Protection of Workers' Claims (Employer's Insolvency) Convention, 1992 (No. 173) - Spain (Ratification: 1995)

Direct Request (CEACR) - adopted 2018, published 108th ILC session (2019)

The Committee notes the observations of the Trade Union Confederation of Workers’ Commissions (CCOO) and the General Union of Workers (UGT), received in 2017, regarding the application of Convention Nos 95 and 173. The Committee further notes the Government’s reply to these observations. The Committee also notes the observations of the Spanish Confederation of Employers’ Organizations (CEOE), supported by the International Organisation of Employers (IOE), concerning the application of Convention No. 95, received with the Government’s report in 2017, and the Government’s reply to these observations. With the aim of providing a comprehensive view of the issues relating to the application of the ratified Conventions on the protection of wages, the Committee considers it appropriate to examine Conventions Nos 95 and 173 together.

Protection of Wages Convention, 1949 (No. 95)

Article 4(2)(b) of the Convention. Partial payment of wages in the form of allowances in kind. In its previous comments, the Committee requested the Government to provide further information and, in particular, copies of court rulings, on issues relating to the application of this Article of the Convention. The Committee notes the CCOO’s indication that the payment of wages in kind gives rise to significant problems insofar as, in many cases, it is difficult to determine the value of the allowances, and that these difficulties lead to an increase in the number of cases being brought to court, mainly in relation to claims relating to dismissals for the purpose of calculating the compensation to be paid for the termination of the contract. The Committee notes the UGT’s indication that section 26(1)(2) of the Workers’ Statute restricts payments in kind by establishing a ceiling for such allowances in relation to the wages received in cash, and by guaranteeing the payment of a minimum proportion of the wage in cash. The Committee observes that the Government and the CCOO have communicated several court rulings that reflect the application of the legislation on personal income tax to determine the cash value of payments in kind.

Article 12(1). Regular payment of wages. Application in practice. In its previous comments, the Committee requested the Government to provide information on the action taken to address the non-payment or delayed payment of wages, and to provide information on the manner in which the Convention is applied in practice, including on the outcome of labour inspection activities. The Committee observes the indication by the CCOO and the UGT that, despite the increase in cases of non-payment and delayed payment of wages in recent years, the number of interventions carried out by the Labour and Social Security Inspectorate (ITSS) in this regard decreased. The Committee notes the Government’s indication that: (i) the ITSS carries out continuous monitoring of the regulations governing wages, particularly with regard to their payment in time and the amount paid; (ii) many of the activities of the ITSS have their origin in complaints made by the workers concerned, and that there have been fewer complaints of delays in the payment of wages; (iii) it should be borne in mind that the labour inspectorate is not the only competent body for wage-related claims, and that since 2012, there have been mechanisms for the swift resolution of wage-related claims by the labour courts; (iv) the ITSS undertakes various inspection campaigns that have a very direct impact on the supervision of wages, such as campaigns to monitor part-time recruitment, overtime and illegal subcontracting and assignment; and (v) the ITSS plays a proactive role in this regard, and over half of its inspections are not based on complaints. The Committee requests the Government to provide information on a number of complaints received by the ITSS concerning the regular payment of wages, as well as on the number of complaints filed with the courts on the same matter, and their respective outcomes. The Committee also requests the Government to provide information on the mechanisms which have been established since 2012 for the resolution of wage claims by labour courts.

Protection of Workers’ Claims (Employer’s Insolvency) Convention, 1992 (No. 173)

