REPORT ON ROYAL DECREE-LAW 32/2021, OF DECEMBER 28, ON URGENT MEASURES FOR LABOR REFORM

A. Purpose of the Report

The purpose of this report is to analyze the new labor reform implemented by Royal Decree-Law 32/2021, of December 28, on urgent measures for labor reform, the guarantee of employment stability and the transformation of the labor market (BOE December 30, 2021).

According to the Explanatory Memorandum, the reform contained in this Royal Decree-Law is intended to correct excessive temporary employment, as well as to implement measures to simplify contracts, modernize collective bargaining and the contracting and subcontracting of business activities and establish a permanent mechanism for flexibility and stabilization of employment, as provided for in Component 23 on “New public policies for a dynamic, resilient and inclusive labor market”.

Royal Decree-Law 32/2021 entered into force one day after its publication in the Official State Gazette, except for certain points affected by a three-month vacatio legis.

The reform consists of five major articles, seven additional provisions, nine transitory provisions, one derogatory provision and eight final provisions, the most relevant aspects of which are summarized in this report.

B. Analysis of the proposed amendment made by Royal Decree-Law 32/2021, of December 28.

Article one. Workers’ Statute:

The following precepts of the Royal Legislative Decree 2/2015 of October 23, 2015, approving the revised text of the Workers’ Statute Law are amended .

1. Training contracts:

Amendment of Article 11 of the Labor Code, regarding training contracts, distinguishing between two modalities:

– Training contract in alternation, to make paid work activity compatible with training processes in the field of vocational training, university studies or the Catalog of training specialties of the National Employment System.

The duration of the contract shall be a minimum of 3 months and a maximum of 2 years, whether continuous or not. The effective working time may not exceed 65% during the first year and 75% during the second year.

Remuneration shall be fixed in the collective bargaining agreement and may not be less than 60% in the first year and 75% in the second year, in accordance with the remuneration level of the corresponding professional group and may not be less than the minimum wage in proportion to the effective working time.

Part-time, night and shift work may be arranged, and several contracts may be formalized with several companies to cover the different modalities of the training plan or program.

There is no possibility of overtime or additional hours, except in cases of force majeure, and there is no probationary period.

– Contract for obtaining professional practice, appropriate to the corresponding level of studies, for those in possession of a specific qualification, within three years, or five years in the case of disabled persons, following the completion of studies and provided that no professional experience or training activity has been obtained within the company for a period of more than three months.

The duration shall be a minimum of six months and a maximum of one year, and the probationary period may not exceed one month, unless otherwise provided in the collective bargaining agreement. No overtime may be worked.

Common provisions in the formative contracting shall be the following:

• Contracts entered into in fraud of law or in breach of formal requirements will be considered as ordinary indefinite-term contracts.
• They may be carried out in companies in ERTEs, of article 47 or 47 bis ET, as long as the hiring is not carried out to replace the persons affected by the suspension of contracts or reduction of working hours.
• The protective action of the Social Security will include all protectable contingencies and benefits, including unemployment and FOGASA.
• According to the Second Transitional Provision, until the entry into force of the new contribution regime on March 31, 2022, alternating training contracts entered into after December 31, 2021 and those training contracts entered into before that date will be carried out in accordance with the requirements contained in the State Budget Law for the year 2022. In addition, internship and training and apprenticeship contracts may continue to be executed until March 30, 2022 in accordance with their regulation and maximum duration, that is, up to 2 and 3 years maximum, respectively.Within three months from December 31, 2021, a regulation on the peculiarities applicable to the hiring of young people under eighteen years of age for jobs with specific risks, in development of art. 27.2 of Law 31/1995, of November 8, on the Prevention of Occupational Risks, is expected to be drafted. Likewise, within six months from the entry into force of the regulation, the most representative trade union and business organizations will be called to discuss the Statute of the Scholarship Holder.

