Conventional & Legal Termination of Employment Contracts in Spain

Conventional Terminations

The Conditions Precedent

Article 49.1.b) of the Spanish Workers' Statute (ET) states that an employment contract may be terminated for reasons mentioned in the contract itself. These are known as conditions subsequent. Jurisprudence considers this type of clause lawful unless there is abuse.

The Mutual Agreement

This is a typical conventional termination, contemplated in Art. 49.1.a) ET. The employer and employee agree to extinguish the contract. This does not, in principle, preclude problems arising from the execution of that agreement, such as the balance of payments and joint settlement.

Conclusion of Time and the Work or Service

This refers to the termination of temporary contracts. In general, Art. 49.1.c) ET states that the employment contract is extinguished by the expiry of the agreed time or the completion of the work or service contracted.

At the end of the contract, the employee is entitled to receive compensation equivalent to the proportionate share of 8 days' wages for each year of service.

Furthermore, fixed-term contracts with an established maximum period, concluded for a period less than the legally established maximum, shall be automatically extended until such time. This extension does not require a complaint or express prorogation, and the worker continues to provide services. If nothing is said and the worker continues to provide services, the contract is extended to the maximum. If the maximum is reached and the worker continues to provide services, the contract is presumed to be indefinite.

Receipt of Balance and Settlements

The receipt of balance and release form is the document which states:

• That the employment contract is extinguished by the common will of both parties.
• That all remaining obligations under the contract that may exist between employer and employee are settled.

If it contains the settlement and liquidation, it signifies the termination of the contract. Case law recognizes its discharge value, subject to proof of vitiated consent.

Disappearance, Retirement, or Disability of the Parties

Death of Worker

Art. 49.1.e) ET considers the worker's death as a cause for termination of the employment contract.

Worker's Disability and Retirement

Disability

Art. 49.1.e) ET states that the employment contract shall end in cases of severe disability, total permanent disability, or absolute disability of the worker.

Total permanent disability refers to the worker's usual occupation, while absolute disability refers to all types of trade or occupation. Severe disability is a total disability where the disabled person needs the help of another person to perform the essential duties of life, such as eating, dressing, and so on.

Retirement

Retirement is the fulfillment of a certain age of entitlement to benefits. The ordinary course of retirement leads to the extinction of the contract.

Collective agreements may include clauses that allow the termination of the employment contract upon the worker reaching the normal retirement age specified in Social Security legislation, provided that the following requirements are met:

• The measure is linked to objectives consistent with the employment policy expressed in the collective agreement.
• The employee affected by the termination of the contract has completed the minimum contribution period and meets the other requirements of the social security legislation for entitlement to a retirement pension under their contribution.

Death, Retirement, or Disability of the Employer

Art. 49.1.g) ET considers the death, retirement, or disability of the employer as a cause for termination of the employment contract. This applies to individual entrepreneurs. Death can be legally physical or objectified.

However, as provided for in Art. 44 ET, the contract is not extinguished if the heir or successor continues the business.

In these cases of termination, the worker is entitled to the payment of an amount equivalent to one month's salary.

Termination of Business Legal Personality: Assumptions

According to Art. 49.1.g) ET, the employment contract will lapse in cases of termination of the legal status of the contractor.

To terminate contracts, you must consult the record of employment regulation foreseen in Art. 51 of ET. In cases of disappearance by acquisition or merger, it is not necessary to file employment regulation.