Employment Regulations and Corporate Reorganization

Companies operate in economic environments that are subject to constant change. Market fluctuations, digital transformation processes, changes in demand, or the need for internal reorganization may require the adoption of measures that affect the organization’s workforce and employment structure.

When these circumstances affect a group of employees, labor laws provide for specific mechanisms to manage the situation in an orderly manner while ensuring the rights of the affected workers. Workforce adjustment procedures are precisely the tools designed to address these types of scenarios.

Taking collective action requires rigorous planning, a preliminary legal analysis, and compliance with complex procedural requirements. Mistakes made during these phases can lead to significant financial risks and subsequent litigation.

At IN DIEM, we advise both companies and employees on workforce reduction procedures, corporate restructuring, and collective bargaining, providing specialized legal assistance throughout all phases of the process.

Our goal is to ensure the legal certainty of the decisions we make and to adequately protect our clients’ interests.

When Might a Workload Adjustment Be Necessary?

Collective employment measures are not limited to situations of business crisis.

Economic, technical, organizational, and production-related causes

Labor laws provide for various circumstances that may justify the adoption of reorganization measures:

• A persistent decline in revenue or sales.
• Technological changes that affect business operations.
• Corporate Restructuring.
• Changes in production systems.
• Internal reorganization of departments.
• Business integration or consolidation processes.

The existence of any of these circumstances does not automatically mean that the proposed measures are appropriate.

The company must adequately document the relevant economic, technical, organizational, or production-related factors and demonstrate the necessity of the proposed actions.

Furthermore, it is essential to evaluate less burdensome alternatives that would allow us to achieve our objectives while minimizing the impact on employment.

The preliminary planning phase is one of the most important elements of any labor regulation procedure.

Workforce Reduction Plans and Mass Layoffs

Collective Layoff Procedure

Workforce Reduction Plans (ERE) allow for the termination of employment contracts when certain legally established grounds exist.

More information about layoffs

The process of carrying out a collective layoff requires compliance with a specific procedure that includes initiating a consultation period with employee representatives.

During this phase, the reasons justifying the measure, the available economic or technical documentation, and any possible alternatives should be analyzed.

The negotiations may address such important issues as:

• Number of affected workers.
• Selection criteria.
• Implementation Schedule.
• Compensation.
• Social support measures.
• Outplacement plans.

Proper preparation of this documentation is essential to ensure the validity of the procedure.

Experience shows that many challenges stem from procedural defects or insufficient evidence supporting the grounds cited.

For this reason, it is essential to have specialized advice from the very beginning of the process.

ERTE and Temporary Workforce Adjustment Measures

Suspension of Contracts

Temporary Layoff Programs (ERTE) are an alternative to mass layoffs when a company’s difficulties are temporary in nature.

Through this mechanism, it is possible to suspend employment contracts for a specified period without permanently terminating the employment relationship.

Reduced Work Hours

Another option is to temporarily reduce the workweek for the affected employees.

These measures make it possible to adapt the labor cost structure to current economic conditions while preserving jobs and facilitating a future recovery in economic activity.

ERTE programs have become particularly important in recent years because of their usefulness in addressing exceptional situations without resorting to mass layoffs.

However, their use also requires compliance with specific requirements and an adequate justification of the circumstances involved.

In addition, these measures often have significant implications from the perspective of benefits and Social Security.