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COVID-19: Measures for Companies in Spain

Updated: Apr 5, 2020

On March 18th, the Royal Decree-Law 8/2020, on extraordinary measures to deal with the economic and social impact of COVID-19, was published in the Official State Gazette (BOE for Boletín Oficial del Estado). Of all these measures, we are appointing here the possibility that companies have of availing themselves of the procedure of suspension of contracts and reduction of temporary working days (commonly known as ERTE, in Spanish Expediente de Regulación Temporal de Empleo, which could be translated into English as Regulation of Temporary Employment Measures), because of force majeure, or for organizational reasons, which administrations across the country are already flooding, even before the publication of this rule.

Now in Spain companies face the important challenge of defining which procedure they should choose, whether they resort to ERTE due to force majeure or instead claim objective causes. The case of force majeure seems evident in the case of a movie theater, for example, that was forced to close as a result of the declaration of the state of alarm and the order to suspend its activity, but what about the company whose activity has not been suspended, but what about their main clients, on whom this company's entire business might be depending?. Well, in this direction, it is worth highlighting the Criterion on Suspensive Records and Reduction of Workday by COVID-19 published by the Ministry of Labor and Economy, by virtue of which important qualifications are made. One of the most important is to reformulate the definition given in Royal Decree-Law 8/2020, of March 17th, which establishes that "force majeure brings with it the impossibility of providing the content of the employment contract, either directly or indirectly by affecting the catastrophic, extraordinary or unpredictable event in such a way that the business activity prevents the basic benefits that constitute its object from being maintained".

In spite of all this, let us remember that article 22.1 of Royal Decree-Law 8/2020 considers as temporary force majeure, the suspensions and reductions of hours that have their direct cause in loss of activity caused by Covid-19. Therefore, it seems that the range of assumptions in which this procedural modality could be applied is expanding, and with it, there will be a change in trends whereby many companies that, preventively and in the absence of direct causality, were taking ERTEs for objective reasons, now, based on this criterion, they will be able to justify, with greater guarantees, the application of ERTEs by force majeure.

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Mar 22, 2020

Very interesting article. I do recommend it.

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