2. Part-time contract:

Paragraph 2 of Article 12 of the Labor Code is amended, which maintains that part-time contracts may be entered into for an indefinite period of time or for a fixed term in those cases in which the use of this type of contract is legally permitted.

3. Temporary contracts:

Modification of Article 15 of the Workers’ Statute, which will enter into force on January 1, 2008.

effective March 31, 2022, with the following particularities:

• Contracts are presumed to be entered into for an indefinite period of time.
• The contract for a specific work or service disappears. Thus, the fixed-term employment contract may only be entered into:
  • Due to production circumstances, formalized:
    • For a duration of 6 months, extendable to 1 year by sectoral collective agreement, in the event of an occasional and unforeseeable increase in production.
    • For a duration of 6 months, extendable to 1 year by sectoral collective bargaining agreement, in the event of fluctuations that generate imbalances in the company’s employment stability, including vacations.
    • For a duration of 90 days in the calendar year, to attend occasional, foreseeable situations and with reduced duration, being able to hire all the necessary people to attend each of the days to the specific needs. In addition, this period of ninety days may not be used continuously and an annual forecast of the use of these contracts must be transferred to the workers’ representatives.
  • For substitution of the worker with the right to reserve the job, to complete the reduced working day by another worker or for the temporary coverage of a job position during the selection or promotion process for its definitive coverage by means of a permanent contract.

• Chaining of contracts: workers who in a period of 24 months have been hired for a period of more than 18 months, through two or more contracts due to circumstances of production, will acquire the status of permanent employees.

• Transitional regime:

The Third and Fourth Transitory Provisions contain the following provisions:

• Contracts for specific works and services, entered into before December 31, 2021 and in force on that date, will be applicable up to their maximum term, i.e. up to 3 years or 4 years if extended by collective bargaining agreement.
• Temporary and interim contracts referred to in articles 15.b) and c) of the Labor Code entered into before December 31, 2021, will be governed by the wording prior to this reform, for a duration of 6 months, or 12 months if provided for in the applicable collective bargaining agreement.
• Contracts for specific works and services and temporary contracts for production circumstances entered into from December 31, 2021 to March 30, 2022 will be governed by the legal regulations in force when they were entered into, although their duration may not exceed 6 months – The provisions of the Fifth Transitional Provision for the chaining of contracts will be applicable as from March 31, 2022. With respect to contracts signed prior to this date, only the contract in force as of December 31, 2021 will be taken into consideration for the calculation of the number of contracts, position and period of their chaining.

4. Permanent-discontinuous contract:

Modification of Article 16 of the Labor Code, regarding the fixed-discontinuous contract, which will enter into force on March 31, 2022. Until such time, contracts will be formalized in accordance with the regulations prior to the reform.

The permanent-discontinuous contract may be concluded:

• For the performance of seasonal work or work linked to seasonal productive activities, or for the performance of work that is not seasonal in nature but which, being intermittent, has certain periods of execution.
• For the development of work consisting of the provision of services within the framework of the execution of commercial or administrative contracts that are part of the ordinary activity of the company.
• By temporary employment agencies for the coverage of contracts for the provision of services linked to the temporary needs of user companies, under the terms set forth in art. 15 of the Labor Code.

5. Contracting and subcontracting:

Article 42 of the Workers’ Statute, relating to subcontracting, is amended. Although the previous regulation is maintained, the following points are incorporated:

The collective bargaining agreement applicable to contractors and subcontractors shall be that of the sector of the activity carried out in the contract or subcontract, unless another applicable sectoral agreement is applicable.

When the contractor or subcontractor has its own collective bargaining agreement, this will be applicable under the terms resulting from the provisions of Article 84 of the Labor Code: the priority of application of the company’s collective bargaining agreement is maintained, with the exception of wage matters; this new provision will not be applicable to special employment centers.

6. Temporary Labor Force Adjustment Plans (ERTE):

Article 47 of the Labor Code is amended, relating to the reduction of the working day and suspension of the work contract due to ETOP causes derived from force majeure, with the following particularities:

– New case in the ERTEs:

• Temporary force majeure is defined as that determined by impediments or limitations in the normal activity of the company.
• The procedure is made more flexible in relation to that applied in the ERTEs during the pandemic.

