This ruling affects millions of workers in all sectors. Photo credit: ra2 studio/Shutterstock
Spain is under fresh pressure from European authorities to review its rules on unfair dismissals. The European Committee for Social Rights (CEDS) has called on the government to introduce a system called despido restructuringo (restorative dismissal), which aims to provide laid-off workers with compensation that reflects the actual damage they have suffered, rather than a fixed severance payment system. The move comes after trade unions argued that Spain’s current compensation provisions are insufficient, do not comply with the European Social Charter and do not adequately protect workers.
The ruling affects millions of employees across all sectors and highlights potential gaps between Spanish labor law and European social rights standards. It also raises questions about how Spain’s courts and parliament will respond to this pressure, and whether this reform has the potential to reshape employer-employee relations in the country.
Meaning of “Despido Restaurativo”
Remuneration tailored to workers
Under Spain’s current system, unfairly dismissed employees are paid a fixed amount of compensation of 33 days’ salary for every year of work (up to 24 months). Despidorestaurativo suggests an individualized approach that includes wage loss, psychological damage, and social disruption. In some cases, courts may even order the worker to be readmitted to the hospital, in addition to monetary compensation.
The goal is two-fold. One is to provide employees with appropriate remedies, and the other is to prevent arbitrary dismissal and ensure fairer treatment across the workplace.
European pressure and union complaints
CEDS decisions and union actions
In 2022, the trade union Union General de Trabajadoras y Trabajadores (UGT) filed a class complaint with CEDS, alleging that Spain’s severance provisions are inadequate. In March 2024, the European Agency ruled that Spain had violated Article 24 of the European Social Charter, which guarantees workers adequate compensation or alternative remedies for unfair dismissal.
In June 2025, the Commission Obleras (CCOO) strengthened the charges. CEDS reaffirmed that Spanish law is too strict, provides insufficient compensation for actual damages, and fails to deter employers from unfair practices.
Congressional proposal, courts still limited
In September 2025, a non-binding parliamentary proposal called for reforms to restaurant regulatory enforcement, but it has not yet become law. The court will continue to enforce the current 33-day annual compensation. Even the Supreme Court recognized in July 2025 that judges cannot award compensation above this statutory limit.
The government recognizes Europe’s calls for reform, but concrete legal reforms are still pending.
Impact on labor relations
Potential changes if adopted
If Spain introduced redundancy restructuring, unfair dismissals would become more costly and less common. Employees will receive compensation that reflects their actual losses, including lost profits and psychological harm. Employers may adopt more stable employment practices, reduce reliance on temporary contracts, and improve workplace conditions.
This reform could align Spanish law with European standards and narrow the gaps highlighted by CEDS. Until the law changes, workers will remain in a gray area. Although it is theoretically protected in European judgments, it is restricted in Spanish courts.
Impact on expatriates and residents of Spain
What does it mean for foreign workers?
For expatriates and long-term residents, this reform could bring much-needed peace of mind. Foreign employees in Spain often face uncertainties such as contract types, temporary work, and unfamiliar labor laws. Despidorestaurativo ensures that both Spanish nationals and non-Spanish nationals receive fair and individual compensation in cases of unfair dismissal.
Expatriates, particularly those on fixed-term contracts or working for international companies, would benefit from clearer legal remedies that take into account their individual circumstances. The possibility of readmission and individual compensation reduces the risk of financial instability after termination. It could also make Spain a more attractive destination for skilled foreign workers, demonstrate alignment with European labor standards, and strengthen confidence in the country’s employment protections.
What workers and employers need to know
- CEDS ruled that Spain’s unfair dismissal system violates the European Social Charter.
- Current coverage (33 days x years of service, capped at 24 months) is insufficient to cover actual damages.
- Despidorestaurativo aims to provide personalized coverage and, in some cases, readmission.
- There are non-binding parliamentary proposals, but no laws have been enacted.
- Courts are still applying the current fixed compensation, which does not actually protect workers.
Looking to the future
A turning point for Spanish workers
The next few months will be decisive. The adoption of despidorestaurativo could establish Spain as a European leader in worker protection and ensure fairer treatment for millions of people, including expatriates and residents alike. Conversely, failure to act would prolong the deficiencies criticized by European authorities and trade unions, putting workers at risk under the current harsh compensation regime.
