Firing an employee in Spain

Under Spanish labor law, there are various ways that the employment relationship may end:

• The employee may resign
• The temporary contract expires
• Objective dismissal (despido objetivo) for economic reasons (layoffs)
• Disciplinary dismissal: firing the employee

We will focus on the last two. As we mentioned, Spain is not a litigious country, except when it comes to employee dismissal. Judges tend to favor the employee, so it is important for the employer to do things right.

For all types of dismissal, the employer must deliver a letter of termination to the employee. This letter must include the date of termination and the reasons for the dismissal.

Objective dismissal (despido objetivo): compensation of 20 days per year of service up to 12 months Objective dismissal is a layoff. The employer must show it is for one of the following reasons:

• Economic reasons: the company is not doing well.
• Technical reasons, e.g. new software or new machines make a certain job unnecessary.
• Organizational reasons, e.g. various departments or businesses are merging, or other type of re-org.
• Reduced demand for a product or service. The company must show a persistent reduction over time.

Disciplinary dismissal (despido disciplinario): Grounds for disciplinary dismissal includes repeated lateness or absence, disobedience, verbal abuse, sexual misconduct, etc. In the termination letter, the reason must be explained in detail and should be justifiable, since this letter may later be used in court.

Unfair dismissal (despido improcedente): What if the employee just doesn't live up to company expectations? There is no company re-org nor are there grounds for disciplinary dismissal. In fact, even if there are strong grounds justifying objective dismissal or disciplinary dismissal, businesses will often use this type of dismissal for termination. It will cost the business more, but it helps to avoid litigation. If the employee contract is after February 12, 2012 and the dismissal is declared "unfair" (improcedente), the business can choose to either re-admit the employee or to pay the employee a compensation of 33 days per year, up to a maximum of 24 months' payment.

Note that when you offer a permanent contact (contrato indefinido), the first months are considered a training period. If you fire an employee within that training period, there is no required compensation.

Final payments to the employee: There are two types of payments:

• The amount owed to the employee (finiquito, also called liquidación): This includes vacation not taken.
• Compensation, if any (see Unfair dismissal above). When an employee resigns or a temporary contract expires, there is generally no compensation.

Steps in a termination:

• Employer delivers letter of termination to the employee.
• In an objective dismissal, the employee continues to work for 15 days. Otherwise the termination is effective inmediately.
• The employer delivers the social security certificate and the final payslip, along with the compensation if any.
• The employee has up to 20 days after receiving the letter of termination to initiate a court case for unfair dismissal.

Employees with special protections:

Note that under Spanish law, certain employees have more protection. Among other groups, this includes:

• employees who have been granted reduced hours for child care
• employees on maternity/paternity leave
• pregnant women

Because of the protections for these employees, it may be very difficult to fire them. If the dismissal does not comply with the special regulations, the courts may deem the dismissal as void (despido nulo). In this case, the employer must reinstate the employee. To avoid reinstatement, a settlement is often reached between the lawyers.

This article does not constitute legal advice, it includes just the basic information. There are many special situations in the labor regulations in Spain that are not covered by this article. Labor law in Spain is very complicated. When you as an employer want to fire an employee, we always recommend that you first seek legal advice specific to the case.

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