• In the case of ERTEs, ETOPs are more easily processed for SMEs, reducing the consultation period to 7 days for companies with less than 50 workers.
• The aim is to give priority to the reduction of working hours over the suspension of contracts.
• It is possible to disaffect and affect workers, in relation to the circumstance justifying the measure.
• It is forbidden to work overtime, establish new outsourcing of activities and make new employment contracts, unless the persons affected by the suspension measure are unable to carry out their functions.
• Voluntary exemptions are provided for in the Social Security contribution on the employer’s contribution for common contingencies and joint collection concepts of:

• 20% for ERTE,s ETOP, linked to the provision of training actions to the employees. In case of non-compliance with the provision of training actions, only the exonerations of the worker affected by such non-compliance will have to be returned.
  • 90% for ERTE’s due to force majeure and due to impediments or limitations in the normal activity of the company.

These exonerations are voluntary on the part of the company, and are conditioned to the maintenance of employment during the six months following the end of the period of validity of the ERTE, having to return the contributions of the dismissed person in case of non-compliance.

• The general unemployment protection regime applies.
• The processing and effects of the ERTEs due to impediments or limitations to the normalized activity linked to COVID-19 will continue to be regulated by the provisions of Royal Decree-Law 18/2021, of September 28 (Third Additional Provision).

7. Employment Stabilization and Flexibility Network Mechanism:

Introduction of article 47 bis, referring to the Employment Flexibility and Stabilization Network Mechanism.

• This is an instrument of employment flexibility and stabilization that allows companies to voluntarily request measures to reduce working hours and suspend work contracts, after a period of consultation with workers’ representatives and labor authorization. To this end, a RED Fund will be set up to finance the needs of this mechanism in terms of benefits and exemptions, including the costs associated with training.
• Two modalities are foreseen:

– Cyclical, for situations that make the adoption of additional stabilization instruments advisable, with a maximum duration of one year. The following exemptions from Social Security contributions are provided for:

• 60% from the date of activation until the last day of the fourth month after activation.
• 30% during the 4 months following the end of the previous term.
• 20% during the 4 months following the end of the second installment.

Sectorial, for permanent situations in a sector of activity that make it necessary to requalify and carry out professional transition processes for workers, with an initial maximum duration of 1 year, with the possibility of two extensions of 6 months each. The contribution exemptions in these cases will be 40%.

Unemployment protection of 70% of the regulatory base is provided for during the entire period of application of the measure, with no vesting period or consumption of benefits, which will come into effect on March 31, 2022.

8. Compensation for temporary contracts:

Article 49.1.c) ET is amended, regarding the termination of temporary contracts. In these cases, except in training and fixed-term contracts for substitution, the worker will be entitled to receive compensation equivalent to the proportional part of the amount that would result from paying twelve days’ salary for each year of service, or the amount established in the specific applicable regulations.

9. Priority application of the company agreement:

Amendment of Article 84.2 of the Labor Code, in order to maintain the priority of application of the company agreement, with the exception of wage matters.

– Sixth Transitional Provision: The amendment will be applicable to those collective bargaining agreements entered into and submitted for registration or publication prior to December 31, 2021, once they cease to be expressly in force or, in any case, after one year has elapsed from the aforementioned date. Once the aforementioned term is reached, the agreements must be adapted within six months.

10. Ultraactivity of agreements:

Article 86 of the Spanish Workers’ Statute, regarding the ultraactivity of collective bargaining agreements, is amended with the following particularities:

• In the absence of an agreement, when the negotiation process has elapsed without reaching an agreement, the collective bargaining agreement shall remain in force.

• As established in the Seventh Transitional Provision, the collective bargaining agreements denounced as of December 31, 2021, until a new one is adopted, will remain in force with indefinite ultraactivity.

