It seems increasingly clear that we are approaching a new economic downturn. Global events, rising inflation, tighter financing, and an energy crisis combine to form a potential autumn storm. The text shares insights from Luis Angel Garrido Martinez, an experienced business lawyer at Devesa & Calvo Firm, who joined from PwC in July, about how companies are preparing to adjust after the summer.
In the same month, the World Bank published an article warning of a possible imminent global recession. It notes that, similar to the recent pandemic, economic weakening built up over years before current worldwide crises.
Spain’s labor market had shown resilience thanks to tourism, but the end of the high season and the energy crisis have raised production costs and drained programs like IMERSO.
Moreover, from this fall, employment protection periods that benefited companies during the pandemic begin to expire.
Many companies have already started planning restructuring measures to respond to the upcoming economic environment.
ERTEs, a familiar tool from the pandemic, allow the workday to be temporarily stopped or reduced for part or all of the workforce when there are economic, technical, organizational or production reasons, or force majeure. This enables a temporary decline in activity without destroying employment.
After the Labor Reform, the RED Mechanism was added, a form of ERTE ETOP that required earlier activation by the Council of Ministers for a sector or cycle. For instance, the travel agency sector currently has an active RED Mechanism.
The main difference is that ETOP ERTEs and the RED Mechanism must be negotiated with workers’ representatives or the most representative unions; force majeure ERTEs should only be authorized by the Employment Agency.
Another important distinction is the social protection of affected workers. ETOP ERTEs and force majeure provide access to unemployment benefits or subsidies, while the RED Mechanism also offers access to a new job sustainability and maintenance allowance that does not exhaust unemployment or require a fixed occupation period.
Currently, there is a 20% exemption from Social Security contributions for ETOP ERTEs.
Meanwhile, the RED Mechanism allows exemptions of up to 60%, and force majeure ERTEs can benefit from a 90% exemption.
However, in all cases, training for affected personnel and a commitment to maintain employment for six months after the measure expires are required.
Regarding Covid ERTEs, the latest Labor Inspection criteria limited the return of workers to the workplace after a violation to coverage. This remains controversial due to the mismatch and the potential consequences, such as significant payback for workers in sectors like hospitality. It is possible that this criterion will be refined in the future, though no one wants to be the first to challenge it.
In any case, the Labor Reform makes it clear that future exemptions for violations will lead only to reimbursement of contributions for the affected worker.
Of course, other legal tools exist, including dismissals for objective reasons, collective dismissals, transfers (individual or collective), and significant changes in working conditions.
These measures allow the workforce to be resized according to actual production needs, enabling reorganization without laying off staff or drastically changing working conditions to fit the new production reality.
Fundamentally, the measure must be negotiated with workers’ representatives. In the absence of such representation, as a consequence of the labor reform, workers themselves, chosen by the workforce and potentially the most representative union, may participate in the negotiating committee of the applicable collective bargaining agreement. This strengthens collective bargaining and the central role of unions.
A large portion of the country’s productive fabric consists of family-owned businesses, which maintain strong trust with their employees and focus on continuity and stability of employment. In this context, negotiating with workers becomes a key approach to reorganizing production means and conditions.
Within Devesa & Calvo, the firm has successfully negotiated converting regular fixed contracts to discontinuous fixed contracts in the hotel sector to align working hours with seasonal openings, or to establish telework framework agreements that help manage rising energy costs.
Ultimately, companies need a comprehensive approach to adapt to new economic conditions. The path to a secure future lies in a cross-functional team that evaluates not only labor results, but also financial and commercial performance.
The Devesa & Calvo office is located in Casa Carbonell in Alicante.
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