Situation of employees in a temporary collective redundancy scheme (“ERTE”)

26 March 2020

Employees in a Temporary Collective Redundancy Scheme (ERTE) due to force majeure, conducted in accordance with Royal Decree-Act 8/2020 of 17 March, will have their contract suspended or their working hours reduced upon approval of the ERTE by the employment authority - from the date the suspension is effective, presumably from the date of petition-. Companies must notify employees both of the initiation of the proceedings as well as, once authorised, the suspension of the contract, and employees must receive a notice of both actions. Given the circumstances, any certified method of notification will be valid. In any case, from the moment of suspension, employees will be entitled to contribution-based unemployment benefit until the end of the suspension.

If the ERTE does not impose a suspension of the contract but rather a reduction in working hours, employees will have their working hours reduced by the appropriate percentage, earning the salary appropriate to the hours worked and being entitled to partial contribution-based unemployment in respect of the reduced working hours.

Essentially, the National Employment Service must acknowledge the contribution-based unemployment benefit for the employee to receive it. Exceptionally, and only for this emergency-based reduction, this right will be recognised for all affected employees, even if they have not made any prior contributions. The new regulation maintains the need for affected employees to apply for the benefit; otherwise, it would not make sense for the emergency legislation to interrupt the consequences arising from an extemporaneous application, i.e. beyond the 15 days from the situation generating application. However, in practice, considering the restrictions on citizens’ mobility and the limited capacity of public services, including unemployment protection, the National Employment Service is acting automatically once it has been informed of the approval of an ERTE. For affected employees, the period of time the “extraordinary” unemployment benefit is received will not factor in for the calculation for future benefits. The benefit will entail 70% of the calculation basis - last 180 days of days of contribution - or, failing that, of the period of time immediately prior to the suspension or reduction and will last until the end of the ERTE.

Employment contracts will be suspended – or working hours reduced — until the end of the scheme, a moment at which the terms of employment will be restored without any modification. However, given the uncertainty as to whether the ERTE will be followed by a Collective Redundancy Scheme (ERE), the 6th Additional Provision of this Royal Decree-law 8/2020 introduces an undertaking by companies to maintain employment for six months after their business activity is resumed. Therefore, if companies elect into this scheme, they must fulfil this undertaking. That said, nothing prevents companies from waiving these extraordinary measures – with the consequences arising therefrom - to later conduct a collective redundancy.

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