Articles 1, 9 and 13 of the Convention. Protection of workers’ claims in pre insolvency proceedings. The Committee notes the allegations by the CCOO that the pre-insolvency proceedings established through various reforms of the Insolvency Act (Act No. 22/2003 of 9 July 2003) affect the protection of workers’ claims. The CCOO specifically indicates that: (i) the commencement of negotiations on pre-insolvency agreements gives rise to the freezing of the debtor’s assets, which prevents the payment of workers’ claims; (ii) the conclusion of pre-insolvency agreements allows for the imposition on workers of reductions in the debt for workers’ claims or deferral in the payment of such claims for up to ten years; and (iii) the legislation does not allow workers to have access to coverage by the Wage Guarantee Fund (FOGASA) during the negotiation of such agreements, and does not require the FOGASA to assume responsibility for labour debts if a pre-insolvency agreement is reached which reduces such debts. The Committee notes the Government’s indication that: (i) the pre-insolvency situation of the negotiation of an out-of-court agreement on payments does not imply a legal situation of insolvency; (ii) the enterprise concerned will attempt to guarantee workers’ claims through the out-of-court agreement; and (iii) in the event of a subsequent declaration of insolvency, the workers’ claims will be guaranteed by the FOGASA. The Committee observes that the legislation allows the initiation of pre-insolvency procedures and the conclusion of pre-insolvency agreements when employers are already in a situation of insolvency, that is, when they can no longer regularly meet their obligations (sections 2, 5 bis and 231 of the Insolvency Act). The Committee also observes that pre-insolvency agreements may include other measures, such as: waiting periods not exceeding ten years, discharges, transfers of assets or rights to creditors in payment or for the payment of the whole or part of their claims, and the conversion of debts into shares or holdings in the debtor enterprise (section 236(1)(a)–(e) of the Insolvency Act). Lastly, the Committee observes that in no case may the proposal for an out-of-court agreement change the order of priority of claims legally established, without the explicit agreement of creditors whose claims are postponed (section 236(1)(3) of the Insolvency Act). In this regard, the Committee requests the Government to indicate the remedies that exist in legislation and practice to give effective protection to workers’ claims in cases in which pre-insolvency agreements are concluded without the consent of the workers and which adversely affect the payment of their claims, once the employer’s insolvency has been declared.

Article 8. Rank of privilege in insolvency proceedings. The Committee recalls that, in its previous comments, it requested the Government to indicate the measures adopted or envisaged to ensure that workers’ claims, in accordance with the definition and limits established by Article 8(1) of the Convention, have a higher rank of privilege than most other privileged claims. The Committee notes the UGT’s indication that the system of guarantees for workers’ claims established by national legislation does not sufficiently and adequately comply with Article 8. The Committee notes the Government’s indication that, in the context of insolvency proceedings, in the event of liquidation, workers’ claims may be considered as claims against the assets of the insolvent employer (sections 84(2)(1) of the Insolvency Act), claims with a special privilege over the items produced by the workers concerned (section 90(1)(3) of the Insolvency Act) or claims with a general privilege (section 91 of the Insolvency Act), and that these privileges give such claims preference for payment over most other privileged claims. The Committee also notes the Government’s indication that when the insolvent enterprise does not have sufficient assets for the liquidation of workers’ claims, such claims are protected by the FOGASA.

Articles 9–13. Protection of workers’ claims through a guarantee institution. Application in practice. With reference to its previous comments, the Committee notes that the Government provides statistical information on the activities of the FOGASA. The Committee also notes that the CCOO reports repeated delays in the finalization of proceedings by the FOGASA. The Committee notes the Government’s indication that: (i) the serious economic crisis that affected the country between 2008 and 2014 led to a significant rise in the number of claims submitted to the FOGASA, which required an increase in its material and human resources, and that it is currently undergoing a process of modernization; (ii) the proceedings brought before the FOGASA are generally processed within the period of three months set out in section 28(7) of Royal Decree No. 505/1985 on the organization and operation of the FOGASA.

Direct Request (CEACR) - adopted 2012, published 102nd ILC session (2013)

Article 8 of the Convention. Protection of workers’ claims by means of a privilege – Rank of privilege. Further to its previous comment, the Committee notes the information sent by the Government on the status of claims enjoying a special privilege. However, there is no indication in this information that claims on the available assets (namely, those arising from the activity of the enterprise after the declaration of insolvency) take priority over other types of claims enjoying a special privilege. Section 154(1) of the Insolvency Act (No. 22/2003 of 9 July 2003), as amended by Act No. 38/2011 of 10 October 2011, provides that claims on the available assets will be paid out of the property and entitlements not attached to the payment of claims enjoying a special privilege. The settlement of wage claims on the available assets may therefore be called into question should the employer’s assets, apart from property attached by special privilege, be insufficient to fulfil them. Moreover, as the Committee emphasized in its previous direct request, the other wage claims protected by the Insolvency Act, corresponding to periods of work prior to the last month preceding the declaration of insolvency, do not constitute claims on the available assets but form part of the liabilities (créditos concursales). However, claims on the available assets (including legal costs arising from the insolvency procedure and maintenance claims) take priority over these wage claims. The Committee requests the Government to indicate the measures taken or contemplated to ensure that wage claims, as defined by and within the limits of Article 8(1) of the Convention, enjoy a higher rank of privilege than most other privileged claims, whether they are classified as claims on the available assets or claims forming part of the liabilities.

