The Spanish Supreme Court rules out “customised” compensation for unfair dismissal

The Plenary of the Social Chamber of the Spanish Supreme Court has issued a landmark decision regarding the scope of judicial discretion in unfair dismissal cases. The Court has confirmed that the statutory compensation established in Article 56.1 of the Workers’ Statute is the only applicable criterion, and that judges cannot increase this amount based on individual circumstances of the employee.

What has the Supreme Court ruled?

The ruling — to be published in full in the coming days — marks a turning point in Spanish labour law. The Court makes it clear that the compensation formula currently in place already meets the requirements of international labour standards and therefore does not allow for case-by-case increases imposed by the judiciary.

The current legal standard — 33 days' pay per year of service up to a maximum of 24 months — cannot be modified based on personal or subjective elements, such as employee vulnerability or low seniority.

What does this mean for businesses?

This ruling has direct implications for companies:

• It eliminates legal uncertainty in unfair dismissal cases.

• It reinforces a predictable, objective and uniform compensation framework.

• It avoids the risk of “customised” payouts, which could otherwise lead to inconsistencies, inequality and increased litigation.

This judicial interpretation allows businesses to confidently implement internal HR policies and cost structures related to contract termination.

What about international labour conventions?

The Court reviewed Article 10 of ILO Convention 158 and Article 24 of the Revised European Social Charter, both of which mention the right to “adequate compensation”.

However, the Supreme Court states that:

• These are not directly enforceable in Spain.

• They are programmatic and imprecise, and require legislation to be made applicable.

• No judge may invoke them to override national law unless a formal legal reform is passed.

The legal effect of CEDS decisions

The judgment also clarifies the status of decisions issued by the European Committee of Social Rights (CEDS):

• The CEDS is not a court of law.

• Its decisions are not binding nor enforceable in Spain.

• They cannot create direct legal effects between private parties.

• This approach is aligned with that of other European courts, including the French Supreme Court and the Italian Constitutional Court.

 

This ruling gives clarity and consistency to companies operating under Spanish labour law. Judicial discretion is ruled out. The statutory formula is the only valid compensation mechanism for unfair dismissal.