New Supreme Court ruling: impact on compensation for wrongful dismissal
A key ruling for companies regarding compensation for unfair dismissal
The Supreme Court has recently issued Ruling no. 1350/2024 of 19 December 2024, in which it addresses the possibility for judicial bodies to establish compensation for unfair dismissal higher than that provided for in Article 56.1 of the Workers’ Statute (ET).
What does the law say about compensation for unfair dismissal?
Article 56.1 of the ET establishes that, in cases of unfair dismissal, the worker is entitled to compensation equivalent to thirty-three days’ salary per year of service, prorated by months for periods of less than one year, up to a maximum of twenty-four monthly payments.
ILO Convention No. 158, Article 10, states that in the case of unjustified dismissals, if reinstatement of the worker is not possible, the competent bodies should ‘order payment of adequate compensation or other appropriate relief’.
The Supreme Court’s decision on compensation for unfair dismissal
In this ruling, the Supreme Court concludes that it is not possible for the judicial body to fix an additional and different compensation to that established in the aforementioned article of the ET, even with regard to the provisions of ILO Convention No. 158.
Key points of the judgment
Interpretation of ‘adequate compensation’: The Supreme Court considers that the term ‘adequate compensation’ is not identified or specified in specific terms, which means that its application is conditional on what domestic legislation develops to that effect.
Compatibility with national legislation: The flat-rate compensation provided for in Article 56.1 of the ET is compatible with the provisions of ILO Convention No. 158.
Implications for business
This judgment reaffirms legal certainty and uniformity in the application of compensation for unfair dismissal in Spain, ensuring that all workers are compensated on equal terms without the need to prove the specific damages suffered.
Benefits of legal clarity
This Supreme Court ruling provides clarity on the economic consequences of unfair dismissal, allowing for better planning and management of human and financial resources.
Legal uncertainties and the future of the unfair dismissal reform
Although this judgment clarifies the scope of the current rules, it also leaves open some important questions about the future of severance payments. The Supreme Court has not ruled on Article 24 of the European Social Charter, as, due to the date of the dismissal at issue, it could not analyse it. This article lays down additional requirements as regards guarantees for dismissed workers.
In addition, the Government Pact between SUMAR and PSOE includes the commitment to ‘establish guarantees for workers against dismissal, complying with the European Social Charter and reinforcing the causality in the cases of termination of the employment relationship’. Likewise, the Government’s Regulatory Action Programme for the year 2024 includes the promise to present a bill to amend the Workers’ Statute on dismissal, also seeking to comply with the European Social Charter.
Therefore, although this ruling reaffirms the current legal framework, the debate on a possible reform of severance payments is still open and could bring significant changes in the near future.
Recommendations for companies in the event of unfair dismissals
It is essential for companies to keep themselves informed about updates in labour jurisprudence to ensure compliance and minimise legal risks.
At DEVESA, our team of employment law experts is available to advise you on all issues related to personnel management and the legal implications of business decisions.
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