• Austerity Measures and Labour Law Reforms in Spain: A New Standard?

  • Adoración Guamán , Raúl Lorente | 17 Mar 16 | Posted under: Spain , Precariousness
  • The economic and sovereign debt crisis is having a particularly strong impact on Spain and its labour market. In comparison with other EU countries, Spain has lost more jobs, more rapidly, than other European economies, more than 3.5 million since the beginning of the crisis. The dramatic increase of the unemployment rate has been used by the government and by the European institutions as an argument for spreading the idea that labour law, including labour rights, such as protection against dismissal, employment stability, or minimum wage and collective bargaining, is one of the main causes of such job loss. As is happening in other European countries, since the beginning of the crisis the Spanish Government has enacted many measures, including amendments to labour and social security regulations. The majority of these reforms have followed the country-specific recommendations issued by the Commission and the Council and the different National Reform Programmes that are approved each year by the Spanish Government as determined by the new system of EU economic governance.[1]

    Among other measures, the government has approved and promoted new types of temporary labour contracts; more facilities for the employers to hire part-time workers; creation of a new open-ended contract to promote entrepreneurship with a one-year trial period; reduction of the rights of young workers employed under training contracts; creation of a new fixed-term contract for young workers allowable simply if the individual is under 30 years of age and without employment.

    Economic crisis and labour law reforms: a permanent change towards a precarious employment society

    The formal purpose given for most of the several labour reforms enacted in Spain in the last three decades was the need to correct or attempt to remedy two main problems: unemployment and temporary work. In order to achieve the first objective, subsequent reforms have increased ‘flexibility’ in order to reduce the so called ‘rigidity’ of the Spanish labour market, which from the point of view of some economists and employers made job creation difficult; the reforms were based on assumption that more flexible employment was needed to create more jobs. Among the measures promoting flexible labour regulation, atypical (fixed-term) labour contracts held an important place. Deregulation of dismissal, encouragement of part-time work by facilitating employers’ recourse to it, priority given to company-level collective agreements against sectoral agreements, and an increase of the employer’s power to modify labour conditions at the enterprise were among these measures.

    Since 2008, two different governments have produced several labour law reforms. Almost all of these reforms involve EU austerity requirements, starting in mid-2009, as a result of Spain’s participation in the Euro System. There have been two phases of enforcement of the Country Specific Recommendations of the European Commission and the Council: the first, between 2009 and 2012, with an important turning point in 2011, and a second phase, from 2012 to the present day.

    In December 2009, the Socialist (PSOE) government approved the ‘Strategy for a Sustainable Economy’, with the goal of carrying out twenty major ‘modernising’ reforms in the labour, environmental, economic, and financial spheres. The first measure passed was RDL (Real Decreto-Ley – Royal Decree-Law) 8/2010, providing for wage cuts in the public sector: The public sector wage bill was reduced by an annual 5 per cent in all administrative sectors (in a country in which public sector employees account for 13 per cent of the workforce); the revaluation of public pensions was suspended for 2011.

    The adoption of RDL 8/2010 provoked three types of reaction: the 8 June 2010 general strike in public services; an action brought arguing that the law was unconstitutional; and a complaint brought before the Committee on Freedom of Association of the International Labour Organization for violation of the rights enshrined in the Convention Concerning Freedom of Association and the Right to Organise and Collective Bargaining Convention (Conventions 87, 98, 151 and 154).[2]

    A few months later the Socialist government undertook a major labour legislation reform (Decree-Law 10/2010 and Law 35/2010), affecting both flexibility and dismissal. Some months later, in August, the Parliament approved a constitutional reform through an agreement between the ruling Socialists and the main opposition party (the conservative PP). The reform introduced a debt limit in the Constitution as well as priority given to interest payments on the public debt over any expenditure. In addition, another labour law reform was passed in the same month focused on youth employment and the modification of training contracts (RDL 10/2011).

    During their last months in the government, the PSOE accepted another recommendation relating to pensions. The Recommendation of the Council of 12 October 2011 proposed both raising the retirement age and an increase in the number of years needed to claim a retirement pension, together with a reform of the formula used to calculate pension levels by taking into account increased life expectancy. The Recommendation urged the adoption and application of a global reform of the process of collective bargaining and the system of annual indexation to give companies the necessary flexibility to internally adapt their employment conditions to the changes in the economic environment. Law 27/2011 on updating, adequacy and modernisation of the social security system enacted a great deal of the pension reform that was demanded; for its part, the 10 June RDL 7/2011 containing urgent measures to reform collective bargaining, opened the way for a decentralisation, or ‘descent to company level’ of collective bargaining that would be completed by the 2012 reform.

