When business transformation requires a strong employment strategy
Companies restructure for many reasons: changes in business models, integrations following a corporate transaction, technological transformation, market developments or the need to adapt their structure to new economic circumstances. Whatever the reason, every organisational restructuring has an employment dimension that must be analysed from the outset. Redefining roles, centralising activities or reducing structures are not merely operational decisions: they have legal consequences that may affect the stability of the organisation.
A well-planned restructuring does not depend solely on the economic or strategic reason behind it, but on being implemented through the correct legal route, anticipating risks and properly managing relations with the workforce and its representatives. For companies with international structures, the challenge is not only to transform the organisation, but to do so in a legally defensible way.
Choosing the Correct Legal Route for Each Change
The first key decision in any employment restructuring in Spain is identifying the nature of the change, as each measure follows its own procedure under the Spanish Workers’ Statute (Estatuto de los Trabajadores, ET):
- Functional mobility (art. 39 ET): changes of duties within the limits of the employee’s professional group.
- Geographical mobility (art. 40 ET): transfers and relocations requiring a change of residence.
- Substantial modification of working conditions (art. 41 ET): working time, schedules, remuneration systems, work and performance systems, or duties beyond functional mobility.
- Temporary layoffs or reductions of working hours (ERTE, art. 47 ET).
- Collective dismissal (art. 51 ET).
- Transfer of undertaking (art. 44 ET), where the restructuring involves the transfer of a business unit or the integration of companies.
A reasonable business decision may be compromised if implemented through the wrong route: for example, a change of working hours treated as a simple organisational decision when it is in fact a substantial modification, or a series of individual dismissals that should have been handled as a collective dismissal.
Prior Planning as the Key Element
A restructuring should not begin with the announcement to employees. The decisive phase comes earlier, when the company analyses the alternatives and defines how the change will be implemented. This means reviewing the contractual structure, the applicable collective agreement, the groups affected, whether there are employee representatives, the timeframes of each procedure and the total cost of each scenario.
In corporate transactions, this analysis is essential to identify potential employment risks through a labour due diligence process in Spain before implementing any organisational change, as those risks may directly affect the price and structure of the transaction.
Alternatives to Dismissal: ERTE and the RED Mechanism
Not every business reason justifies terminations. Where the difficulty is temporary, suspending contracts or reducing working hours through an ERTE (art. 47 ET) allows companies to adjust workforce capacity at a lower cost and with less risk of conflict. In cyclical or sector-wide situations, the RED Mechanism (art. 47 bis ET), when activated by the Spanish Council of Ministers, provides an additional route.
Assessing these alternatives is not only a matter of cost. The consultation period in a collective dismissal itself requires the parties to consider measures to avoid or reduce dismissals, and having analysed them rigorously strengthens the company’s position.
Workforce Restructuring and Collective Dismissals
A collective dismissal, commonly known in Spain as an ERE, requires economic, technical, organisational or production-related grounds and a consultation period with employee representatives. A dismissal is collective where, within a 90-day period, it affects at least:
- 10 employees, in companies with fewer than 100 employees.
- 10% of the workforce, in companies with 100 to 299 employees.
- 30 employees, in companies with 300 or more employees.
The complete closure of a business affecting more than five employees is also a collective dismissal. In addition, following the judgment of the Court of Justice of the European Union in Rabal Cañas (C-392/13), the thresholds must also be checked at the level of each workplace employing more than 20 people, which may turn into a collective dismissal an adjustment that would not qualify as such at company level. Terminations staggered over successive 90-day periods to avoid these thresholds, without new grounds, are considered an evasion of the law and are null and void.
The consultation period lasts a maximum of 30 calendar days, or 15 in companies with fewer than 50 employees. Where there are no employee representatives, employees may appoint an ad hoc committee. The company must provide the required documentation and negotiate in good faith: courts do not only examine whether the grounds exist, but also what information was provided and whether genuine negotiations took place. Defects in the information or in the negotiation may lead to the dismissal being declared null and void.
