Mandatory retirement and equality

After the successive regulatory ups and downs experienced, since the initial approval of the Workers' Statute (WS), in relation to the ability to determine mandatory retirement ages by law or agreement (in other words, terminating employment contracts on age grounds, because actual retirement is the employee’s decision in all cases), and amid contradictory tides (extension of working life, freedom of work, generational renewal, distribution of work), final provision 1.1 of Law 21/2021, of December 28, 2021 on guaranteeing the buying power of pensions and other measures to strengthen the financial and social sustainability of the public pension system redrafts additional provision ten of the Statute, on collective agreement terms relating to reaching the ordinary retirement age.

Because the possibility of legally stipulating a maximum age for remaining at work and of establishing, in line with this, the "incapacity to work and, direct and unconditional, termination of the employment relationship" at that age has been severely limited, since the early constitutional court judgment 22/1981, of July 2, 1981, the question has focused on the ability to establish,  via collective bargaining, ages at which the termination of employment contracts is allowed for reasons of employment policy ("distribution of work"), which is also referred to in constitutional and judicial analysis. And this is the perspective of the new wording of additional provision (AP) ten of the WS. It contemplates two options for collective bargaining: the first is to establish terms allowing the employment contract to be terminated when the employee reaches 68, in order to facilitate generational renewal through the hiring of a new employee on an indefinite basis. And a second, which exceptionally allows the employment contract to be terminated at the ordinary retirement age where this occurs to promote female employment, through the hiring of a female employee on an indefinite and full-time basis.

Whereas the first option has already been implemented, with the endorsement of judicial analysis, the second poses numerous interpretative issues that will require judicial clarification. I am going to discuss these interpretative issues in this article.

First of all, what AP ten regulates in paragraph two is an option open to collective bargaining on an exceptional basis. "Exceptionally" (says the provision, with the interpretative consequences that this must have), the employment contract may be terminated at the ordinary retirement age, in the event of underrepresentation of female employment in the economic activity or activities (defined by the codes for the National Classification of Economic Activities, NCEA) included in the functional scope of the agreement (female employment rate below 20%). Secondly, there is some confusion about the NCEA to be taken into account to decide whether there is female underrepresentation that opens up this exceptional option. Whereas it starts off speaking about the employment rate "in any of the economic activities relating to the functional scope of the agreement", it later speaks about "each of the related NCEAs" (included in the scope of the applicable agreement), and lastly the provision refers to the NCEA "to which the person affected by the application of this clause belongs".

It appears that the female employment rate of each of the activities included in the functional scope of the agreement triggers, at first, if it is below 20%, the option for the agreement to include a term on this exceptional type of termination of contract. And, after this term has been included, when applying it, it will be necessary to take into account, exclusively, the NCEA to which the employee whose contract is intended to be terminated belongs.

Furthermore, the employment rate is not measured at the company but in the economic activity it carries out. Therefore, it could happen, paradoxically, that a company with a high rate of female employment can apply this exceptional option if in the scope of its economic activity this rate is below 20%.

It is the social security authority that must provide the employment rate for these purposes and must do so by reference to the date of the constitution of the negotiating committee. Therefore, it appears that the agreement can only include terms on the exceptional termination option allowed in AP ten, paragraph 2, of the WS, if on the date of constitution of its negotiating committee the female employment rate for the relevant NCEA is below 20%.

However, this seems to refer to terms on the ability to impose termination of the contract under the collective agreement, not to its implementation, because the AP requires the female employment rate for the NCEA to which the employee whose contract is to be terminated belongs to be measured again, "on the effective date of the termination decision".

There is, therefore, a double requirement:

• That the female employment rate in the activity, or activities, included in the functional scope of the agreement (defined by the NCEA) must be below 20% at the time of the constitution of its negotiating committee.
• That the female employment rate for the NCEA to which the employee whose contract is to be terminated belongs, must also be below 20% on the effective date of the termination decision.

The provision is certainly confusing. A female employment rate below 20%, which must exist at the time of the constitution of the negotiating committee for the collective agreement, allows it to implement the provision in AP 10.2 of the WS, but does not cover any terminations that may subsequently occur as a result of its implementation. For these terminations, it is necessary to provide evidence that, at the time of each termination, the percentage of female employment for the NCEA to which the affected employee belongs is also below 20%.

This requires the social security authority to provide the female employment rate at two points. And at companies with a large workforce, where numerous contractual terminations may occur under this provision, management difficulties may arise, and continual requests will have to be made for information on the female employment rate.

Finally, the requirement of simultaneity in the hiring of female employees (section c) of AP 10.2) also raises interpretative issues. Do the termination and the hiring have to take place in the same transaction? This does not appear to make much sense, considering that recruitment procedures can be highly complex, especially at large companies. This appears to be a requirement that should be interpreted flexibly, and a recruitment and hiring process can be carried out before and with a view to termination of the contract; or that process can be opened immediately after termination, in order to fill the job concerned as soon as possible. However, it should not be forgotten that the exceptionality specified by law may lead the courts to a restrictive interpretation of this way of terminating contracts.

It is therefore highly advisable for collective bargaining to address this simultaneity issue and to lay down reasonable guidelines in this regard, which in all cases will have to be validated by the courts. What will indeed have to be made clear is which contract occurs for each termination. And one last remark: this provision should justify the announcement of jobs reserved for women when such positions are intended to "replace" employees whose contracts are going to be terminated under the collective agreement clause that allows under AP 10.2 of the WS.