Labor Reform and Mediation: Trends in Dismissals and Settlements

No time to read?
Get a summary

Labor reform marked a turning point in how work contracts are handled. The shift to permanent contracts by default reduced temporary staffing overall, lifting conditions for many workers. Yet it also complicated things when it came to hiring new staff or letting someone go. What used to be resolved by allowing a fixed-term contract to end now often requires formal steps, with dismissals potentially triggering more conflict and negotiation.

Disputes have moved into mediation, arbitration and conciliation services known as SMAC, and into social courts. The first half of this year showed a clear uptick in cases reaching these venues, reflecting a broader trend in how labor issues are resolved in practice.

Within the first half of the year, 5,995 dismissal agreements were recorded in the province, up 32.6% from the same period in the previous year, according to data compiled by the Ministry of Labor and Social Economy and the Department of Education, Universities and Employment. This body is the initial stop for workers who oppose the conditions or reasons given by employers for terminating a contract, and it serves as a strong indicator of the overall situation.

In this context, the regional directorate of labor has shown that of all cases processed, 3,115 resulted in settlements, a 35% increase from the prior year; 1,193 cases concluded without a deal (up 51%); 1,385 closed as ineffective due to non-attendance by participants (often the company); and 302 cases were withdrawn or deemed not submitted for various reasons.

Maria Antonia Olivado, President of the Alicante Social Graduate College, attributes the rise in mediation requests to the change in legislation. She notes that the only guaranteed way to end an indefinite employment relationship is dismissal, and with workforce reform, this has become the default mode of hiring. While many companies previously relied on temporary hiring to adjust their workforce to workload, the new framework adds complexity to those decisions.

Lower compensation

Oliva also mentions that many workers turn to SMAC to avoid having severance pay taxed without a formal decision from this body, which could otherwise be interpreted as an agreed withdrawal on the tax return.

One striking data point is the average agreed severance compensation within SMAC, which fell from 10,818 euros per worker last year to 9,134 euros in the first half of this year. This decrease suggests a backlog of layoffs affecting workers with lower seniority. Provincial data from the Consell indicates that up to 5% of SMAC applicants in the first half had less than a year with their employer, while about 68% had between one and five years of tenure.

Elche’s SMAC archive footage is often cited in discussions about these trends.

This rise in conciliation requests, especially those without an agreement or where the company does not attend, has led more workers to file in the courts after SMAC. In the first period, nearly 2,826 dismissal cases were filed in the state, marking a 37.3% increase and the highest level since 2009, according to data from the General Assembly of the Judiciary. The real estate market downturn had contributed to a wave of personnel cuts and historically high unemployment figures.

Cheap or expensive?

Juan Angel Torregrosa, head of the CC OO work office in L’Alacantí, acknowledges that the rise in layoffs is a direct consequence of labor reform. Yet he argues it remains an improvement for affected workers because dismissed employees tend to receive higher compensation than those whose contracts end on a temporary basis. He also suggests that lingering insecurity persists due to shorter tenure, calling the cost to workers with longer company tenure relatively low in some cases.

Although 3,443 new jobs were created in Alicante in October, 1,294 people remained unemployed

Yolanda Diaz, the UGT secretary for L’Alacantí-La Marina, reminds readers that one of the union’s demands in forming a new government is a real increase in layoff costs to prevent exploitation. The council and employers’ groups alike provide a mixed view. The CEV notes that hiring methods are only one factor behind rising layoffs and emphasizes that the overall cost of dismissal in this country remains high compared with Europe, potentially signaling broader changes in compensation expectations.

Requests for compensation also surged by 78% in the period. In addition to layoffs, workers demanded sums tied to non-payment by their employers in the first half of the year. SMAC recorded 2,436 settlement requests on this issue, up 78% from the same period in 2022. In less than 6% of cases did mediation lead to a collection agreement. The average payment to employees was 2,126 euros, while 2,293 cases were subsequently filed in the courts, up 44% from the previous year.

No time to read?
Get a summary
Previous Article

Why A Celebrity Couple Chose Private Moments During Birth

Next Article

Amelia and Eliza Spencer at the Melbourne Cup: Fashion, Family, and Public Appearances