Spanish Cabinet gives the green light to labor reform aimed at combating abuse of temporary contracts

The Spanish Cabinet today approved a labor reform via Royal Decree that was agreed on by the government, unions and the business sector on December 23, and which is aimed primarily at reducing the high temporary nature of work contracts that are signed in the labor market. This new legislative framework that will regulate the professional relationships between businesses and staff will have to find sufficient support in parliament – the Socialist Party (PSOE) is governing in a minority, with coalition partner Unidas Podemos – and remain mostly unchanged in its key points. If this does not happen, Antonio Garamendi, the president of the main CEOE business confederation, has warned that his organization will withdraw its support.

“Since March we have been in a dialogue with the parties that have been supporting the government on these reforms, and we are going to continue to do so with discretion and with the conviction that dialogue is possible,” said labor minister and deputy prime minister, Yolanda Díaz. “This agreement improves the lives of the workers in this country,” added the politician.

Díaz went on to explain that the legislation will come into force the day after it is published in the Official State Gazette (BOE), something that is due to happen tomorrow, but that companies will have three months to adapt their in-force temporary contracts to the new conditions.

The labor reform approved today is the result of nine months of negotiations, during which the government, unions and the business sector have agreed to modify some of the most controversial elements of legislation passed by the main opposition Popular Party (PP) back in 2012.

Of particular note is the disappearance of a type of contract known as “por obra y servicio,” for a specific project or service. This is the model that is used most for fraudulent hires, when companies issue this temporary contract to workers instead of a permanent one, which has better conditions. Instead there will be two types of contract: structural, for production circumstances, and the substitution of another employee with the preservation of their role. The former can only be renewed up to six months, or a year if the collective agreement for the activity in question permits it.

To reduce temporality even further, anyone who has racked up 18 months’ worth of temporary contracts in the space of 24 months will be considered permanent, thus reducing the current time frames for this to happen.

The new labor reform does, however, include a 90-day window for companies to issue temporary contracts for planned situations, such as the Christmas season or for fruit pickers in the agricultural sector. To do so, in the last quarter of the year before these contracts are issued, union representatives must be informed of companies’ annual plans for such hires.

With all of these barriers to temporary work, the labor reform seeks to encourage the use of the contrato fijo discontinuo, or the permanent seasonal contract, for seasonal work. This recognizes labor seniority for the worker’s entire time at the company, and not just the periods worked.

The government, however, may have a complicated task ahead when it comes to finding the political support it needs for the Royal Decree in the lower house of parliament, the Congress of Deputies. Since PSOE Prime Minister Pedro Sánchez came to power, he has sought the support of regional parties and leftist groups such as the Catalan Republican Left (ERC), the Basque Nationalist Party (PNV), EH Bildu, Más País and Compromís. But these sometime allies have all voiced their rejection of the new legislation, on the basis that it is not a complete overhaul of the legislation put in place by the then-prime minister, Mariano Rajoy of the PP, back in 2012.

Gabriel Rufián, the spokesperson for ERC, described the staging of the deal reached as a “smokescreen,” and warned that “things are missing” from the reforms and that there is a “lot more room for improvement.”