Labor force adjustment plans
A Labor Force Adjustment Plan (ERE) is an administrative procedure required to take certain measures that collectively affect a workforce, i.e., ten workers in companies that employ less than one hundred workers, 10 percent of the workers in those companies that employ between one hundred and three hundred workers, or thirty workers in companies that employ more than three hundred workers (art. 51 of Legislative Royal Decree 1/1995 of March 24, which approves the consolidated text of the Workers’ Statute).
An ERE is necessary to deal with the contract extinctions and terminations and reductions of working hours for economic, technical, organizational or production reasons and the dismissals owing to cessation of the contractor as a legal entity.
There are economic causes when the company results show a negative economic situation (present or expected losses) or a persistent drop in income or sales; there are technical causes when changes occur, including in the area of production resources or instruments; organizational causes refer to changes in the working systems and methods of the personnel or in the way production is organized; and there are production causes when changes occur in the demand for the products or services that the company aims to bring to market.
The labor reform (Act 3/2012 of July 6, with urgent measures to reform the labor market) has abolished the requirement for prior administrative authorization and the company may take the initiative of carrying out an ERE; however, it is the Courts that must control whether there are causes that actually justify the workforce adjustment (Article 124 of the law regulating Social Jurisdiction, Act 36/2011 of October 10) when the affected workers, their representatives or the labor authority itself contest the adjustment plan.
The procedure to undertake a collective dismissal is regulated in art. 51 of the Workers’ Statute and in Royal Decree 1483/2012, and it includes the beginning a period for consultations with the worker representatives and the submission of a report explaining the causes of the collective dismissal, as well as the accounting and tax documents and technical reports..
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