Collective layoff procedure, also known as ERE (Expediente Regulación de Empleo) is regulated as a cause for termination of the employment contract in article 49.1 letter i) of the Workers‘ Statute (hereinafter E.T.); “By Collective layoff procedure based on economic, technical, organizational or production causes”, and its specific and concrete regulation is developed in article 51 of the Workers’ Statute, and in its implementing regulations, Royal Decree 1483/2012.

In accordance with this basic regulation, it can be summarized that Collective layoff procedure is identified by the applicable causes (1) and by the number of workers affected (2), and Collective layoff procedure does not apply when the numerical thresholds for dismissal are not reached.

Thus, firstly (1) Collective layoff procedure is based on what are commonly referred to in the market as ETOP causes, which are economic, technical, organizational and productive causes (2).

Economic causes are understood to be present when the company’s results show a negative economic situation, in cases such as the existence of current or expected losses, or a persistent decrease in the level of ordinary income or sales. In any case, the decline shall be understood to be persistent if for three consecutive quarters the level of ordinary income or sales in each quarter is lower than that recorded in the same quarter of the previous year.

Technical causes are understood to occur when there are changes, among others, in the means or instruments of production; organizational causes when there are changes, among others, in the systems and working methods of the personnel or in the way production is organized; and productive causes when there are changes, among others, in the demand for the products or services that the company intends to place on the market.

Secondly (2), it will apply Collective layoff procedure when the following thresholds or number of workers affected by redundancy are reached or exceeded in a period of ninety days.

a) Ten workers in companies employing less than one hundred workers.

b) Ten per cent of the number of workers in the company in companies with between one hundred and three hundred workers.

c) Thirty workers in companies employing more than three hundred workers.

The procedure applicable to Collective layoff procedure is regulated in article 51 of the E.T. as well as in its implementing regulation, Royal Decree 1483/2012, whose formalities must be inexcusably complied with by the companies undertaking the Collective layoff procedure, and otherwise the whole process may be declared null and void.

Within the requirements of collective dismissal, the consultation period between the company and the legal representation of the workers is substantial to this type of procedure and must also be complied with effectively under penalty of possible nullity of the procedure.

As a final feature of this brief summary of Collective layoff procedure, and substantial to understand the comparison of Collective layoff procedure in bankruptcy, it is that after the legal reform of the Workers’ Statute in 2012, it will be the employer who, once the mandatory procedures have been completed, must adopt the decision on Collective layoff procedure after the end of the consultation period with the workers’ legal representatives (with or without agreement), and this decision may be reviewed in the labour courts by means of the process provided for this purpose by the Law Regulating the Social Jurisdiction (Articles 124 of the LRJS).

For its part, dismissal in bankruptcy proceedings, known in the market as ‘ERE concursal’, takes place from the moment of the judicial declaration of the company’s bankruptcy, which is regulated in the Bankruptcy Law 22/2023, The specialties provided for in these commercial regulations must be applied, as is already established in Article 57 of the E.T.T.

Without prejudice to the extensive insolvency regulations with employment effects, and regarding this article, when companies are legally declared bankrupt and need to carry out a Collective layoff procedure of their workers, they must proceed in accordance with the provisions of article 53 of the Insolvency Act.

Once the insolvency proceedings have been declared in court, the insolvency judge has been assigned to hear social actions that have as their object, among other measures, the substantial modification of collective working conditions, collective transfer and collective dismissal.

For these purposes, Article 53 of the Insolvency Act assigns the commercial judge to hear collective dismissals, although the insolvency regulations themselves establish that in order to distinguish the collective nature or not of the measure, as well as the necessary documentation, and the regulation of the consultation period, labour legislation must be consulted. In other words, to define what a Collective layoff procedure in bankruptcy is, the same definitions and prescriptions of Collective layoff procedure must be applied as explained in accordance with the provisions of article 51 of the E.T. (ETOP causes and numerical thresholds of affected workers), with labour legislation on collective dismissals (article 51 of the E.T., but also Royal Decree 1483/2012, and the Law Regulating Corporate Jurisdiction) being applicable in a subsidiary manner to the Bankruptcy Law.

Subsequently, the Insolvency Act establishes the regulation of the Collective layoff procedure in court in articles 169 to 184, and as previously expressed, labour legislation is of subsidiary application.

Finally, to this general summary of the comparison of collective dismissal, it is very important to note that it will be the insolvency judge who will determine and authorize the applicability of Collective layoff procedure in insolvency by means of an ‘Auto’, and not directly the employer as occurs in the Collective layoff procedure regulated in the Workers’ Statute, as we have seen above.

Thus, given the different attribution of who executes the Collective layoff procedure, another main difference is the jurisdictional competence in the event of possible challenges to the decisions; and it will be the jurisdictional competence of the social order in the case of Collective layoff procedure without being in insolvency proceedings, and it will correspond to the civil-commercial order when we are dealing with a Collective layoff procedure in insolvency proceedings in insolvency proceedings with creditors.

Without prejudice to the many practical differences that may exist in the Collective layoff procedure in bankruptcy and the common procedure of collective dismissal, and that we will try to go into more practical aspects in later articles, the big differences here exposed (basically and mainly who finally decides the Collective layoff procedure and which jurisdictional order has to review the possible legal claims on said process) we understand and advise to previously seek the appropriate legal advice in labour matters, such as the one we provide from the of