    Spain went into recession again in the last three-month period of 2011. According to the European Commission analysis, this was the result of deteriorated labour market conditions. At that moment, and after general elections in November 2011 when the PSOE was voted out of government, a set of reforms relating to the economic crisis and aimed at stopping the continued rise in unemployment were approved. The common denominator of this set of ‘labour policies addressing precarisation’ has been the devaluation of labour and of stability factors in employment and employment conditions, together with the reduction of social protection rights.

    Regarding the private sector, the 2012 reforms (Decree Law 3/2012 and Law 3/2012) and those following them have modified both hiring and internal flexibility, as well as dismissals and collective bargaining. Their main aim has been to reduce labour cost, by reducing wages and the hiring and dismissal cost for employers.[3] It should be noted that the Constitutional Court, contradicting the opinion of many legal experts, has considered these reforms compatible with the Spanish Constitution (see Resolutions 119/2014 and 8/2015).[4]

    Regarding the public sector, the RDL 20/2012 followed the Council's Recommendation: the public deficit had to stay below the reference value of 3 per cent of GDP in 2014, and Spanish authorities were to enforce the cuts adopted in the 2012 budget and the rebalancing plans of Spain’s Autonomous Communities. In order to reach these objectives the Council established a time limit of three months for the Spanish government to adopt effective measures and to transmit a detailed report on the planned reorganisation for the achievement of the objectives. RDL 20/2012 provided four types of measures: measures regarding public administrations and the reduction of expenses in their staff; those regarding social security; those regarding employment;  and measures reforming the care system for dependent people. Moreover, RDL 20/2012 froze the Public Employment Offer for 2012, 2013 and 2014, imposing a staff replacement rate of zero on a general basis, and of ten per cent for those public services deemed essential.[5]

    2013 and 2014 saw the consolidation of the reformist path towards precarisation. On 10 April 2013, the Commission pointed out that the necessary corrections were of such a scope that it was essential to have ‘decided action in public policies within the services and goods markets, the labour market, the financial sector, and public finances’. That month Spain presented its National Reform Programme of 2013 and its Stability Programme for the 2012-2016 period, which included the reform of pensions, integration of the sustainability factor, the revision of the 2012 labour reform, and the promotion of a ‘Spanish Economy De-indexing Law’ to moderate wages and prices.

    Several structural reforms, many of them regarding labour matters, were passed to apply these Recommendations throughout 2013. These reforms began with RDL 4/2013 on 22 February (Law 11/2013 on 26 July 2013), which dealt with employment promotion through measures fostering the reduction of social security contributions in precarious contract types, basically targeting the incorporation of young unemployed people in the labour market, as well as a series of reforms in social security matters, all of them intended to apply the ‘Entrepreneurship and Youth Employment Strategy’ launched by the government on February 2013 for the three-year period 2013-2016. Other areas where adopted measures had serious consequences were aimed at reduction in spending within the pension system, with RDL 5/2013 of March 15 and Law 23/2013 of December 23.

    Regulatory changes related to the extension of precarity

    Among the measures promulgated by the government, the following are particularly relevant to the above-mentioned forms of precariousness:

    • creation of a new type of contract, the ‘contract supporting entrepreneurs’, regulated in article 4, Law 3/2012 with a one-year trial period and tax and social security discounts;

    • New temporary contracts for young people have been created as the ‘first employment contract for young people’ regulated by article 12 of Law 11/2013, or the part-time contract based on training, regulated in article 9 of the same law.

    • Training contracts have also been targeted by this permanent labour law reform. The trainee and apprenticeship contracts have been reformed since 2012 and been turned into the path to job placement for low-wage young people, with the door open to temporary employment companies to formalise them.

    • Part-time contracts have also been modified in order to promote their use by employers. Part-time work regulation (modified by RDL 4/2013 and by Law 11/2013 and RDL 16/2014) has become flexible thanks to the new regulation of complementary hours (In Spain overtime in part-time contracts is prohibited, but ‘complementary hours’, slightly more regulated, in permanent contracts are allowed), which has resulted in a kind of ‘on demand’ contract.

    • One of the most important goals of these reforms has been the promotion of internal mobility of workers and change of working conditions, including working time and wages. For this goal, the 2012 reforms included salary opt-out clauses and mechanisms to amend the provisions established by collective agreements.

