The stoppage of activity caused by COVID-19 can lead to serious economic difficulties for many companies that will be forced to readjust their workforces in order to get ahead.

As is well known, Labor Law provides for various mechanisms to deal with the readjustment of workforce, among which it is worth highlighting that of objective dismissals for economic, technical, organizational and production reasons and the employment regulation files, whether temporary or permanent. .

Sometimes, The depth of the crisis cannot be addressed only from the perspective of Labor Law and it is convenient, or even necessary, to propose restructuring by resorting to the mechanisms provided for in Bankruptcy Law.. Whether or not to attend the contest, or the pre-contest, requires analyzing other aspects that go beyond the strictly labor scope (see article on bankruptcy instruments as prevention tools on our website), but in this article I would like to focus on highlighting some of the advantages that the so-called Bankruptcy Law can offer in a crisis situation, that is, the best treatment of labor issues in the framework of a bankruptcy process.

Let us begin by recalling a matter of a transitory nature, but of great practical importance in the coming months. Those companies that have availed themselves of the ERTES of force majeure contemplated in art. 22 of RDL 8/2020 and to ERTE as a consequence of economic, technical, organizational or production causes (ERTE ETOP) regulated in art. 23 of the aforementioned legal text, as well as the various types of ERTE contained in RDL 18/2020, RDL 24/2020 and RDL 30/2020, they acquired the commitment to maintain employment for a period of six months from the date of resumption of the activity, when they have benefited from the exemption of social contributions, without forgetting the mandate contained in art. 2 of RDL 9/2020, which prevents the termination of employment contracts for objective reasons, a legal mandate that is currently maintained. RDL 18/2020 exempts from said commitment those companies in which there is a risk of bankruptcy. In order to avoid, therefore, the serious consequences of the breach of said legal commitment (a circumstance that could entail the payment of all social contributions not paid during the ERTO, possible sanctions from the Labor Inspection and even risk of nullification of the compulsory dismissal of reinstatement and payment of processing salaries, there are already various judicial pronouncements in this regard), the company should avail itself of the pre-competition in order to avoid the stated serious consequences that, in another case, could occur.

Within the contest, objective dismissals and employment regulation files can also be carried out. The difference is that such dismissals or files will be processed before the Bankruptcy Judge himself, who therefore knows the economic situation of the company, which translates into a different approach to labor legislation. If, in general, the social jurisdiction governs the pro-operative principle, in the commercial jurisdiction, the principle of contest interest. The Commercial Court will also protect, of course, the interests of the workers, but will also take into account many other circumstances, among which the future viability of the company stands out.

Practical experience shows that, As a general rule, both dismissals for objective causes and collective files for modification, transfer, suspension or termination of employment contracts reach a more favorable resolution in bankruptcy in order to the future continuity of business activity.

Hopefully your company can recover from the crisis caused by COVID without the need for drastic remedies, but if the readjustment is unfortunately necessary, The specific instruments provided for in Labor Insolvency Law can be very useful to minimize the impact of the crisis.