Temporary Redundancy Schemes (ERTE)

In view of the impact of the measures adopted by the Government

to mitigate the effects of COVID-19 on business economies, and following the publication of Royal Decree-Law 8/2020, which sets out the special procedures approved to make it easier to use Temporary Redundancy Schemes (ERTE) — suspending contracts and reducing working hours — as a result of COVID-19, we would like to share this guide with you, to help you carry out these measures in your businesses and to clarify which procedure you should follow.

1.- What is an ERTE?

An ERTE is a highly exceptional measure that involves suspending the contract or changing the working conditions of a group of staff within the company, or even the whole workforce, based on a series of grounds set out by law, including economic, technical, organisational or production reasons, or temporary force majeure. Its distinguishing feature compared with a Collective Redundancy Scheme (ERE) is that the measure is temporary or transitional — while an ERE ends the employment relationship and is therefore permanent, an ERTE is temporary.

2.- Changes brought in by Royal Decree-Law 8/2020:

ERTEs are not a new measure created by the Government now — they were already provided for in the Workers' Statute. Specifically, the suspension of contracts or reduction of working hours was already regulated under Article 47 of the Statute.

However, the processes set out in that article could not respond to the extraordinarily urgent and exceptional situation we are currently experiencing, as the deadlines were too long and inflexible. Consequently, alongside the state of emergency declared by Royal Decree 463/2020 of 14 March, urgent and extraordinary measures have been adopted to speed up and adapt the procedures to the pressing situation, as well as to offer workers extra protection.

Royal Decree-Law 8/2020 has introduced a series of changes to employment law. It is important to note that it prioritises any other organisational measure that allows activity to continue, mainly remote working, over ERTEs.

The two main measures a company can use to "weather this storm" of uncertain duration are essentially two: suspending contracts and reducing working hours, both of which, we reiterate, are temporary and tied to the length of the crisis caused by the Coronavirus that gives rise to them.

In turn, these two different measures can be based on two types of grounds: on the one hand, force majeure; and on the other, organisational, economic, technical or production grounds.

Special attention must be paid to the grounds behind the ERTE, since the procedure to be followed — each with its own advantages and drawbacks — depends on them. It is extremely important to know how the coronavirus crisis has affected or impacted the company's activity before choosing one or the other, since this is not really a free choice for the employer.

As for workers on fixed-term contracts, whether training, cover or interim contracts, they may be affected by ERTEs, but the counting of their contract term will be suspended

It should be clarified that the procedural specifics of this Royal Decree-Law will not apply to redundancy proceedings initiated or notified before it came into force based on the grounds set out therein (First Additional Provision).

However, the extraordinary measures approved under that Royal Decree-Law regarding unemployment protection will apply to those affected by procedures for suspending contracts and reducing working hours notified, authorised or initiated before this Royal Decree-Law came into force, provided they arise directly from COVID-19.

3.- ERTEs DUE TO FORCE MAJEURE (Articles 22 and 24):

A.- What counts as force majeure for the purposes of this Royal Decree?

That which has its DIRECT cause in loss of activity as a result of COVID-

1. Specifically:
• The company providing evidence of the inability to keep providing services — wholly or partly — due to the declaration of the state of emergency under Royal Decree 463/2020, of 14 Example: A restaurant that had to close by order of RD 463/2020
• Decisions linked to COVID-19 taken by the competent authorities of the Public Administrations. E.g. companies that had to close by express order of the authority
• Those due to urgent and extraordinary situations caused by staff being infected or by the adoption of preventive isolation measures that are duly
• Suspension or cancellation of activities due to COVID-19, as a result of the temporary closure of premises open to the public, restrictions on public transport and, generally, on the movement of people and/or goods, lack of supplies seriously preventing the continuation of the activity as a direct consequence of COVID-19.

In short, whatever the company's sector of activity, as long as it is not covered by the state of emergency, not affected by the urgent and extraordinary situation, or does not meet the criteria set out above for what is understood as force majeure due to COVID-19, it must be considered as based on economic, organisational or production grounds.

B.- What is the maximum duration of ERTEs based on force majeure?

The duration may not extend beyond the period during which the extraordinary situation arising from COVID-19 continues (art. 28). Its maximum duration will therefore be that of the state of emergency decreed by Royal Decree 463/2020 and any extensions thereof.

This limit will apply both to cases resolved by express decision and to those resolved by administrative silence, regardless of the content of the specific company application.

C.- How is the process started?

By means of a request from the company to the competent labour authority, accompanied by a report on the link between the loss of activity and COVID-19, as well as, where applicable, the corresponding supporting documentation.

D.- Who does the company notify of the start of the procedure?

The company must notify its request, in addition to the labour authority, to the employees and pass on the report on the link between the loss of activity and COVID-19 and the supporting documentation to the workers' representatives, if any exist.

Note: in some cases we are finding that the Labour Authority is requiring a written commitment from the company to maintain employment for the 6 months immediately following the end of the ERTE. However, since this is not a legal requirement, it seems to depend on the relevant Labour Authority.

