The Spanish government announced on Friday 13 March that it was implementing a state of alarm for 15 days owing to the “health crisis” brought about by the Covid-19 outbreak. Royal Decree 463/2020 of 14 March introduces restrictions on people’s movements and, although there is prohibition as such on going to work, in practice the government recommends people and companies to adopt social distancing measures and self-isolation.

The government’s announcement of a state of alarm and health crisis constitute a force majeure event enabling employers (save those specifically excepted by RD463/2020) affected by this situation temporarily to suspend contracts of employment or reduce working hours.

The procedure for doing this is a Temporary Collective Redundancy & Re-organization Procedure (ERTE). The ERTE procedure requires the company to communicate the redundancy/re-organization measures to the employees and the employment authority. In contrast to a normal collective redundancy procedure, there is no requirement for prior consultation with the employees or their representatives.

This procedure allows the company temporarily to suspend all or some of its employees’ contracts of employment or reduce the working hours by 10% – 70%. The employees concerned by these measures will be entitled to unemployment benefits for as long as the temporary measures last. The company will not have to pay any indemnity for the temporary lay-offs and the employees will be reinstated to their employment when the force majeure event ends. This procedure is not subject to the usual thresholds for collective redundancies and is available to all companies affected by the situation, even those having a single employee.

Although the state of alert and measures introduced by RD 463/2020 are in principle, only temporary (15 days), they will almost certainly be extended for a considerably longer period of time.

RD 463/2020 does not provide for the termination of employment contracts, however when the temporary suspension of employment contacts is eventually lifted, it is foreseeable that many companies whose business has been seriously curtailed by the Covid-19 pandemic will be able to take collective redundancy measures for economic or organizational reasons thus availing themselves of the lower cost of collective lay-offs.

We can upon request immediately initiate the Temporary Collective Redundancy & Re-organization Procedure (ERTE) before the employment authority on the company’s behalf (on receipt of list of the employees affected, duration of suspension …).

Once we have filed the documentation with the employment authority, it has 7 working days to issue a resolution confirming the existence of the force majeure event (subject to its power to request further information) with effect from the date the force majeure event occurred or at such later date as the company may specify (where the employees have continued to work). The company can then notify the resolution to the employees.