Article two. Construction sector:

The Third Additional Provision of Law 32/2006, of October 18, 2006, regulating subcontracting in the Construction Sector is amended.

• Indefinite-term contracts assigned to construction work shall be considered to be those whose purpose and results are linked to construction work.

• At the end of the work, the company shall offer a relocation proposal to the worker, subject to the development, if necessary, of a training period at the company’s expense.

• If the employee rejects it or if it is determined that it is impossible to relocate him/her, the contract will be terminated, with a 7% indemnity calculated on the salary concepts accrued during the term of the contract, contained in the applicable collective bargaining agreement. The termination regime will be applied regardless of the employees affected.

Article three.

Social Security:The amendment of various precepts of the Royal Legislative Decree 8/2015, of October 30, which approves the revised text of the General Law on Social Security is carried out, namely:

• The contribution with respect to fixed-term contracts of less than 30 days, specifying the cases in which this increase in contribution is not applicable.

• A new article 153 bis is added, relating to the contribution in the event of reduction of working hours or suspension of the contract.
• Paragraph 1 of Article 267, referring to the legal situation of unemployment, is amended.
• Article 273.2 is amended to provide that, in the event of a reduction in working hours or suspension of the contract, the managing entity will only pay the employee’s contribution, after the appropriate deductions have been made.
• A new Thirty-ninth Additional Provision is added, relating to the Social Security contribution benefits applicable to ERTEs and the RED Mechanism.
• A Fortieth Additional Provision is added regarding the actions of the Labor and Social Security Inspection.
• A Forty-first Additional Provision is added regarding social protection measures for workers affected by the application of the RED Mechanism for Employment Flexibility and Stabilization, regulated in Article 47 bis of the Workers’ Statute.
• A Forty-second Additional Provision is introduced, on actions of the State Public Employment Service and the TGSS to simplify administrative actions.
• A Forty-third Additional Provision is introduced, regarding the contribution for training contracts in alternation.

Article Four. Vocational Training:

Amendment of Law 30/2015, of September 9, which regulates the Vocational Training System for employment in the workplace.Companies that train people affected by ERTE,s regulated in Article 47 of the Workers’ Statute or by one of the modalities of the RED Mechanism of Article 47 bis, will be entitled to an increase in credit for the financing of.

actions in the area of programmed training, depending on the size of the company:

• From 1 to 9 workers: 425 euros per person.
• From 10 to 49 workers: 400 euros per person.
• For 50 or more employees: from 320 euros per person.

Article Five. Infringements and Penalties:

Amendment of Royal Legislative Decree 5/2000, of August 4, 2000, approving the revised text of the Law on Infractions and Penalties in the Social Order.

1. New infractions are defined in relation to direct temporary hiring and hiring through temporary employment agencies, information on filling vacancies in the company, follow-up in the procedures of ERTEs, EREs and RED Mechanism, as well as non-compliance with hiring and outsourcing prohibitions during ERTEs.

Infringements on contractual modalities and fixed-term and temporary contracts shall apply to each worker concerned.

Infringements in the social order committed prior to December 31, 2021 shall be sanctioned in accordance with the amounts and shall be subject to the liability regime in force prior to said date.

Additional Provisions:

The reform provides for seven Additional Provisions, among which is the extension of the minimum wage for 2021 ( A.D. 7a). Thus, the validity of Royal Decree 817/2021, of September 28, which sets the minimum interprofessional wage for 2021, is extended until the approval of the Royal Decree that sets the minimum wage for 2022.

Final Provisions:
There are eight Final Provisions, the most important of which are the following:

– First Final Provision : Temporary Employment Agencies may enter into contracts for the hiring due to circumstances of production, as well as for cases of permanent-discontinuous hiring.

– Eighth Final Provision. Entry into force:

• In general, on the day following its publication in the BOE.
• Three months after its publication in the BOE: the new regulation of training contracts (art. 11 ET), temporary contracts (art. 15 ET), and permanent-discontinuous contracts (art. 16 ET).