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Suspension of labor contracts by COVID-19

​As you may well know, in recent days we are experiencing exceptional circumstances, never occurring in our country, which are generating great uncertainty among all citizens, given the unforeseeable short and medium term consequences of the spread of COVID19, not only at the health level, but also regarding the affectation that said outbreak is having at a social and economic level.

Adrián Castro Gálvez

Date 17/03/2020

As you may well know, in recent days we are experiencing exceptional circumstances, never occurring in our country, which are generating great uncertainty among all citizens, given the unforeseeable short and medium term consequences of the spread of COVID19, not only at the health level, but also regarding the affectation that said outbreak is having at a social and economic level. 

At the expense of the measures that, foreseeably, will be adopted by the Council of Ministers at the meeting that is taking place right now, this information note will serve to inform you of how to proceed, in case you are affected by the situation.

In the proposed scenario, there are two options:

1)     Direct impact: When the company is forced to suspend its activity in whole or in part, either because the competent health authorities so dictate or such decision is adopted in compliance with the duty to ensure the health of its workers.

2)     Indirect impact: Without having any case in the company, there is a decrease in activity as a consequence of a decrease in orders and sales, or the impossibility of producing due to the lack of materials from suppliers.

In the first case, we may request a Temporary Employment Regulation File (ERTE) for reasons of force majeure, the second of the cases being left at the expense of those approved by the Minister's Council at the meeting that is taking place at the moment. 

In accordance with the Order of the General Directorate of Labor of 03/12/2020 (DGE-SGON-811CRA) on suspensive and reduction of working hours files by covid-19, loss of activity derived from the different governmental or sanitary containment measures adopted as a consequence of Covid-19, including the declaration of the state of alarm by Royal Decree 463/2020, of the 14th of March, which implies or may imply, among others, suspension or cancellation of activities, temporary closure of public affluence premises, restrictions on public transport and, in general, the mobility of people and goods.

For these purposes, all the activities included in the annex to the aforementioned Royal Decree are considered affected by temporary force majeure.

The ERTE allows us to suspend the employment contracts of all or part of the company's workers or apply reductions in working hours between 10% and 70%, whether daily, weekly, monthly or annually; in both cases temporarily, as long as the situation continues over time. There is the possibility that a company carries out both measures at the same time, that is, that it suspends the contract on the part of its staff and that it reduces the working hours of the rest.

The decision to suspend contracts by the company, are generating a legal situation of unemployment for affected workers. 

While the appropriate measures are dictated and published in the exceptional situation in which we find ourselves, the procedure begins by submitting a request from the company to the competent body, accompanied by the means of evidence it deems necessary for the accreditation of the concurrence of the cause of force majeure alleged, a requirement that, in principle, should be considered as completed with the mere indication of the Royal Decree establishing the state of alarm. Simultaneously with said request, the company must notify the legal representation of the workers, if they have one, of the request made. Otherwise, you must make a communication to the entire workforce.

It is essential to make it known that, in the case at hand, and regardless of when the request is submitted, the effects go back to the moment in which the government enacted RD 463/2020 of the 14th of March, an instant as reflected in the rule “…date of the act causing the force majeure…”.

By virtue of the aforementioned, from Balms we remain at your disposal to solve any doubts or questions that arise in the interest of alleviating the damages and that this crisis has the least impact on the income statement.

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