Can compensation for unfair dismissal increase? Europe puts pressure on Spain

Europe considers that, in certain circumstances, compensation for dismissal in Spain is not sufficiently dissuasive for employers and does not comply with European regulations. This raises questions for the courts, which may be asked to award compensation higher than that provided for in the Workers' Statute. Could this become possible? As specialist employment lawyers, we explain everything you need to know in this article.

What compensation applies in cases of unfair dismissal?

Compensation for unfair dismissal is governed by Article 56 of the Spanish Workers' Statute, which provides that compensation shall amount to 33 days' salary for each year of service, with periods of less than one year calculated on a pro-rata monthly basis, up to a maximum of 24 months' salary.

Where the dismissal is based on objective grounds, or is an objective dismissal for economic, organisational, technical or production-related reasons, compensation is limited to 20 days' salary per year of service, subject to a maximum of 12 months' salary.

Why is Spain considered to be in breach?

To understand what is happening and why Spain is considered to be in breach of European regulations, it is necessary to examine Article 24 of the European Social Charter, which establishes the right to protection in the event of dismissal. It provides that workers must be guaranteed effective protection against dismissal, including adequate compensation or other appropriate relief.

As a result, the Council of Europe has stated that Spain should amend its employment legislation to ensure that compensation awarded in cases of unfair dismissal reflects the actual loss suffered by the dismissed employee and takes into account the specific circumstances of each case.

Furthermore, Article 10 of the International Labour Organization (ILO) Convention No. 158 provides the following:

If the bodies referred to in Article 8 of this Convention conclude that termination of employment is unjustified and, under national law and practice, are not empowered or do not consider it practicable, in the circumstances, to annul the termination and, where appropriate, order or propose the reinstatement of the worker, they shall be empowered to order payment of adequate compensation or such other relief as may be deemed appropriate.

These two legal instruments support the view that every dismissal case may differ depending on its particular circumstances and that compensation may therefore vary accordingly.

What does the Supreme Court say?

This position contrasts with a 2025 judgment of the Spanish Supreme Court concerning an appeal arising from a disciplinary dismissal that had been declared unfair by Social Court No. 3 of Barcelona. In that judgment, the employer was ordered to pay the statutory compensation together with an additional award for loss of earnings. The decision was appealed before the High Court of Justice of Catalonia, which overturned the additional compensation. The case ultimately reached the Supreme Court, which held that the compensation provided for under the Workers' Statute is sufficient and is not incompatible with the provisions of the European Social Charter.

Accordingly, the Supreme Court concluded that the courts are not entitled to award compensation beyond that expressly provided for unfair dismissal under Article 56 of the Workers' Statute.

However, prior to that ruling, a number of lower court decisions had accepted the possibility of granting additional compensation in order to comply with the European Social Charter.

The European position

From an international perspective, several bodies have criticised Spain for failing to comply with the European Social Charter. In particular, the European Committee of Social Rights has declared that the Spanish system of compensation for unfair dismissal does not comply with Article 24(b) of the European Social Charter because it does not guarantee adequate compensation in every case and lacks a sufficiently deterrent effect for employers.

In this regard, the European Committee of Social Rights issued a decision following a complaint brought by the UGT trade union, which was followed by a recommendation from the Committee of Ministers urging Spain to revise its employment legislation so that compensation fully reflects the actual loss suffered by dismissed workers.

The current position of the Spanish courts

In light of the above and, in particular, the Supreme Court's case law, the current legal position regarding unfair dismissal is as follows:

• The courts cannot award compensation exceeding the amount resulting from the strict application of Article 56.1 of the Workers' Statute in cases of unfair dismissal.
• No additional compensation may be awarded on the basis of the International Labour Organization Convention or the European Social Charter.
• Additional compensation is only available in certain situations:
  ○ Where the dismissal is declared void because it infringes a fundamental right (for example, in cases of discrimination), allowing compensation for both moral and material damages.
  ○ Where the employment contract or the applicable collective bargaining agreement expressly provides for such additional compensation.
  ○ Where there is a failure to comply with a court judgment ordering reinstatement following a finding of unfair dismissal.

Therefore, in cases of unfair dismissal, except in the circumstances outlined above, seeking additional compensation may result in the claim being dismissed and even being regarded as procedurally reckless, given the clarity of the Supreme Court's case law to date.

If you have been dismissed and are considering bringing a claim, it is essential to seek advice from specialist unfair dismissal lawyers who can assess your case and determine whether there are grounds to pursue additional compensation. Contact our team so that we can review all the circumstances of your case, negotiate compensation on your behalf and represent you in court where there is a reasonable prospect of success.