Spanish Constitution Court Up-Ends Collective...

by Marta Navarro and Carmen Ruiz de Gordejuela of Cuatrecasas

In a recent ruling, the Spanish Constitution Court overruled the Supreme Court and held that an agreement between a company and workers’ representatives is not in itself sufficient justification if an individual dismissal is challenged in court. Despite the agreement, the court can itself decide whether there were sufficient and valid grounds justifying the individual dismissal. 

The judgement raises questions over the value of a collective redundancy agreement, as discussed in this analysis paper from Marta Navarro and Carmen Ruiz de Gordejuela of the leading Spanish law Firm, Cuatrecasas.

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Agreements with workers’ representatives during the consultation period of collective dismissals no longer suffice to consider the grounds for collective dismissal applicable in individual proceedings

In Judgment 140/2021, of July 12, 2021, the Spanish Constitutional Court  reversed the Supreme Court’s doctrine that precluded contesting the grounds for collective dismissals in individual proceedings when the collective dismissal had been agreed with workers’ representatives (“agreed collective dismissal”) and they had not challenged the dismissal.

The debate revolves around (i) article 51 of the Workers Statute (WS); (ii) article 124 of the Spanish Labor Court Act (LRJS) ; and (iii) Supreme Court Judgment 699/2018, of July 2, 2018. These two provisions do not lay down a presumption that the grounds for collective dismissals apply and remain valid for individual proceedings when collective dismissals are agreed between the company and workers’ representatives. 

The Supreme Court judgment precluded contesting the grounds for collective dismissal in individual proceedings if the collective dismissal had been agreed between the parties during the consultation period and had not been challenged by the workers’ representatives with legal standing. This judgment led to assume that, in individual proceedings, workers could only bring claims specific to the claimant worker’s individual dismissal resulting from the collective dismissal.

However, recent Constitutional Court Judgment 140/2021 of July 12 radically changes this interpretation. The Constitutional Court found that the grounds for collective dismissals can be contested in individual proceedings even in case of agreed collective dismissals. Otherwise, there would be a violation of the workers’ right to effective legal protection under article 24(1) of the Spanish Constitution (CE), since no legal provision expressly excludes the grounds for collective dismissal from the scope of individual proceedings.

The Supreme Court’s criterion precluded contesting the agreements between the company and workers’ representatives in individual proceedings, whereas the Constitutional Court puts the right to effective legal protection (article 24(1) CE) above collective bargaining.

In the court’s words: “If workers’ representatives have not challenged a collective dismissal through the procedure provided in article 124 of the LRJS, note that the applicable provisions do not prevent courts from assessing the grounds for collective dismissal during individual proceedings, even in case of collective dismissals agreed with workers’ representatives […]. Therefore, according to the right provided in article 24(1) CE, we acknowledge the challenge brought by the claimant workers’ representatives, thus concluding that the Supreme Court’s judgment is contrary to the right to effective legal protection.”

The Constitutional Court’s stance is binding on labor courts, which will have to assess the validity of the grounds for collective dismissal during individual proceedings arising from the collective dismissal if the worker challenges those grounds, even if the collective dismissal has been agreed with workers’ representatives.

As a result, despite the efforts for reaching an agreement, there can be judgments against companies ruling that there are not sufficient grounds for collective dismissal. This can (i) lead to situations of legal uncertainty; and (ii) slow down the dismissal procedure, thus making redundancies less efficient and effective.

It is worth highlighting the dissenting opinion against the Supreme Court judgment, now supported by the Constitutional Court. The dissenting opinion argued that there were alternatives to prioritizing the agreement. To mitigate the adverse impact of downplaying the importance of collective dismissal agreements, the dissenting opinion recalled that article 124(3) of the LRJS allowed companies to anticipate (even if the workers or workers’ representatives had not filed an action against the company) and seek an “endorsement judgment” (i) declaring that the dismissal is legal; and (ii) having res judicata effects on the remaining individual proceedings.

Also, the Supreme Court’s dissenting opinion underlined that the workers’ representatives agreeing that there are grounds for a collective dismissal has to make a difference for courts ruling on the grounds for collective dismissal during individual proceedings. In fact, before the 2018 judgment that precluded contesting the grounds for dismissal in case of agreed collective dismissals, a Supreme Court judgment of June 25, 2014 had declared that contesting the grounds for collective dismissal in individual proceedings was possible, although adding that “courts may take into account, [...] as a very significant fact, that workers’ representatives consider that there were grounds for dismissal in the case at hand.”

Finally, the dissenting justices emphasized that parties could use as precedents any final judgments on individual proceedings ruling on the legality and justification of the grounds for collective dismissal, relying on these precedents to avoid contradictory judgments.

It is worth concluding that, from now on, companies carrying out collective dismissals should take into account the following aspects:

1. Even in case of agreed collective dismissals that have not been challenged by workers’ representatives with legal standing, the grounds for collective dismissal may be contested in potential individual proceedings brought by the affected workers. 
2. Although they will continue to be helpful, agreements in collective dismissals are weakened and discouraged, since they no longer guarantee that the agreed grounds remain applicable.
3. We expect increased individual litigation, since the protection of agreed collective dismissals disappears.
4. Courts require that grounds for dismissal be justified and proven during the proceedings, since regardless of the outcome of the collective bargaining, companies will likely have to prove the grounds for dismissal in potential individual proceedings.
5. From now on, there may be contradictory judgments and different interpretations for the same collective dismissal when courts rule on the individual challenges.
6. It will be important to consider the actions seeking endorsement judgments declaring that the collective dismissal is legal and having res judicata effects on subsequent individual proceedings challenging the collective dismissal.
7. Note that the agreement with workers’ legal representatives constitutes strong evidence. Courts ruling on the grounds for collective dismissal during subsequent individual proceedings should carefully consider the agreement.
8. There being previous judgments on individual dismissals can be a double-edged sword, raising new interpretative concerns: what if a previous final judgment had found that the collective dismissal was unfair? Should this judgment have an effect on the remaining workers’ dismissals under the res judicata principle?

The upcoming legal uncertainty of redundancy plans and dismissals should lead companies to continue seeking agreements while strengthening their arguments and justifications regarding the grounds for collective dismissal during the consultation period, with the aim of being better prepared for their likely assessment in subsequent individual proceedings.