Spain: The Royal Decree implementing the RED Mechanism provides that closures of work centers will require six months’ notice

Royal Decree 608/2023, of July 11, 2023, implementing the RED Mechanism for Employment Flexibility and Stabilization, has been published. It gives effect to the provisions of article 47.bis of Royal Legislative Decree 2/2015, of October 23, 2013, approving the consolidated Workers’ Statute relating to the RED Mechanism for employment flexibility and stabilization which, when activated, will allow employers to seek measures for reduction of working hours and suspension of employment contracts. It also introduces new important features in the regulations governing collective layoffs.

The legislation regulates, inter alia, the following aspects:

1. Activation of the RED Mechanism

The RED Mechanism may be activated in cyclical (when a general macroeconomic environment is found which renders it advisable to adopt additional stabilization instruments) and sectoral forms (when in a certain sector or sectors permanent changes are found which give rise to needs for worker retraining and career transition processes) by a resolution of the Council of Ministers, after informing the most representative labor union and employers’ organizations at national level, which will be published in the Official State Gazette (BOE).

2. Applicable measures

Once the RED Mechanism is activated employers can voluntarily request from the competent labor authority the reduction of working hours or the suspension of employment contracts, while it is activated.

The employment contract can be suspended when the termination of the activity that was engaged in by the worker affects entire days, consecutive or alternate, for at least one ordinary working day.

Reduction of working hours will mean the temporary reduction of employment activity, which may be calculated on the basis of daily, weekly, monthly or annual working hours. 

Insofar as this is feasible, priority will be given to the adoption of measures for reduction of working hours over those of suspension of contracts.

During the application of a procedure derived from the RED Mechanism, each worker may only be affected exclusively by a reduction of their working hours or by a suspension of their contract, without the possibility of a combination of both.

3. Procedure

The following aspects, among others, are noteworthy:

• The management of the company must duly notify to the workers or to their representatives its intention to commence the procedure, for the purposes of forming the representative committee.
• The establishment and operation of the negotiating committee will be governed by the provisions of article 41.4 of the Workers’ Statute subject to the particular features provided in the Royal Decree.
                                                                        
  The deadline for establishing the workers’ representative committee will be five days from the date of the above-mentioned notification, unless any of the work centers that will be affected by the procedure does not have employee legal representatives, in which case the period will be ten days.
• The legislation specifies the data and documentation that must accompany the formal notification of commencement of the consultation period.
            
  The maximum consultation period will be fifteen days. In the case of companies with less than fifty employees, the consultation period may not exceed seven days (which may be extended by agreement).
• The employer must submit, at the same time as the notice of commencement of the consultation period, the request for application of measures of reduction of working hours or suspension of contract under the RED Mechanism through the website of each competent labor authority (which is regulated in the Royal Decree itself).
• Once the request has been received, the labor authority will immediately forward it, together with the documentation in its possession, to the Labor and Social Security Inspectorate, seeking at the same time, on a mandatory basis, a report. That report will focus on the aspects of the employer’s notification and the existence at the company of the situation envisaged in the activation resolution and will verify whether the criteria used for designating those affected are not discriminatory.
             
  It is also provided that the labor authority may send, if appropriate, warnings and recommendations and, at the request of any of the parties or on its own initiative, assistance or mediation measures to the negotiating committee. All of this with the assistance and support of the Labor and Social Security Inspectorate.
                
  The workers’ representatives can also send observations to the labor authority at any stage of the procedure.
• When the consultation period ends with an agreement between the parties, the labor authority will issue a resolution within seven calendar days from the notification of that agreement by the employer, authorizing the application of the RED Mechanism under the terms established in the agreement.
             
  If an express decision has not been issued within that period, the application of the RED Mechanism under the terms established in the agreement between the parties will be deemed to be authorized.
               
  At any time while the measure of reduction of working hours or suspension of contracts authorized under the RED Mechanism in any of its forms is in force, the employer can notify to the workers’ representative with whom it has conducted the consultation period a proposal for extension of the measure, which may not in any event exceed the limit established in the activation resolution. The need for this extension must be discussed in a consultation period not exceeding five days, which may be prolonged by express agreement in this respect on the negotiating committee, notified to the competent labor authority before it takes effect.
• When the consultation period ends without an agreement, the labor authority will issue a resolution accepting or rejecting the employer’s request.
           
