17 Mar

Thinking about an ERTE? Let us help you

Bernardo Martínez | GAP, ERTE

The health emergency that we are experiencing due to the COVID-19 Pandemic has multiple consequences. One of them are the effects that such situation will have on the financial situation of the companies whose activity is affected by reason of the measures announced by the Administration to reduce the contagion rate.

questions ERTE

Among other alternatives that companies have to mitigate these negative effects, and within the scope of the recently announced "State of Alarm", the Temporary Employment Regulation File (Expediente de Regulación Temporal de Empleo - ERTE) is of vital importance.

In these notes our aim is to inform you which are the main implications of this procedure, notwithstanding the fact that we are expecting an announcement from the competent authorities that will presumably establish a simplified procedure that companies must follow in order to file an ERTE, since it is likely that the aforementioned State of Alarm may be the basis of a “Cause of Force Majeure" that shortens the before mentioned process.

Our Client Management team will contact you in the following days to assess your particular situation and to support you regarding any extraordinary action that requires our advice.

In case you urgently need our help, or have any questions regarding this matter, please do not hesitate to contact our Client Management team (Cristina Hernández (+34) 678 46 43 66 / Gisleno Castro (+34) 670 268 533).

WHAT IS A TEMPORARY EMPLOYMENT REGULATION FILE (EXPEDIENTE DE REGULACIÓN TEMPORAL DE EMPLEO - ERTE)?

An ERTE is a temporary authorization through which a company can: i) suspend one or more employment contracts, or ii) reduce the working hours, in accordance with the provisions of Articles 47 and 51 of the Spanish Workers' Statute.

The reduction of working hours is a transitory decrease between 10% and 70% of the working day. The reduction can be applied on the daily, weekly, monthly or annual working period. During the period of reduction of working hours, no overtime may be requested, except for causes of force majeure.

WHICH ARE THE CAUSES INVOKED TO FILE AN ERTE?

There causes to invoke an ERTE can be of the following nature: i) technical (i.e. changes in production methods), ii) organizational (i.e. changes in systems and in staff work methods, or in the way of organizing production), iii) productive (i.e. variations on the demand of the products or services that the company intends to market), iv) economic that compromises the viability of the company (i.e. the existence of current or anticipated losses, or the persistent decrease in the level of income or sales), and/or v) force majeure (i.e. natural disasters and other unforeseeable and inevitable catastrophes, such as an epidemic)

In the case of the "State of Alarm" decreed on March 14, 2020, it is presumed that we could be facing a circumstance of Force Majeure caused by the measures implemented to reduce the contagion of the COVID-19 Pandemic (Coronavirus).

WHICH IS THE TERM OF AN ERTE?

Unlike a regular Employment Regulation Files (ERE), an ERTE is essentially a temporary measure. An ERTE is not definitive and does not extinguish the employment relationship, which means that once the causes that originated it cease, the employment relationship must be restored.

There is no minimum term for an ERTE. Due to its temporary nature, one of its fundamental requirements is to establish how long it will last.

WHICH COMPANIES CAN FILE AN ERTE?

Any company can file an ERTE, regardless of its size

WHICH IS THE ECONOMIC IMPACT OF AN ERTE?

During the period of validity of an ERTE, the company has no obligation to pay the wages of the workers affected by the measure, nor to pay any severance compensation. However, the company is obligated to pay social security contributions (business quota).

Within this period, the employer will neither have to pay the rest of the supplements like extra payments or vacations.

During the ERTE, the company will be able to reduce half of the Social Security contributions for common contingencies, for a maximum of 240 days per employee.

MAY EMPLOYEES INVOKE THE RIGHT TO BENEFIT FROM UNEMPLOYMENT ALLOWANCE?

During the period in which the ERTE remains in force, the employees affected by it may request the unemployment allowance, provided that they have the right to such benefit: i) when they have contributed for a period of at least 360 days within the six years period prior to the legal unemployment situation and when they have not used the contributions of said period for a previous unemployment situation, or ii) when they do not have incomes higher than 75% of the current minimum wage.

WHICH IS THE PROCEDURE FOR FILING AN ERTE?

The procedure can be initiated by the company or by the employees through their legal representatives (if it is presumed that the non-initiation of the procedure by the company itself could harm the employee’s situation beyond repair)

The ERTE is processed before the competent Labor Authority, following the subsequent steps, provided that is initiated for a “Cause of Force Majeure":

  • Dossier filed by the company requesting its approval, together with the evidence that the company deems necessary.
  • Communication to the legal representatives of the employees of such action.
  • Agreement of appointment of employees’ representatives, when there are no such official representatives.
  • Minutes of the beginning of the negotiation process and minutes of the agreement, in the same document.
  • Resolution of the case issued by the competentLabor Authority.

The simplification of the overall ERTE procedure is expected given the present circumstances. It is fairly possible that the authorities allow the companies to file the dossier together with a minimum documentation requirement, allowing the company to later files those additional documents deemed relevant.

It is also important to mention that, depending on the activity of the company, we understand that it may be easier to justify the force majeure or the connection of said activity with the State of Alarm.

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