    • The reforms have also significantly modified firing procedures. For individual dismissal, both cost and procedure have been changed. Today, compensation for unfair dismissal equals 33 days of salary per each year worked up to a limit of 24 months. Moreover, the reforms suppressed procedural salaries (or interim wages) in cases in which, if the dismissal notice is conceded to be unfair, the employer chooses to pay a compensation but not re-admit the employee. In this way, the cost of unfair dismissal can be determined without the need to enter into a dispute resolution process and independently of the time it takes to solve it, which minimises the interest employers have in reaching agreements in order to avoid judicial proceedings. Also for individual dismissal, article 52 of the Workers Statute (Estatuto de los trabajadores – ET) establishes the possibility of terminating an employment contract a) for causes not attributable to the employee, even when they are related to his own personal conditions, and b) for causes related to the enterprise (objective dismissal). Included under a) are incapacity, lack of adaptation to technical modifications in the workplace, and absenteeism above a certain limit, even when justified. The conditions indicated under b) relate to economic, technical, organisational, or production problems that negatively affect a company’s economic situation. With the RDL 3/2012 reform, the definition of these justifications has been greatly broadened, in particular in the case of economic ones. Even sales losses, or predicted sales losses, or the steady diminution of normal revenue or sales, are considered causes for dismissal. A ‘steady diminution’ is said to exist when for three consecutive three-month periods, the ordinary revenue or sales level for each of these periods is lower than what it was in the same three-month periods of the previous year. The same applies to justifying collective redundancy.

    • Decree-Law 3/2012, later transformed into Law 3/2012, carried out the farthest-reaching reform of collective bargaining in three directions with the stated objective of ‘making collective bargaining an instrument rather than an obstacle to adapt employment conditions to the company’s specific circumstances’. First, in regard to the so-called ‘opting out’ of statutory collective agreements (art. 82.3 ET), increasing the possibilities of opting out of such agreements at the company level; second, granting the collective company agreement partial priority over the sectoral agreement (art. 84.2 ET), eliminating the authority of social partners to specify a suitable negotiation structure; and, finally, a temporary limitation on the ‘extended validity’ (‘ultraactividad’) of collective agreements (art. 86.3 ET) to impede the mandatory extension of their content. Later, Decree-Law 20/2013 allowed the non-enforcement of collective agreements in the sphere of Public Administrations at the unilateral will of the Administration.

    • Reduction in pension benefits: By the adoption of 27/2011 Act on the Updating, Improvement, and Modernisation of the Social Security System, the Socialist government raised the retirement age to 67; lengthened the reference period for calculating pension benefits and increased the number of years of contribution required to receive the maximum allowance. With the 23/2013 Act on regulating the sustainability factor and the revaluation index for the pension benefits of the social security system, the Conservative government delinked annual pension increases from the inflation rate and stabilised the sustainability factor, which will relate benefits paid to life expectancy and workers’ contributions within the same year.

    • Elimination of ‘co-responsibility’ labour policies for men and women and restriction of conciliation measures.
    Conclusions

    The context of a high structural unemployment level in Spain, which the economic crisis has aggravated, amounting to six million people (more than 6.5 million if we add hidden unemployment or the potentially active population) provides fertile ground for the extension of the precarity model. The pressure caused by this strong industrial reserve army of labour brings down employment conditions and standards, first by acting directly on the labour market and, secondly, through its regulation, on the premise, shared by several governments, that in order to create employment it is necessary to make it cheaper and strip it of its protection.

    All these processes put people in a situation in which ‘normality’, the only thing they have known, is precarious labour. It is something to which young people are used, but it is now extending to higher age groups. This extension of employment precarity socialises young workers, and other social groups such as female or immigrant workers, in a context that treats employment precarity as ‘the rule’, through a collectively shared consciousness, as a necessary labour context, shattering their aspirations for decent work, which appears to them to lie beyond the realm of possibility. This perception of precarity as the rule has a demobilising effect, which also fragments the working class, creating apparent contradictions of interests between its members, thus lending credence to arguments that point to the alleged existence of privileges for some workers, or of worker elites. All of this, together with the extension of individualist values and the breaking up of ties of class solidarity, leads to the spread of the attitude: ‘if I’m suffering, let others suffer too’, which, ironically, increases the pressure to extend precarity amongst the whole working class and consequently lowers the entire range of employment conditions.

