The Supreme Court rules that severance pay cannot be increased through legal proceedings

Compensation for unfair dismissal cannot be increased through the courts, according to a ruling handed down by the Social Chamber of the Supreme Court in July.

The issue is controversial because in Spain compensation for unfair dismissal is capped, and the European Committee of Social Rights considers Spanish legislation to be contrary to Article 24 of the European Social Charter, which refers to the right to fair compensation.

How is compensation for unfair dismissal regulated under Spanish law?

Compensation for dismissal is the right of an employee to receive a sum of money if they are dismissed and there is no justifiable cause for dismissal. Dismissal is unfair if it does not comply with the requirements established by law, but it is important to bear in mind that whether or not the dismissal is unfair is determined by a judge.

In Spain, compensation for unfair dismissal is regulated by Article 56 of the Workers' Statute, which establishes that when a dismissal is declared unfair, the employer can choose between reinstating the employee or paying compensation equivalent to 33 days' salary per year worked, with a limit of 24 monthly payments. It is therefore a fixed and specific amount of compensation.

In the case of dismissal for objective reasons, compensation is also limited to 20 days per year of service, with a maximum of 12 monthly payments. It is therefore also limited by law.

How do you claim compensation for unfair dismissal?

To claim compensation for dismissal that is considered unfair, the steps are as follows:

• Submission of a conciliation form. The deadline is 20 working days from receipt of the dismissal letter and must be submitted to the mediation, arbitration and conciliation service (SMAC) of the autonomous community. To do this, it is highly recommended that you seek the help of a labour lawyer who will protect your rights.
• Holding of the conciliation hearing. This must be held within a maximum period of 15 days. Several things can happen: there may be an agreement, there may be no agreement, or the company may not show up.
• Filing a lawsuit to challenge the dismissal. If there is no agreement or the company does not show up, a lawsuit must be filed with the labour courts, requesting that the dismissal be declared unfair.

What does the European Committee of Social Rights say about compensation for unfair dismissal in Spain?

The European Committee of Social Rights (ECSR) recently issued a resolution stating that Spanish legislation on compensation for unfair dismissal violates the European Social Charter because it is limited and capped.

In this regard, the ECSR considers that Spanish legislation (the Workers' Statute) violates Article 24 of the European Social Charter, which recognises the right of workers dismissed without valid reason to adequate compensation or other appropriate redress.

Supreme Court ruling: severance pay cannot be increased in court

The Plenary Session of the Social Chamber of the Supreme Court considers in its ruling that the severance pay regulated in the Workers' Statute in the case of unfair dismissal cannot be increased in court considering the specific circumstances of the case.

Furthermore, it considers that this does not violate either Article 10 of ILO Convention 158 (which also refers to adequate compensation) or Article 24 of the European Social Charter, as we have seen, because they do not require different compensation for each case that takes into account the circumstances of the worker.

As for the decision of the ECSR, the Supreme Court considers that it is not enforceable because it is not a court of law, unlike the European Court of Human Rights or the Court of Justice of the European Union. In fact, the decisions of the ECSR are not binding on the Council of Ministers of the Council of Europe or on the domestic courts of each Member State of the European Union.

Another important aspect considered by the Supreme Court is that, currently, Spanish legislation allows both dismissed employees and employers to have legal certainty and to know the amount of compensation.

What are the effects of the Supreme Court ruling?

The ruling handed down by the Supreme Court has several important effects:

• End of additional compensation through the courts. For example, the High Court of Justice of Catalonia upheld an increase in the amount of compensation for unfair dismissal because it considered it to be meagre and without any deterrent effect on the company. Decisions of this kind must now comply with the Supreme Court's criteria.
• Clarity on dismissal costs. Companies will know clearly what the cost of unfair dismissal is, and employees will know how much they will receive.
• Limits for employees. They will not be able to claim compensation for other items or damages, such as loss of earnings, to increase their dismissal compensation.

Should the current regulations be amended?

Both some trade unions and the Ministry of Labour believe that severance pay should be amended so that:

• It complies with European law.
• It acts as a deterrent for employers and prevents redundancies.
• It takes into account the personal and working circumstances of each worker who is made redundant.

If all of the above is taken into account, severance pay could vary in each case rather than being a fixed amount as is currently the case.

In short, the Supreme Court has applied current legislation and ruled that there is no grounds for increasing severance pay due to the employee's particular circumstances. However, there could be a change in the legislation that would mean adapting the severance pay to each individual case.

If you need an employment lawyer for your case, contact us so that we can analyse your case and defend your rights. We are lawyers who are experts in employment law and have helped many employees in complex circumstances.