment Records

This document outlines the administrative procedure to obtain authorization to suspend or terminate the employment relationship for selected causes, guaranteeing the rights of workers.

When is this procedure followed?

  • Collective dismissal based on economic, technical, organizational, or production reasons.
  • Suspension or termination of employment due to force majeure.
  • Suspension of the employment relationship based on economic, technical, organizational, or production reasons.
  • Termination of employment upon termination of the legal status of the contractor.

Employers should initiate this process. If workers start the process, it could cause harm to the employer.

Who initiates the procedure?

The procedure is initiated with the labor authorities in the province or the Labor Directorate of the Ministry of Labor, which is the authority to determine the respective Autonomous Community.

Procedure initiated by the company (excluding force majeure):

  1. Request for approval of lay-off employment to the labor authorities.
  2. Open a consultation period.
  3. Communicate the outcome of the consultations to the Labor Authority.
  4. Resolution of the Labor Authority on the dossier.

Procedure initiated by workers:

The procedure is the same, but the representatives of the workers make the request to the Labor Authority.

Procedure due to force majeure:

  1. Application for approval of company records, accompanied by evidence.
  2. Communication to the legal representatives of workers for such action.
  3. Resolution of the Labor Authority on the dossier.

Action by workers after the decision is rendered:

  • Appeal against the decision.
  • Process their unemployment benefits before the Public Employment Service.

Application for employment lay-off:

  • Report explaining the reasons motivating the lay-off.
  • If the cause is economic: audited documentation evidencing the status and progress of its economic situation for the last 3 years.
  • If the cause is technical, organizational, or production-related: plans, projects, and technical reports supporting measures to be taken and their expectations regarding the future viability of the company.
  • Number and categories of workers employed last year.
  • If > 50 workers, a social support plan that includes measures to avoid or reduce the effects of collective redundancies.
  • If the application does not meet all requirements, correction within ten days.

Previous consultations:

  • Not less than thirty calendar days, or fifteen if < 50 employees.
  • Must negotiate in good faith and must cover the motive causes and the possibility to avoid or reduce its effects.
  • The deal would require the agreement of most members of the committee or committees.

Resolution of the case:

  • If the consultation period ended with agreement of the parties: the Labor Authority will issue a resolution within 15 days.
  • If the Labor Authority finds the existence of fraud, deceit, coercion, or abuse of law in concluding the agreement, forward it to the Judicial Authority.
  • If the consultation period ended without agreement of the parties: The Labor Authority shall issue an order accepting or refusing, in whole or in part, the request made.
  • If the file was for the existence of force majeure: The Labor Authority, once it has found its existence, shall resolve the case within five days from application, and the resolution shall be effective from the date of the event in question.

Compensation for termination of the employment contract:

  • In cases of agreement between the parties, compensation is fixed at least 20 days’ salary per year of service up to 12 months.
  • In cases of force majeure, the Labor Authority may decide that all or a portion of the compensation due to workers affected by the termination of the contracts be met by the Wage Guarantee Fund, subject to its right of recovery from the employer.

Corporate action once the resolution of the case is given:

  • Make effective compensation.
  • Appeal against the decision.
  • Suspend the contracts. (The company is obliged to pay into Social Security)