In a bid to unpick legislation from the previous government, satisfy EU demands, lead economic recovery post-pandemic, and try and rebalance the relationship between workers and employees, Spain’s coalition government has decided to take action at a time when La Moncloa has been mainly focused on handling the Covid-19 pandemic. 

The long awaited labour reform was announced by the PSOE-led coalition government last Thursday following a deal made with unions and employers. The changes are now set to be approved in the Spanish Parliament on Tuesday December 28th.

Spain’s Second Deputy Prime Minister and Labour Minister Yolanda Díaz led the reforms. According to the member of hard-left party Podemos, the reforms​​ will bring Spaniards great “stability and security in employment” and represent “the beginning of the end of labour market anomalies involving temporary and precarious work.”

Spain’s temporary work problems

One of the major flagship reforms agreed by government, major unions, and employers, are changes to the nature of temporary contacts in Spain.

In order to try to rectify the prevalence of temporary jobs in the labour market (over 26 percent, according to the latest figures) and avoid the more exploitative elements of the practice, two newly defined types of temporary contracts have been established: structural and training. 

Structural temporary contracts are acceptable to deal with “the occasional and unpredictable increase that, even in the case of normal activity of the company, generates a temporary mismatch between the stable employment available and that required.” Obvious examples of situations like this include Christmas or seasonal agricultural work, but the new reforms formalise this long standing practice by requiring employers to “formalize contracts for production circumstances to attend occasional, foreseeable situations that have a reduced duration.” 

Temporary workers may be hired to fill the same position, but for a maximum of 90 days a year and not consecutively, as is often the case for large employers trying to save on costs who effectively employ temporary workers full-time but don’t recognise their pay or protection as such.

Likewise, in the last quarter of each year, companies must give workers some kind of forecast of what type and how much work they will need for the coming year. Structural temporary hires are also allowed to cover another worker, the duration of which may be extended until they return to their position.

On the new temporary training contracts, temporary hires are allowed in alternation, meaning in situations that include both elements of work and training, but are only available to employees up to 30 years of age – a measure surely designed to try and redress Spain’s high youth unemployment rate – during the three years following the conclusion of their studies, and which must be supervised by a tutor or boss of some description. The minimum contact will be three months, extendable up to a maximum of two years.

Fixed-discontinuous contracts

To try and further clamp down on exploitative practices in seasonal work, the reforms introduce a ‘fixed-discontinuous contract’ for “carrying out work of a seasonal nature or linked to seasonal productive activities.”

A contrato fijo discontinuo, as the name suggests, is a type of contract with no set end date but that isn’t carried out throughout the whole year and it is often meant for seasonal work.

In order to fill vacancies, employers must now send the workers proposed schedules for the entire year, including the type and duration of work, among other points, at the beginning of each fiscal year.

This move aims to end some of the unpredictability and exploitative power dynamic between employers and temporary workers that was typical of the previous labour reforms approved by the Rajoy government back in 2012, and will provide workers with more consistent work throughout the year. Crucially, it will give workers a better idea of when, where, and for how long it will be.

No limits to ultra-activity

One of the most controversial elements of the PP reforms from a decade ago was the limitation of ‘ultra-activity’ (the period during which an expired agreement remains in force while its renewal is being negotiated) to one year.

This was a key issue in the recent metalworkers strikes in the southern city of Cádiz because with this time limit, workers saw their bargaining position weakened, and if negotiations extended beyond that year, the previous agreement that had been regulating their activity became invalidated.

Last week’s reforms remove the time-limit and the validity of previous agreements will now be maintained for the duration of negotiations, levelling the playing field in collective bargaining agreements. 

RED Mechanism to avoid layoffs

The RED Mechanism for Employment Flexibility and Stabilisation will be used to support workers employed by companies that reduce working hours and suspend work contracts.

There will be two types of support: the cyclical (when changes to work or incomes requires “additional stabilisation instruments”), which will last for one year; and the sectorial (when more permanent changes to work on pay conditions “generate the need for retraining and professional transition processes of the workers”) which will also last for a year with the possibility to extend twice by six months.

Combating abuses by subcontractors

A new regulatory framework between contractors and subcontractors has changed the existing power dynamic, under which the agreements of contracting companies allowed them to lower wages to compete with each other. In addition, an employee’s main contractor will now be “jointly and severally” liable during the three years following the termination of work “for the Social Security obligations contracted by the contractors and subcontractors during the term of the contract.”

In the case of a reduction in hours, pay, or the complete termination of employment contracts, all decisions “must be accompanied by a plan for the retraining of the persons affected” and the worker would receive financial help during the period of lost work.

The money for the RED Fund for the Sustainability of Employment will come from the “surplus income which finances unemployment benefits, the contributions which are included in the General State Budget, and contributions from the European Union financing instruments aimed at fulfilling the object and purposes of the Fund.” 

Not only did many in and out of government feel these changes were long overdue, and that Spain’s labour relations had been imbalanced since the PP reforms of a decade ago, but in order to receive €70 billion of funds as part of the EU’s coronavirus recovery plan, the European Commission had given Madrid a deadline of December 31st conditional on reaching an agreement on the reforms. 

That there was external political pressure – with an underlying financial incentive – to get these reforms approved by the end of the calendar year certainly played a role, but so too did Spain’s precarious domestic labour market.

With a national unemployment rate of over 14 percent (up to 25 percent in certain regions) and a quarter of employees are on temporary contracts, ​​Díaz and the coalition government were keen to unpick the PP reforms and rebalance what is widely perceived to be an unfair, exploitative, and unproductive labour model.

Article by Conor Faulkner