Part III of the Convention. Protection of workers’ wage claims by a guarantee institution. The Committee notes the observations made by the Trade Union Federation of Workers’ Committees (CCOO) and the General Union of Workers (UGT) in communications dated 13 and 31 August 2012, respectively. According to the CCOO and the UGT, Royal Legislative Decree No. 20/2012 of 13 July 2012 issuing measures to guarantee budgetary stability and develop competitiveness has drastically reduced guarantees relating to workers’ claims in the event of employer insolvency. Firstly, the amount of outstanding wages covered by the wage guarantee fund (FOGASA) is now only twice the interoccupational minimum wage (SMI) for a maximum period of 120 days, whereas the said amount previously corresponded to three times the SMI for a maximum period of 150 days. Secondly, the ceiling for allowances due in the event of dismissal or termination of the employment contract remains fixed at one year’s wages but that the daily wage serving as the basis for calculation is now limited to twice, and no longer three times, the SMI. Thirdly, in bankruptcy proceedings, allowances due from FOGASA will be calculated on the basis of 20 days’ wages per year of service, up to a maximum of one year’s wages, without the daily wage serving as the basis for calculation exceeding twice the SMI, whereas the previous limit was three times the SMI.

The Committee notes that, in its reply to the observations of CCOO and UGT received on 20 November 2012, the Government indicates that the framework for the protection of wage claims by FOGASA, which was introduced by the Royal Legislative Decree No. 20/2012, is virtually identical to the framework that was applicable before the adoption of Act No. 43/2006 of 29 December 2006 on economic growth and employment. The legislation currently in force is, however, more favourable to workers in a certain number of points, in particular, in so far as it covers compensation for termination of temporary or fixed-term contracts. The Government has also provided statistical data showing a considerable increase between 2008 and 2012, of the number of protected workers (from 90,318 to 198,574) and of the sums of compensation paid by FOGASA (€434,015 in 2008 and €1,166,200 on 30 September 2012). This evolution is due to the severe economic crisis, the significant number of enterprises that have ceased their activities and the high rate of unemployment. In this context and given the impossibility of increasing the resources of FOGASA by raising the employers’ contribution, the only option in order to maintain its sustainability was to reintroduce the ceilings that were applicable to benefits before the legislative amendments introduced in 2006, while preserving the abovementioned improvements. Finally, the Government underlines that, in any event, the level of protection afforded by the national legislation is higher than that required under the Convention.

The Committee notes the Government’s explanations and requests it to keep the Office informed of new developments relating to the regulation of the protection of wage claims by FOGASA and to transmit together with its next report statistical data on the evolution of the number of employees covered by the relevant legislation, the sums paid by the Fund and the number of bankruptcies registered per year.

Part IV of the report form. Application in practice. The Committee notes that the UGT also refers in its observations – as does the Government in its reply – to the substantial increase in the amount of benefits paid by FOGASA and in the number of enterprises affected while noting that budget cuts in 2012 reduced the amount of benefits by 10.7 per cent and the body that collects employer contributions has not repaid the amount of these contributions to FOGASA since May 2011. The UGT concludes from this that a considerable financial imbalance is to be expected in the accounts of the latter. Finally, it mentions that the large increase in the number of cases processed has not been matched by an increase in staff. Consequently, in certain agencies, the average time for processing a file is more than six months, whereas the legal maximum is three months. The Committee requests the Government to send in its next report any comments it may wish to make in reply to the observations of the UGT on this point.

Direct Request (CEACR) - adopted 2007, published 97th ILC session (2008)

Part II of the Convention. Protection of wage claims by a privilege. The Committee notes the adoption of the Insolvency Act (No. 22/2003 of 9 July 2003), which consolidates the various insolvency procedures, drastically reduces the number of privileges and preferences relating to claims on the assets available for distribution, and amends section 32 of the Workers’ Charter concerning the protection of wage claims by a privilege. It notes that the provisions of section 32 no longer apply when a declaration of insolvency has been made pursuant to the abovementioned Act.

