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Spain: Barcelona Court is the First to Declare Lawful a Dismissal Attributable to the COVID-19 Economic Crisis

The recent judgment 283/2020 of the Social Court 1 of Barcelona, dated 15 2020, is the first to declare lawful a dismissal based on economic and productive causes resulting from the COVID-19 crisis, despite the fact that the current employment regulations regarding the pandemic still ban such action. Although employees currently enjoy greater protection against termination as established by various laws which the Spanish Government has passed during the past few months, this ruling alleges that as long as the company has acted under the principle of good faith, the dismissal will be lawful, since it is the only way that the company is able survive. Thus, this judgment attempts to balance, on the one hand, employment protection rights and on the other, the freedom to conduct a business, which is a fundamental right afforded to companies, that has nevertheless been neglected over the course of this crisis.

The main claims made by the company in order to justify the dismissal were economic and productive issues, primarily because sales declined significantly in 2020 compared to 2019 and it is expected that they will remain on this path in 2021. The demand from customers was severely reduced as well. As a consequence of the dismissal, the employee requested that the dismissal be declared null. In contrast to this, the employer maintained that they acted in good faith.

There are two main controversies involved in this ruling. Firstly, because of the huge impact of the COVID-19 crisis on the economy, the Spanish Government passed a law, Royal Decree 9/2020 (article 2), that banned dismissals based on economic, technological, organisational and productive grounds as a consequence of the pandemic, in order to protect employment as much as possible. The second controversy deals with the reality that business freedom protection is just as important, and it is protected by our legal system through article 38 of the Constitution, as well as article 16 of the European Convention on Human Rights, and also article 3.3 of the European Union Treaty.

This judgment will have a major impact, because it opens the door for those companies that have acted under the principle of good corporate faith, protecting their employees as best they could with measures such as ERTES, and yet, despite such efforts, they find themselves in a very critical predicament; to invoke objective dismissals in order for the business to survive.

The reality is that the impact of the pandemic entails an inevitable legal adjustment to the circumstances, a statement which the court sought to emphasise in its judgment. Also, due to the long and rather unforeseen duration of the pandemic, it has become obvious that the decisions made, and actions taken by the government have proved inadequate to the task of creating and sustaining a recovery plan in order for many companies to overcome this crisis. Accordingly, extending the ban on lawful dismissals over such a long period is not an appropriate and proportionate course of action.

Therefore, the judgment tries to ease the burden of this crisis on companies that were severely hit and which have been struggling to stay afloat, and have all the while continued to act in good faith and by the principle of good corporate governance.


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