  The period for issuing the resolution will be seven calendar days from the notification by the employer of its final decision.
               
  If an express decision has not been issued within that period, the application of the RED Mechanism under the terms of the final decision notified by the employer will be deemed to be authorized, subject to the review which may be appropriate due to noncompliance with the minimum content and essential conditions provided.

4. Employee protection

The workers affected by a RED Mechanism will be entitled, following a collective request, to the benefits provided for in the forty-first additional provision of the General Social Security Law and will be a considered a priority group for accessing training initiatives of the system of occupational training for employment.

5. Benefits in relation to Social Security contributions

While these measures are applied, employers will benefit from the exemptions from Social Security contributions which are indicated in the forty-fourth additional provision of the General Social Security Law, provided that the conditions and requirements included in that provision are met.

The exemptions from contributions will be subject to the maintenance of the employment of the workers affected by the measures of reduction of working hours or of suspension of contracts for six months from the end of the period of validity of the authorized RED mechanism.

Employers who fail to comply with this undertaking must repay the amount of the contributions from which they were exempted in relation to the worker for whom this requirement has not been met. The legislation specifies the termination scenarios in which the undertaking is not considered to be breached.

6. Training activities linked to extraordinary benefits for employers

During reductions of working hours or suspensions of employment contracts, employers shall carry out the training activities for each of the persons affected, the objective of which will be to enhance their occupational skills and employability. Certain exemptions will be linked to the performance of training activities.

7. Limits relating to overtime, recruitment and outsourcing

During the actual application of the RED Mechanism no overtime can be worked, no new outsourcing of activity can be established, nor can new recruitments be arranged, either directly or indirectly.

This prohibition will not apply if the persons subject to contractual suspension or reduction of working hours who work in the work center affected by new recruitments or outsourcing cannot, because of their training, qualifications or other justified objective reasons, carry out functions entrusted to such persons, after the employer has informed the employee legal representatives in this respect.

Training contracts can be entered into provided that functions or tasks normally performed by the persons affected by the measures of suspension or reduction of working hours are not carried out.

8. Regulations governing procedures for collective layoff and for suspension of contracts and reduction of working hours

Any matter not provided for in the legislation will be subject to the regulations governing the procedure for conducting collective layoffs and temporary employment regulation procedures approved by Royal Decree 1483/2012, of October 29, 2012.

Furthermore, these regulations are amended, inter alia, in the following respects:

• Obligation to give six months’ notice in the event of closure of a work center: employers that intend to close one or more work centers, when this involves the definitive termination of the activity and the dismissal of 50 or more workers, must so inform the competent labor authority for that area and the Ministry for Labor and Social Economy, through the Directorate General of Labor at least six months prior to the notice of commencement of the consultation period. If that minimum notice period cannot be observed, it must be notified as soon as possible showing the reasons why the stipulated period could not be observed.
              
  A copy must be sent to the most representative labor union organizations and to the most representative organizations of the sector to which the company belongs, both at national level and in the autonomous community in which the work center or centers intended to be closed are located.
• It is added that the labor authority will ensure the access of the parties concerned to the administrative file and, in particular, will send to them the report of the Labor Inspectorate at the time it is received.
• The provisions of the legal rules on temporary employment regulation procedures (ERTE) are amended in terms similar to those mentioned above for RED Mechanisms (for example, the possibility of release and reapplication to employees, that employees cannot be affected by a combination of measures or the prioritization of reduction measures over suspensions).
                
  A new title is also added with rules common to the temporary employment regulation procedures for economic, technical, organizational and production reasons and due to force majeure, which provides for benefits relating to Social Security contributions, the training activities linked to the benefits, the undertaking to maintain employment and the limits on overtime, recruitment and outsourcing.
• New features are introduced in the rules on procedures due to force majeure.

9. Entry into force

The legislation comes into force on July 13, 2023 and will apply to procedures the commencement of which is notified by employers after its entry into force.

Any collective layoffs and temporary employment regulation procedures that have been commenced before the date of entry into force of the regulations will be governed by the legislation in force at the time they were commenced.