The Labour Authority must confirm the existence of force majeure as the ground justifying the suspension of contracts or reduction of working hours, whatever the number of employees affected.

The labour authority must issue its decision within 5 days of the request, after a report, where applicable, from the Labour and Social Security Inspectorate (which is optional), and must limit itself to confirming the existence of the force majeure claimed. It is up to the company to decide whether to apply suspension or reduced-hours measures, which will take effect from the date of the event that caused the force majeure.

E.- How is silence from the Administration interpreted?

If the administration does not decide within the five-day period, the confirmation of force majeure will be deemed granted through positive administrative silence.

Neither Royal Decree 1483/2012 of 29 October, which approves the procedures for collective redundancy and for suspending contracts and reducing working hours, nor Royal Decree-Law 8/2020 of 17 March, on urgent extraordinary measures to address the economic and social impact of COVID-19, set out the consequences of administrative silence on the part of the labour authority. Therefore, following the rules on administrative silence in procedures initiated at the request of the interested party set out in Article 24 of Law 39/2015 of 1 October, as a general rule the same positive effect is granted.

However, as the Government has clarified, the 5-day period may be extended as provided for in Article 23 of Law 39/2015 of 1 October, which must be justified and adopted by agreement of the labour authority, to be notified to the interested parties, and may be extended to 10 days.

Likewise, the period may also be suspended when the Government decides to carry out some additional action, or when it requires the interested party to correct deficiencies or provide documents

F.- For how long do the effects of ERTEs due to force majeure extend?

For as long as the extraordinary situation arising from COVID-19 continues (According to the criterion of the Directorate-General for Employment, they will extend for as long as the state of emergency declared by the Government remains in force, and under the same conditions, together with any extensions or amendments to it, or for as long as the serious and extraordinary circumstances constituting force majeure persist).

G.- Must the company keep paying social security contributions in procedures for suspending contracts and reducing working hours due to force majeure? (art. 24)

In these cases, the TGSS (Social Security Treasury) will exempt the company from paying the employer's contribution as well as the amounts relating to jointly collected contributions.

The exemption percentage will depend on the number of workers registered with Social Security that the company had on 29 February 2020:

. Companies with fewer than 50 workers: 100% of the employer's contribution.

. Companies with 50 workers or more: 75%

This exemption will last for as long as the period of contract suspension or reduced working hours continues.

The exemption is applied by the TGSS at the employer's request. To this end, the company must send the TGSS a notification identifying the workers and the period of suspension or reduced hours.

The extraordinary measures on contributions for force majeure are subject to the company's commitment to maintain employment for a period of 6 months from the date on which activity resumes (Sixth Additional Provision).

H.- Can a company in the Insurance Mediation sector use an ERTE due to force majeure?

As mentioned above, it depends on the grounds behind the ERTE. It is important to note that, to be eligible for a force majeure ERTE, the ground must be a DIRECT consequence of the impact of COVID-19 on our company's activity. To be eligible for a force majeure ERTE, our company must meet one of the grounds indicated. For example: part of our workforce being off sick due to infection or in quarantine.

According to the guidelines published by the State Agency for Labour and Social Security Inspection, for the existence of force majeure to be recognised, the circumstances invoked by the company must be justified, explained and evidenced. In addition, the proportionality of the measure and the balance in the distribution of the burden will be assessed, particularly whether the employer has suffered a drop in income as a result of the external event — otherwise force majeure will not be recognised, as it could be considered unjust enrichment for the employer (who saves on salaries and contributions without any drop in income).

Since our sector is not included among the activities required to suspend their activity, the general rule is that force majeure will not be considered to exist (according to the Labour Inspectorate), as the loss of activity caused by COVID-19 is not the direct cause of the suspension or reduction.

Nevertheless, the circumstances of each case must be assessed

4.- ERTEs DUE TO ECONOMIC, TECHNICAL, ORGANISATIONAL AND PRODUCTION GROUNDS (art. 23)

A.- Grounds for using ERTEs based on economic, organisational or production reasons:

Although Article 47 of the Workers' Statute already regulates the possibility of suspending contracts or temporarily reducing workers' hours on these grounds, RD 8/2020 has introduced some new features that make the procedure more flexible.

However, to be eligible for any of the ERTEs regulated by this Royal Decree-Law, the ground behind it must be essentially linked to COVID-19.

Well then, Article 23 of the Royal Decree-Law allows this type of exceptional ERTE to be used when there are economic, organisational or production grounds RELATED to COVID-

1. This means we will include here those grounds that do not arise directly from the measures adopted by the Government as a result of COVID-19, but which have nonetheless occurred as a consequence of the virus. For example, some companies are closing down and, as a result, cancelling contracts they had with our company. This would be a consequence related to COVID-19 but not arising directly from it.

Economic grounds will be understood to exist when the company's results show a negative economic situation, such as current or expected losses, or a persistent fall in ordinary income or sales. In any case, the fall will be considered persistent if, for two consecutive quarters, the level of ordinary income or sales in each quarter is lower than that recorded in the same quarter of the previous year.

