Saturday, January 22

The Government reaches a historic agreement on the labor reform to reduce temporary work in Spain

This Thursday, December 23, has been the date of “a historic agreement”, highlighted the Vice President and Minister of Labor, Yolanda Díaz. For the first time in the history of Spain, the Government is carrying out a far-reaching labor reform with the agreement of the employers and the majority unions. There have been some previous examples, but with much less profound changes. This aims to address one of the biggest burdens of our labor market: the very high temporary employment. The Pedro Sánchez coalition executive wanted the legislation, key for the future and which is being followed closely in Brussels, to have strong social support. A few months ago it seemed almost impossible for employers to give their approval. This Thursday, after nine months of negotiations, it is a reality. The reform goes ahead with priority promises for the coalition, but also with several assignments that have allowed the employers to join.

Yolanda Díaz: “This is the first labor reform that recovers and gains rights for workers”

Know more

Perhaps the first thing that needs to be clarified, although it has already been recognized by the Government on countless occasions, is that this legislation is not as such “the repeal of the PP labor reform.” Of all of her, no. Despite the political recourse of the left-wing forces to this proclamation, the coalition executive had already explained that the reform that was now being negotiated and had just been agreed “was much more than that,” in the words of Yolanda Díaz.

From the dismantling of the labor reform, a few issues were now actually being addressed, no doubt important to the coalition and the unions, but basically there have been four. The reform is “much more,” said Díaz, because it also addresses the enormous challenge of agreeing on measures that allow the high temporary employment rate in Spain to be reduced once and for all, and other flexibility alternatives in companies (future ERTE) that avoid the massive layoffs that they weigh down the Spanish economy and society in each crisis, all with the necessary approval from Brussels.

With the starting frame clear, what labor reform has been carried out?

Regarding the “dismantling of the labor reform” by Mariano Rajoy, the two measures that the coalition agreement considered as “most urgent” are included: the limit to the ultra-activity of collective agreements is put to an end (their extension once they expire until a new one is agreed) and the primacy of the sectoral agreement over that of the company is recovered. This last measure is only finally applied to the wage issue, which is the one that most concerned the Government and the unions, which have yielded at the last minute regarding the days.

These two issues were a priority, especially for the unions, to “rebalance the collective bargaining” that the PP dismantled in favor of the employers. When some companies wanted to end the conditions of an agreement, they only had to not negotiate after its validity and it declined every year. On the other hand, it was possible to agree on lower salaries than those agreed for the sectors, which had given rise to precariousness and especially to the devaluation of salaries in certain types of companies, such as multi-service companies. To avoid this situation, prevalence and ultra-activity were put ahead of other matters when negotiating with employers.

This is the case of the substantial modification of the working conditions that the company can agree to (article 41 of the Workers’ Statute) and that in the end is not touched. This measure is included in the coalition agreement and was present in the drafts, to restrict it and above all to end the so-called ‘ad hoc’ commissions. But the bosses insisted on preserving this measure of flexibility and this has been the case in the end.

Outsourcing, for its part, has been the great last minute stumbling block. Social dialogue sources assure that there are still conversations about the final draft of the measure, which has been lowered somewhat at the end of the negotiation. The Government proposed not to restrict the activities that can be subcontracted (as stated in the coalition pact), but to define that the minimum working conditions in the sector should be the one established by the sectorial agreement of the subcontracted activity. In other words, if the cleaning service of a company is outsourced, the minimum conditions for these workers would be those set out in the sectoral agreement. Again, the measure sought to avoid the devaluation of working conditions of “pirate” companies that compete by making their staff more precarious.

Finally, the text has not been completely like that. The reference for subcontracted workers is set to be the sectoral agreement of the activity in question, but if the company they depend on has its own agreement, this is the one that would apply. Of course, given that the prevalence of the sectoral agreement regarding wages has been agreed, in practice these would continue to be set by the sector. The company could not play to the downside with remuneration, although the same does not happen with other working conditions (days, hours, compensation or payment of overtime, etc.).

