A technology company incorporated as a Sociedad Anónima (SA) in Madrid had expanded its European operations rapidly. Within eighteen months, it had hired a senior management team of twelve employees across three Spanish cities. Then the business pivoted. Two product lines were discontinued. The restructuring required terminating five employment contracts simultaneously – including two employees who had signed agreements tied to a convenio colectivo (collective agreement) in the technology sector. The client contacted Ferraz & Whitmore after a preliminary internal attempt to handle the dismissals had already generated two formal objections from employees.
Employment disputes in Spain proceed through a mandatory pre-litigation conciliation phase before reaching the Juzgado de lo Social (Spanish Labour Court). Dismissals must comply with both statutory termination procedure requirements and the applicable collective agreement. Failure to observe either renders the termination procedurally defective, exposing the employer to reinstatement orders or enhanced severance obligations.
This case study outlines how the firm structured the legal strategy, the complications that arose during the process, and three transferable lessons for international businesses managing employment disputes in Spain.
Client profile and the challenge
The client was a mid-sized technology group with its Spanish operating entity structured as an SA. Its parent company was incorporated under German law and had no prior experience with Spanish employment legislation or the procedural requirements of Spanish labour courts.
The core challenge was threefold. First, two of the five employees were covered by a sector-level collective agreement that imposed notice periods and redundancy consultation steps beyond the minimum statutory floor. The internal HR team had not identified this. Second, one employee had been on medical leave for eleven weeks at the point of the proposed termination. Under Spanish employment legislation, dismissals during certain protected periods require particular justification. Third, the company had failed to issue a formal carta de despido (dismissal letter) with the required statutory content to two of the five employees. This procedural gap had already been flagged by one employee's representative.
The two existing formal objections had been filed by employees invoking protections under the applicable collective agreement. The risk of the matter escalating to the Tribunal Supremo (Supreme Court of Spain) in a consolidated challenge was real if the procedural defects were not addressed immediately.
For a tailored strategy on employment disputes and dismissal procedures in Spain, reach out to info@ferrazwhitmore.com.
Strategy and key milestones
The firm's first action was a full audit of all five employment contracts, the applicable collective agreement, the existing dismissal notices, and the social security contribution records for each employee. This audit took four working days and produced a written risk matrix for each case.
Three dismissals were assessed as legally defensible with corrective action. Two carried material procedural defects that, if contested, would likely result in a finding of despido improcedente (unfair dismissal) rather than despido procedente (fair dismissal). The financial difference between these two outcomes is significant: unfair dismissal in Spain triggers either reinstatement or an enhanced severance payment calculated by reference to years of service.
The strategy chosen had three components. First, the firm issued corrected dismissal letters with the full statutory content for the three defensible cases, including precise reference to the economic and organisational grounds under Spanish employment legislation. Second, for the two procedurally defective cases, the firm recommended a negotiated settlement before the mandatory SMAC conciliation hearing – the Servicio de Mediación, Arbitraje y Conciliación (Spanish Pre-Litigation Mediation Service). Reaching agreement at this stage avoids judicial proceedings entirely. Third, the firm coordinated with the client's corporate counsel on the interaction between the individual dismissals and the company's ongoing restructuring obligations under Spanish corporate legislation. This cross-practice coordination was essential, as the restructuring potentially triggered collective dismissal thresholds under Spanish labour law.
Our broader approach to employment law matters in Spain follows this same audit-first methodology, mapping contractual, collective, and statutory obligations before any procedural step is taken.
Key milestones ran as follows. The risk audit was completed by day four. Corrected dismissal documentation was issued by day eight. The SMAC conciliation hearings for the two contested cases were scheduled within twenty-two days of the formal objections. Settlement terms were reached in both cases at the conciliation stage. The three non-contested dismissals were finalised without judicial challenge within thirty days of the corrected notices.
Complications encountered
Two complications arose that had not been anticipated at the outset.
The first involved the employee on medical leave. Spanish employment legislation does not create an absolute prohibition on dismissing employees during sick leave. However, the courts apply heightened scrutiny to such dismissals, particularly where the employer cannot demonstrate that the decision was taken for reasons entirely unrelated to the employee's health situation. The firm advised the client to delay this dismissal by three weeks until the protected period had elapsed and the documentary record of the economic rationale was fully consolidated. This decision avoided a potential procedural challenge on grounds unrelated to the merits of the redundancy.
The second complication arose from the collective agreement. One of the two employees in the conciliation process raised a specific clause in the sector collective agreement that required the employer to offer redeployment within the group before proceeding with redundancy. The parent company's German entity had one open position broadly matching the employee's profile. The firm coordinated with the client's German counsel to assess whether a genuine redeployment offer was feasible. It was not, for operational reasons that were documented. This documentation was presented at the conciliation hearing and was decisive in achieving a settlement on reasonable terms rather than a full reinstatement demand.
Businesses with cross-border corporate structures should also review how their corporate law obligations in Spain interact with employment restructuring decisions – particularly where group-level redeployment obligations may be triggered.
Lessons for cross-border employment disputes in Spain
Lesson one: Identify collective agreement coverage before taking any dismissal step. The applicable convenio colectivo defines procedural floors that frequently exceed the statutory minimum. International employers accustomed to at-will employment systems or civil law systems with simpler notice regimes consistently underestimate this. A collective agreement audit should be the first action in any Spanish employment dispute, conducted well before any dismissal notice is issued.
Lesson two: The conciliation stage is not a formality. it is the primary settlement window. Many international businesses treat the mandatory SMAC conciliation hearing as a procedural hurdle before the real negotiation begins in court. In practice, Spanish employment disputes are frequently resolved at conciliation, and the terms available there are often more favourable than those achievable after months of litigation. Arriving at conciliation with a strong documentary record and a realistic settlement proposal is the most cost-effective approach for most employers.
Lesson three: Protected categories require documented decision-making, not avoidance. Dismissing an employee during a protected period – illness, pregnancy, or union representation – does not automatically make the dismissal unlawful. What matters is the employer's documented rationale and the timing of the decision. Companies that delay all action to avoid any perceived risk often find that the delay itself creates complications, including claims that the economic grounds have become less credible. Clear contemporaneous documentation of the business rationale, prepared with legal input, is the most reliable protection.
For information on related employment matters in comparable civil law jurisdictions, our employment dispute case study for Portugal covers parallel procedural issues in the Portuguese labour court system.
To discuss how these lessons apply to your situation in Spain, contact us at info@ferrazwhitmore.com.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our employment law practice supports international employers – from SA and SL structures to multinational groups – in managing dismissals, collective disputes, and workforce restructuring across Spain and the broader EU. The firm combines Portuguese civil law expertise with English common law tradition, giving clients a distinctive vantage point on cross-border employment matters that involve both civil law procedure and common law enforcement strategies. Our attorneys have advised on employment disputes before Spanish labour courts and in conciliation proceedings under both individual and collective employment legislation. As an international law firm in Spain and Portugal, Ferraz & Whitmore provides practical, results-oriented counsel to in-house legal teams and business executives who need a lawyer in Spain with genuine cross-border experience. To discuss your employment law situation in Spain, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.