THE EUCJ PROVIDES THAT THE SEVERANCE PAYMENTS ON TEMPORARY CONTRACTS MUST BE THE SAME AS IN INDEFINITE CONTRACTS

The Court of Justice of the European Union (CJEU) has established in its judgment of September 14th (Case C-596/14) that Spanish law is contrary to the rules of the European Union (EU) because it establishes a difference between severance pay on temporary contracts and permanent contracts.
Specifically, the resolved case concerns a worker at the Ministry of Defense who was hired in 2003 as interim for nine years, with several contracts. When the Ministry gave her the severance pay, it applied the Spanish legislation which provides for a compensation of 12 days per year worked. However, she appealed to the High Court of Justice in Madrid (HCJM) because she understood that the rightful compensation had to be 20 days per year worked similar to the one established for permanent contracts.
The HCJM raised a preliminary question to the CJEU, who concluded that different treatment of severance pay to workers with temporary contracts vs. permanent contracts are contrary to European standards and should be equal.
The Spanish legislation establishes various types of allowances:
- 12 days per year worked when certain temporary contracts are ended.
- 20 days per year worked when a contract is ended for objective reasons.
- 33 days per year worked when the dismissal is declared unfair.
 
 

The CJEU refers in its judgment to the ending of an interim contract, to which a compensation of 12 days per year worked is applicable, and its conclusion is that the same compensation should be applicable in the case of permanent contracts

The CJEU refers in its judgment to the ending of an interim contract, to which a compensation of 12 days per year worked is applicable, and its conclusion is that the same compensation should be applicable in the case of permanent contracts.
The judgment requires, in principle, to amend the Spanish legislation. Its interpretation may suppose that, in practice, equality between compensations in both cases may be made to the lower amount. In any case, the judgment relates to interim contracts, not exactly temporary contracts but does not establish how equalization should be done. Thus it could occur that only interim workers are equalized with permanent contracts, and not all temporary workers.
Another possible interpretation of this judgment would be that they are equating the two types of contracts (temporary and permanent), which would result in a single type of contract. However, this option seems somehow remote, since the judgment relates to severance pay, but does not consider contrary to law the existence of several types of contracts.
Also it is likely that the judgment will lead to complaints from other interim workers which will force the authorities to clarify how the judgment is applied to past situations.
In conclusion, the CJEU ruling forces to modify the Spanish legislation, although it has sown doubts that will be have to be cleared in the coming months and that will lead to many discussions between the various actors (workers, unions, employers and public administration).