The big bet, reduce temporary work

But the focus of discussion and debate for months at the negotiating table was another: temporality. All the actors agreed that it was the most complex issue, both technically and to be implanted and assimilated by a productive fabric with an established culture of temporary work. That normalizes irregular temporary contracts, those that have no real cause but that seem the way to enter the labor market. Spain is a machine that creates and destroys 100,000 jobs every day. Changing that and that the businessmen were on the boat to change widely used practices led to more than one of them during the negotiations.

The changes that are coming forward are far-reaching. Here are the four lines of action taken by the Executive. Waiting to see if they manage to reduce the temporality with forcefulness, as expected by the Executive and as requested by Brussels, it is to be noted that the most used temporary contract (for work and service), which has been the gateway to Spain, ends for a lot of fraudulent temporality. In addition, with a very wide margin of action, because they could be extended up to four years. Now much lower limits are set on the time a person can be on temporary contracts: six months, one year and 90 days, depending on the cause of the temporary contract. And also at the time when a person – and importantly, a position – can have this type of contract.

The Government has also tightened the sanctions for non-compliant companies by the Labor Inspectorate. There is no minor change: sanctions are individualized. Instead of fining an irregularity, for example, Bar Juan for having five workers with irregular temporary contracts, with this legal framework Juan would have to pay five fines. The sanctions are also more expensive, going from 750 and 7,500 euros (minimum grade to maximum grade) to penalties of between 1,000 and 10,000 euros. And, we remember, for every employee.

In this negotiation it has also given in on issues. How to make it possible for covering vacations to be a cause of temporary hiring, maintaining a certain exceptionality in the indefinite hiring for construction and dropping the text, for example, the consequence of nullification of any termination of a fraudulent temporary contract, whatever the cause. In other words, an employee at the end of his irregular temporary contract could appeal to the courts and they should agree to reinstate his position as a permanent employee.

In this intention of changing a “culture”, the way of understanding the labor market, the Government has tried to join all the social agents in promoting fixed-discontinuous contracts. Permanent contracts but that are interrupted during certain times of the year because they are designed for seasonal activities, such as tourism, or with clear intermittencies. The Ministry of Labor hopes that this contractual modality that gives stability will be replicated more, by which the company uses the same person when there is activity, instead of signing several temporary contracts for which a worker is hired each time different.

A future with crisis, but less unemployment

The reform addresses another fundamental element for the future that also aims to end a very frequent practice in the Spanish labor market. This is a great destruction of employment, which makes unemployment rise like foam, in crisis situations. This is explained by the large number of temporary workers, who fall from the labor market first in the face of instability, which is already addressed in the reform. But the Government and social agents have also wanted to incorporate a lesson from the pandemic: ERTE can be a good cushion to avoid unemployment.

Thus, the three parties have reformulated the ERTEs that were already in the Workers’ Statute and have configured the new Network Mechanism, the ERTEs of the future for cyclical crises in the economy and for sector-specific crises. With the possibility of aid to companies, benefits for workers and an incentive path to training to re-qualify staff.

It is important to pay attention to the fine print of all the legislation that is published in the BOE, but it is undeniable that the Government has managed to sign up a point that few expected. Months ago it seemed science fiction that businessmen supported a legal reform that revokes some emblems of the PP labor legislation labeled “enemy number one” by the left and the workers, which reduces their power at the collective bargaining table. The unions, which acknowledge that everything they would have liked has not gone ahead, emphasize that this is the first labor reform that recovers labor rights for workers, instead of cutting them. This idea was also underlined by Vice President Yolanda Díaz, minutes after the social pact was reached.

The government’s proposal has changed to include businessmen, true, but the Executive of Pedro Sánchez insisted that its final objective was an agreed reform. Even so, with the changes and the measures that have come out hand in hand, few could anticipate the three-way pact that the government coalition has achieved in such a broad labor reform that addresses such thorny issues. It had never been achieved.