The Committee notes that section 84 of Act No. 22/2003 establishes a distinction between claims constituting the liabilities and claims on the assets available for distribution. It notes that the following are considered as claims on the available assets: (1) wage claims corresponding to the 30 days of work preceding the declaration of insolvency, up to a limit of twice the inter occupational minimum wage (SMI), being claims that will be paid immediately under section 154(2) of the Act; (2) other claims, including wage claims arising from the debtor’s activity after the declaration of insolvency. The Committee also notes that, under section 154(3) of the abovementioned Act, claims on the available assets will be paid out of the property and entitlements not attached to the payment of claims enjoying a special privilege. If the assets are insufficient, the proceeds will be distributed between all parties making claims on the available assets according to the order of the due dates.

The Committee also notes section 89 of Act No. 22/2003, under the terms of which claims constituting the liabilities are divided into privileged claims (which are in turn divided into special privileged claims and general privileged claims), ordinary claims and subordinate claims. It notes that workers enjoy a special privilege on the goods that they have manufactured or constructed even if they are the debtor’s property or in the debtor’s possession, in accordance with section 90(1)(3) of the Act. Section 91 states that a general privilege applies, inter alia, to wage claims that do not enjoy a special privilege, up to a limit of three times the daily minimum wage for the number of days of unpaid wages, and also to statutory severance payments for an amount not exceeding three times the minimum wage. The Committee also notes that, under section 156, general privileged claims will be paid, after deduction of the property and entitlements necessary for the payment of claims on the available assets, out of the assets not subject to a special privilege and out of the remainder of the assets subject to such a privilege after payment of the corresponding claims.

Hence it can be seen from the above that Act No. 22/2003 grants the status of claims on the available assets to wage claims arising after the declaration of insolvency. However, they do not take priority over the other claims on the available assets, the various claims being paid according to the order of the due dates. At all events, claims on the available assets are paid out of the assets not attached to the payment of claims enjoying a special privilege (such as claims secured by mortgage). Moreover, the wages due for the period preceding the declaration of insolvency (beyond the first month, for which a claim on the available assets also applies) are covered by a general privilege but are paid only after settlement of all the claims against the available assets, including legal costs, etc. The Committee therefore understands that this Act provides substantial protection of workers’ claims by means of a privilege in the event of the insolvency of their employer. The Committee requests the Government to supply all relevant explanatory information on this subject.

Further, the Committee notes that the Spanish Government submitted a Bill to Parliament on 8 September 2006 concerning insolvency and the order of priority of claims in the case of individual liquidation (i.e. in the absence of a creditors’ agreement), which is likely to have consequences for the protection of wage claims. It notes that the Economic and Social Council has expressed certain reservations with regard to this Bill. The Committee requests the Government to supply information on the progress made on the the adoption of this Bill and on its possible impact on the order of priority of wage claims.

Part III. Protection of workers’ claims by a guarantee institution. The Committee notes that section 33(1)(2) of the Workers’ Charter was amended by Act No. 43/2006 of 29 December 2006 concerning the increase of economic growth and employment. It notes with interest that the maximum amount of wage claims protected by the wage guarantee fund, which used to correspond to twice the daily minimum wage for a maximum period of 120 days, now corresponds to three times the minimum wage for a maximum period of 150 days. The Committee also notes with interest that the guarantee fund also covers new types of payment for dismissal or termination of employment, including termination of the contract on objective grounds, judicial termination in the context of the Insolvency Act, and the expiry of temporary contracts and fixed-term contracts. Moreover, it notes with interest that the ceiling for payments covered by the guarantee fund remains fixed at one year’s wages but that the daily wage serving as the basis for calculation is now limited to three times (and no longer twice) the minimum wage, including, proportionally, the 13th and 14th months. Finally, the Committee notes with interest that the amount of payments in the event of termination of the employment contract on the worker’s initiative is calculated on the basis of 30 (and no longer 25) days’ wages per year of service, without prejudice to the abovementioned ceiling.

In addition, the Committee notes the fourth supplementary provision of Act No. 43/2006, under the terms of which future modifications to contributions and benefits relating to the wage guarantee fund will be determined according to the financial surplus of this fund. The Committee requests the Government to provide further information on the possible impact of the application of this provision on the level of protection of workers’ claims in the event of the insolvency of their employer.

Part IV of the report form. The Committee notes the information in the Government’s report to the effect that, in 2005, 68,557 workers were protected, for a total amount in excess of €232 million; and in 2006, 75,081 workers (+9.5 per cent) were protected, for a total amount in excess of €312 million (+34.5 per cent). The Committee requests the Government to supply further information on the reasons why the amount of wages and benefits paid by the wage guarantee fund increased so sharply between 2005 and 2006.