Beyond severance payments, companies should plan from the outset for other costs and obligations that are often overlooked:
A special agreement with the Social Security system (convenio especial) for affected employees aged 55 or over.
An external outplacement plan, where the dismissal affects more than 50 employees.
A financial contribution to the Spanish Public Treasury, in certain cases where the company or its group has more than 100 employees, has made a profit and the dismissal affects employees aged 50 or over.
Negotiation as Part of the Strategy
In most restructuring processes, negotiation with employee representatives plays a central role. It is not a mere formality: the company must explain the reasons for the change, provide sufficient information and consider the alternatives put forward. The quality of that negotiation largely determines the legal certainty of the measures adopted.
These processes require a proper understanding of collective bargaining in Spain and the importance of conducting transparent and legally sound consultations. Closing the consultation period with an agreement significantly reduces the risk of disputes and legal challenges.
Changes to Employment Conditions During Restructuring
Not every restructuring involves workforce reductions. Many companies adapt by changing working methods, duties, schedules or production systems. The key is to classify the measure correctly: a collective substantial modification of working conditions requires a consultation period of up to 15 days, whereas functional mobility within the same professional group does not.
An incorrect classification may turn a reasonable business decision into a source of conflict and expose the company to the measure being declared unjustified or null and void.
Business Restructuring in International Groups
For multinational groups, restructuring in Spain involves additional complexity. Decisions are designed from a global perspective, but implementation must comply with Spanish employment law, the applicable collective agreement and local information and consultation procedures.
One point that is often overlooked: the obligation to inform and consult employee representatives lies with the Spanish subsidiary even where the decision was taken by the parent company (Directive 98/59/EC and Akavan, C-44/08). The subsidiary cannot justify insufficient information on the grounds that the parent company did not provide it. Coordinating global corporate strategy with local execution from the outset avoids inconsistencies and delays.
Risks of Poorly Managed Restructuring
Insufficient planning may lead to all kinds of employment disputes: individual claims, collective disputes, challenges to dismissals or proceedings for breach of fundamental rights. Beyond the financial impact (back pay during proceedings, reinstatements or higher severance), poor management damages the company’s reputation and makes future changes more difficult.
When a restructuring leads to collective disputes or court proceedings, companies need an employment litigation strategy in Spain based on proper preparation and careful management of evidence.
The Role of Human Resources
HR does not merely implement management decisions. It takes part in planning the change, internal communication, relations with employee representatives and managing the organisational impact. In complex processes, coordination between HR, management and legal advisers is decisive.
A Long-Term Strategic Decision
Restructuring is not only a response to adverse circumstances. It is often part of a company’s natural development: technological adaptation, international expansion, business integration or a change of operating model. And it does not end when management adopts the strategic decision: its success depends on employment implementation consistent with the objectives pursued.
At Suárez de Vivero, we advise national and international companies on restructuring processes, collective dismissals, ERTEs, collective bargaining and employment litigation. If your company is considering a reorganisation, contact our team to assess the most suitable route before taking the first step.
Frequently Asked Questions About Business Restructuring in Spain
What is business restructuring?
It is the process through which a company modifies its structure, organisation or operating model to adapt to new strategic, economic or organisational needs.
Does restructuring always involve dismissals?
No. It may involve internal reorganisations, changes of duties, modifications to working conditions, business integrations or temporary measures such as an ERTE.
When must a collective dismissal procedure be followed?
When, within a 90-day period, terminations based on economic, technical, organisational or production-related grounds reach the thresholds in article 51 ET: 10 employees in companies with fewer than 100, 10% in companies with 100 to 299 and 30 in companies with 300 or more. It also applies to the complete closure of a business with more than five employees.
What must the company justify?
The existence of the grounds supporting the measure and compliance with the information, consultation and negotiation procedure applicable in each case.
What if the decision is taken by a foreign parent company?
The information and consultation obligations still fall on the Spanish company, which cannot rely on the parent company’s failure to provide the necessary information.
Why is employment planning important?
Because it allows companies to identify risks, choose the correct legal route, calculate the real cost of each alternative and properly prepare the negotiation and documentation of the process.
