Termination of Employment Contracts: A Detailed Look
Termination of Employment Contracts in Spain
Termination of Temporary Contracts Due to Expiration
Applies to temporary contracts (training, internships, etc.). After the contract’s period of existence, termination can proceed. Prior notification to the employee is required for contracts of six months or longer. A proposed settlement signed by the trabajador (worker) is also required. For contracts with a maximum duration that are concluded in less time, if the employee continues working without receiving notification, the contract extends to the maximum extension. If the contract concludes at the maximum duration and work continues, the worker is considered a permanent employee indefinitely.
Termination Due to Serious Employer Violations
A worker can request termination if their situation falls under these cases:
- Changes in working conditions.
- Non-payment or continued delays in payment.
- Serious breaches of the employer’s obligations.
If the worker requests termination under these circumstances, they are entitled to unemployment benefits (cobrar el paro). They also have the right to compensation of 45 days’ pay per year of service, with a maximum of 42 months’ pay.
Termination by Mutual Agreement, Deposited Causes, or Resignation
The most common termination by the worker is resignation, where the worker leaves the company without a specific cause. Resignation requires 15 days’ written notice. The most common reason is finding another job. The worker loses the right to wages for each day the notice has been breached. If a contract is terminated by resignation, the worker is not entitled to unemployment benefits. If the worker does not communicate the resignation in writing, the employer may claim compensation for damages.
Termination by the Employer
The employer can terminate the employment relationship for the following reasons:
Major Causes (Dismissal without Compensation)
Breaches by the worker. These are disciplinary dismissals.
Specific Causes (Disciplinary Dismissal)
- Repeated and unjustified absences or lateness.
- Indiscipline or disobedience.
- Verbal or physical offenses.
- Transgression of good faith.
- Continued decline in performance.
- Intoxication or addiction affecting work performance.
Termination must be notified in writing, stating the facts and dates. Violations must be serious and the worker culpable. The worker can contest the dismissal within 20 working days of receiving the letter.
Court Classification of Disciplinary Dismissal
- Dismissal from (Despido procedente): Real cause for dismissal is proven.
- Unfair Dismissal (Despido improcedente): No breach is proven. The company must re-admit the worker or pay compensation of 45 days’ pay per year of service, up to a maximum of 42 months.
- Null Termination (Despido nulo): Discrimination prohibited by law, or dismissal during maternity, risk during pregnancy, adoption, or fostering. The company must re-admit the worker and pay unpaid wages.
Objective Causes (Dismissal with Compensation)
Not based on worker breaches, but on objective circumstances.
Causes:
- Worker ineptitude.
- Worker maladaptation.
- Justified absences totaling 20% of working days in two consecutive months, or 25% in four discontinuous months.
- Need to amortize jobs for economic, technical, or organizational reasons.
The dismissal letter must be provided with 30 days’ notice. The worker is entitled to 20 days’ compensation for each year worked, up to a maximum of 12 months. The objective causes are similar to disciplinary ones, but if declared inadmissible or invalid, different rules apply.
Collective Dismissal (Despido colectivo) / Force Majeure
Different causes with common elements and compensation. If effected without work authorization, they are void.
Causes:
- Economic, technical, productive reasons necessitating job reductions.
- Affects: a) all staff; b) more than 5 workers; c) within 90 days, affects a certain number of workers.
The event must be involuntary, necessary, and inevitable. Procedure: request for authorization through employment regulation file handling and openness. Compensation: 20 days per year worked, with a 12-month limit.
Termination Due to Death, Retirement, or Disability
If termination is due to the worker’s death, retirement, or disability, the employer may provide compensation of 30 days’ wages.
Settlement (Finiquito)
The employer informs the worker of the contract termination and presents the liquidation of assets. By signing, the worker acknowledges the contract is extinguished and may request the presence of a legal representative. Once signed, the worker generally cannot make further claims.
Concepts Included:
- Amounts of wage and non-wage perceptions up to the termination date.
- Proportional shares of bonuses.
- Accrued vacation days.
- Compensation amount (if applicable).
Deductions:
- Social security contributions.
- Withholding tax on personal income (IRPF).