Direct Request (CEACR) - adopted 2004, published 93rd ILC session (2005)

The Committee notes the detailed information contained in the Government’s last two reports and the attached documentation.

Articles 6(d) and 12(d) of the Convention. The Committee notes the decision of the Supreme Court of 26 December 2001 in which it was concluded that the termination benefits referred to in section 33(2) of the Workers’ Statute have the same meaning as the term "severance pay" employed in Articles 6(d) and 12(d) of the Convention and include compensation payable only in the event of the termination of employment at the initiative of the employer. The Committee recalls in this connection that the International Labour Office has on three different occasions given informal opinions suggesting that the term "severance pay" should be understood in a narrow sense to cover only that form of compensation due to workers upon termination of their employment at the initiative of the employer and that it should be read in conjunction with Articles 3 and 12 of the Termination of Employment Convention, 1982 (No. 158), which are drafted upon the same understanding.

Part IV of the report form. The Committee notes that according to the statistical information supplied by the Government, in 2000 the Wage Guarantee Fund (FOGASA) settled claims of 76,827 beneficiaries for a total amount of 228 million euros while in 2001 some 70,237 workers received payments totalling 214 million euros. The Committee would appreciate if the Government could continue to supply detailed information on the practical application of the Convention, including for instance available statistics on the number of bankruptcies and the amount of unpaid wages recovered through judicial proceedings in accordance with existing bankruptcy laws and regulations, but also full particulars on the operation, financing and management of the wage guarantee institution, particularly as regards the number of applications received, the proportion of claims settled and the sums of wage debts paid on a yearly basis.

Direct Request (CEACR) - adopted 1998, published 87th ILC session (1999)

The Committee has noted the Government's first report and requests the Government to supply further information on the following points:

Article 1(3) of the Convention. The Committee asks the Government to indicate in what way the extent of the employer's responsibility in the insolvency proceeding is determined by legislation or practice.

Articles 6(d) and 12(d). The Committee notes that, under sections 32.3 and 33.2 of the Workers' Statute (as consolidated by Legislative Decree 1/1995 of 24 March 1995), indemnities for dismissal (indemnizaciones por despido) are protected by privilege and by the guarantee institution. It also notes the Government's statement in the report to the effect that other types of severance pay (indemnizaciones por fin de servicios) are considered to be covered by the obligation of guarantee as having been incorporated into internal rules by way of the ratification of the Convention. The Committee recalls however that, under Article 2 of the Convention, its provisions have to be applied by means of laws or regulations or other means, and requests the Government to indicate measures taken to protect other types of severance pay than indemnities for dismissal by privilege and by the guarantee institution.

Article 7. With reference to its observation relating to the comments of the General Union of Workers (UGT) that the quantitative limit to the payment of guarantee by the Wage Guarantee Fund (FOGASA), which is based on the interprofessional minimum wage (SMI), is resulting in insufficient protection, and noting that quantitative limits based on SMI are also set for the protection by privilege, the Committee invites the Government to supply its observations with regard to the above-mentioned quantitative limitations to the protection by privilege.

Further to the observation it is making, the Committee requests the Government to supply information on the practical application of the Convention, with particular reference to the actual functioning of the FOGASA, and including the number of workers covered by the measures giving effect to the Convention, in accordance with point IV of the report form.

Observation (CEACR) - adopted 1998, published 87th ILC session (1999)

The Committee has noted the Government's first report, as well as the comments of the General Union of Workers (UGT), which were sent to the Government for observation on 24 March 1998.

The UGT points out that the quantitative limit to the payment of guarantee by the Wage Guarantee Fund (FOGASA) which is based on the interprofessional minimum wage (SMI) is resulting in insufficient protection. It also notes that, because of the budgetary insufficiency of the FOGASA itself and administrative procedures, it takes the worker at least three-and-a-half years to receive the indemnities after the non-payment by the employer occurred.

The Committee notes that the Government has not supplied its observations in reply to these comments and invites the Government to do so, with reference to Article 13 of the Convention regarding the first point, and treating the second point as a question of the application of Part III of the Convention in practice.

As to the contributions payable by the employer regarding social security, mentioned among other points by the UGT in the comments, the Committee notes that such contributions are not included in the "workers' claims" to be protected under this Convention (Articles 6 and 12), and therefore do not fall within its scope.