Spanish legal compensation for unfair dismissal is appropriate

In its judgment of December 19, 2024, the Spanish Supreme Court (the "Court”) analyzes a topic that has led to one of the most controversial legal and business debate in recent years, offering a first ruling on the possibility of the courts increasing the established legal compensation for unfair dismissal established in article 56.1 Workers Statute ("WS"), under the protection of article 10 ILO Convention 158.

Specifically, the Court considers that article 10 ILO Convention 158 does not give the courts the authority to establish an additional compensation to the compensation legally established to guarantee "appropriate compensation" in certain cases in which the dismissal is declared unfair.

We summarize the arguments behind the Court’s conclusion below.

• Although ILO Convention 158 is part of domestic law since its ratification by Spain, and its provisions have been incorporated into the Spanish legal system, this does not mean that all its provisions are directly applicable and that they can be directly applied by the courts.
• Unlike what occurs with article 7 ILO Convention 158—regarding a preliminary hearing, see Post | Disciplinary dismissals can no longer be immediate in Spain—, the imprecision of the terms used in article 10—referring to "appropriate compensation or reparation"—prevent this rule from being directly applicable.
• In turn, due to this same vagueness regarding the appropriate nature of the compensation, it is not possible to conclude that the compensatory formula established in article 56.1 WS for compensating the unjustified loss of employment infringes article 10 ILO Convention 158.
• In this context, the Court highlights that to calculate the compensation for unfair dismissal, article 56.1 WS uses the same objective parameters of seniority and salary that ILO Convention 158 uses in article 12 to calculate other types of compensation.
• Consequently, the Court concludes that the compensation established in the Spanish legal system guarantees the payment of a compensation, is appropriate and respects the terms of article 10 ILO Convention 158, as well as offering legal certainty and homogeneity.

Without prejudice to the above, the Court reminds that the analysis in the judgment regarding the appropriate nature of the compensation established under article 56.1 WS does not consider the provisions of article 24 of the Revised European Social Charter, because it was ratified by Spain after the dismissal object of the appeal.

Although this judgment does not completely end this debate regarding the possibility of improving the legally established compensation, it is a first ruling in favor of the compensatory formula established in article 56.1 WS and the legal certainty that this system offers both to companies and workers.