Technical grounds are understood to exist when changes occur, among other things, in the field of production methods or tools; organisational grounds when changes occur, among other things, in the systems and methods of staff work or in the way production is organised; and production grounds when changes occur, among other things, in the demand for the products or services the company aims to place on the market.

In our sector, we are finding that new insurance business is almost non-existent, cancellations are occurring, sales activity has been reduced to a minimum, and so on. As a result, most ERTEs arising will usually be based on one of these grounds and will therefore need to cite production grounds. Nevertheless, we recommend seeking proper advice from a specialist before starting an ERTE at your company.

It is important to note that the Labour Authority requires the ground cited to be properly evidenced, otherwise companies may be penalised. Accordingly, we must provide evidence of the drop in insurance business, the fact that more cancellations than usual for this time of year are occurring, and so on.

B.- Procedure:

• The procedure begins with the company notifying its intention to start the ERTE. Once received, the constitutive committee must be formed (where there is no workers' representation) within 5 days. It will be made up of:
• The most representative unions in the company's sector, entitled to sit on the negotiating committee for the applicable collective agreement (1 seat per union), with decisions taken by the relevant representative majorities. The CC.OO and UGT unions have given us their contact people, whom we can pass on to any companies that need them.
• 3 employees of the company
• Handing over the documentation to the representative committee and notifying the authority. The consultation period may not exceed 7 days.
• Once the consultation period has ended, the company will notify its final decision or the agreement reached to the labour authority
• The Labour Authority will carry out the appropriate follow-up and pass this on to the SPEE (Public Employment Service)

5.- EXTRAORDINARY MEASURES ON UNEMPLOYMENT PROTECTION FOR WORKERS COVERED BY ERTEs UNDER THIS ROYAL DECREE (art. 25)

These measures will apply to all types of ERTEs based on the extraordinary circumstances regulated by this Royal Decree-Law.

A.- Who is entitled to receive the contributory unemployment benefit?

• Employees covered by the General Social Security Scheme
• Employees covered by the special Social Security schemes that protect against this contingency
• Migrant workers returning to Spain and those released from prison
• Interim civil servants, temporary staff, and staff contracted at the time under administrative law to work for public administrations.

• Members of local councils and members of the General Assemblies of the Historic Territories, Canary Island Councils and Balearic Island Councils, and representatives of trade union organisations, provided they carry out these roles on an exclusive or part-time basis and receive remuneration for it, under the conditions applicable to employees
• Senior public administration officials working exclusively and remunerated for it, who are not civil servants, under the conditions applicable to employees, unless they are entitled to receive remuneration, compensation or any other type of compensatory benefit as a result of their
• Persons who are working members of labour companies and worker cooperatives who are set to contribute for the unemployment contingency

B.- What requirements or conditions must be met for entitlement to this contributory unemployment benefit?

Access to the contributory unemployment benefit will be possible even without the minimum contribution period normally required for it.

In all cases, the employment or corporate relationship must have begun before this Royal Decree-Law came into force.

C.- What will be the amount of the contributory unemployment benefit?

The benefit's reference base will be calculated as the average of the contribution bases for the last 180 contributed days, or, failing that, for the shorter period immediately before the legal unemployment situation, worked under the employment relationship affected by the extraordinary circumstances that directly caused the suspension of the contract or the reduction of working hours. The amount has been capped at a maximum of €1,098.

D.- How long will the contributory unemployment benefit last?

The benefit will last until the end of the period of contract suspension or temporary reduction of working hours from which it arises

E.- How will receiving this benefit affect future rights?

The time during which this contributory unemployment benefit is received as a result of these exceptional circumstances will not count towards using up the maximum benefit periods established

During the period in which the extraordinary measures adopted as a result of the state of emergency remain in force, submitting applications to start or resume the benefit and the unemployment allowance outside the set deadlines will not result in a reduction of the length of entitlement to the corresponding benefit.

F.- What is the procedure for applying for the contributory unemployment benefit?

The procedure for recognising the contributory unemployment benefit, for all persons affected by procedures suspending contracts and reducing working hours based on the grounds set out in Articles 22 and 23, requires the company to submit two documents within 5 days of the ERTE application for force majeure grounds or, in the case of ERTEs for economic, organisational or production grounds, from when the company notifies the labour authority of its decision. On the one hand, the company must submit a collective application to the body managing unemployment benefit, acting on behalf of those affected. This application must be completed using the form provided by the body managing unemployment benefits.

In addition, it must also provide an individual notification for each of the affected workplaces, with the information set out in section 2 of Article 3 of Royal Decree-Law 9/2020.

Failure to send this information will be considered a serious offence under Article

22.13 of the LISOS (Law on Labour Offences and Penalties in the Social Order).

6.- ARE OBJECTIVE DISMISSALS ALLOWED?

Royal Decree-Law 9/2020 establishes, in its Article 2, a ban on justifying dismissals on the grounds of force majeure and economic, technical, organisational and production reasons arising from COVID-19.

Dismissals based on any other ground are not prohibited.