Workforce Restructuring: Legal Compliance & Fair Termination Procedures in Spain

When companies need to reduce workforce due to economic circumstances, understanding proper legal procedures is critical. This guide covers ERE (Expediente de Regulación de Empleo) processes, fair termination procedures, and documentation required to minimize legal disputes.

When Restructuring is Necessary

✓ Economic hardship affecting company viability
✓ Organizational restructuring changing roles
✓ Technological changes eliminating positions
✓ Production changes requiring fewer staff
✓ Market changes reducing demand

All terminations must be based on objective, documented reasons. Arbitrary or retaliatory terminations are illegal and result in severance liability.

ERE Process (Formal Restructuring)

Step 1: Internal Documentation
Document all business reasons for restructuring. Create business case with financial analysis supporting necessity.

Step 2: Employee Notification
Notify affected employees of restructuring. Explain reasons and affected positions. Begin good-faith negotiations with employee representatives.

Step 3: Good-Faith Negotiation
Engage employee committees or union representatives in formal negotiations. Consider alternatives: voluntary departures, reduced hours, internal transfers.

Step 4: Settlement Agreement
If possible, reach agreed settlement with employees. Typically includes enhanced severance in exchange for waiving legal claims.

Step 5: Legal Termination
Execute formal terminations according to legal procedures. Provide final payments and documentation.

Severance Calculations

Without Cause Termination (Most Common):
20 days salary × years of service (maximum 12 months salary)
Plus: Payment for unused vacation

Fault Termination (With Cause):
Typically lower or no severance depending on cause severity.

Settlement Agreements:
Often 25-30 days × years of service in exchange for legal certainty and waived claims.

Documentation Requirements

✓ Written reasons for each termination
✓ Notification letters to each employee
✓ Settlement agreements (if applicable)
✓ Severance calculations and payments
✓ Final pay stubs
✓ Continuation/termination of benefits
✓ References and recommendations (if provided)

Best Practices

• Treat all affected employees fairly and consistently
• Provide clear, objective reasons for each termination
• Maintain respectful, professional communication
• Consider outplacement assistance
• Follow legal procedures precisely
• Document all decisions and communications

Legal Risks of Improper Restructuring

Improper restructuring can result in: wrongful termination claims, severance liability multiplied by court awards, reinstatement demands, reputational damage, and labor authority investigations.

Professional Guidance Critical

Employment restructuring is complex and high-risk. Professional legal guidance ensures proper procedures are followed, fair treatment maintained, and legal exposure minimized.