    Beyond the problem of unemployment, a solution for precarity is absolutely needed. As we have seen, all labour law reforms adopted following the recommendations of the EU have had the same goal: the erosion of Spain’s ‘standard employment relationship’. The new standard is being built in a context of the rise and generalisation of temporary contracts and part-time work, the de-regulation of permanent contracts, the destruction of permanent jobs (which will not be recovered), the stabilisation of the unemployment rate, the modification of the collective bargaining structure and the narrowing of the collective agreement’s coverage, and the reduction of the trade union’s power, social legitimation, and institutional weight. In particular, temporary hiring has been the spearhead of the process of labour precarisation in Spain. The repeated calls for employment flexibility have resulted in a growth of temporary employment in Spain and the growth of business sectors based on low productivity and a low level of value added.

    The main economic think tanks connected to the business and political establishment have launched the formula of a ‘single contract’ to reduce the high level of temporary work in Spain. It is premised on the insider-outsider paradigm and the alleged excessive protection of Spain’s permanent workers (insiders) as the supposed cause of the low rate of job creation. In this logic, excessive protection of permanent workers is the cause of the high volume of temporary employment (outsiders) because, allegedly, employers have no choice but to turn to temporary workers in order to avoid the exorbitant costs of permanent hiring. In our opinion, this proposal not only goes against the international and national fundamental rights of labour (not to be dismissed without due cause) but will also not reduce unemployment; it will spread precarity.

    Trade unions are launching various proposals that mostly aim at derogating from the recent labour law reforms and creating employment plans as well as restoring public services and rehiring public employees.

    Another proposal advanced by the Izquierda Unida’s Europe of Citizens Foundation – complementing those made by trade unions – and theorised by many critical economists, labour experts, and sociologists is that of a ‘Job Guarantee’ or ‘Employer of Last Resort’, together with a new Workers Statute based on stability, equality, and a non-discriminatory labour relations’ system.


    Notes

    [2]Adoración Guamán Hernández, ‘Los desencuentros entre el Tribunal Constitucional y las normas internacionales a propósito de la Ley 3/2012 (Sobre el derecho al trabajo y las SSTC 119/2014 y 8/2015)’, Revista de Derecho Social 70 (2015).

    [3] For critical treatmenets of this and subsequent reforms, see María Emilia Casas Baamonde, Miguel Rodríguez Piñero y Bravo Ferrer, and Fernando Valdés Dal-Ré, ‘La nueva reforma laboral’, Relaciones Laborales, Revista crítica de teoría y práctica, 5 (2012); María Emilia Casas Baamonde, Miguel Rodríguez Piñero y Bravo Ferrer, and Fernando Valdés Dal-Ré, ‘La huida del derecho del trabajo hacia el “emprendimiento”, las reformas de la Reforma Laboral de 2012 y otras reformas: la Ley 11/2013 y el RDL 11/2013’, Relaciones Laborales, Revista crítica de teoría y práctica 10 (2013); Adoración Guamán and Héctor Illueca Balester, El huracán neoliberal, una reforma laboral contra el trabajo (Madrid 2012); Cristóbal Molina Navarrete, ‘De la “flexibilidad laboral al ajuste social total”. Lo que el “austeritario” Real Decreto-Ley 20/2012 se llevó, de momento’, Revista de Trabajo y Seguridad Social (Estudios Financieros) 356 (2012); Fernando Valdés, ‘La reforma laboral de 2012 (Notas sobre su texto -sistemática interna y calidad técnica- y su contexto -la falta de correspondencia entre el objetivo proclamado y los objetivos realmente perseguidos-)’, Relaciones laborales: Revista crítica de teoría y práctica 2 (2013).

    [4] See, among others, the following authors: Cristóbal Molina, ‘Reforma laboral y “justicia constitucional”: el Tribunal Constitucional ni es “infalible” ni ya tiene la “última palabra” (Comentario a la STC 119/2014, de 16 de julio, RI 5603/2012 interpuesto por el Parlamento de Navarra contra la Ley 3/2012, de 6 de julio, de reforma del mercado de trabajo’, Estudios financieros. Revista de trabajo y seguridad social 377-378 (2014); Adoración Guamán, ‘Los desencuentros entre el Tribunal Constitucional y las normas internacionales a propósito de la Ley 3/2012 (Sobre el derecho al trabajo y las SSTC 119/2014 y 8/2015)’, Revista de Derecho Social 70 (2015).

    [5] Molina, ‘Reforma laboral’.


Related articles