The Supreme Court Clarifies How to Calculate Compensation for Unfair Dismissal

20 May 2008

The ruling of October 31 2007 by the Supreme Court clarifies that compensation for unfair dismissal, laid down in Art.56.1a) of the Workers´Labour Act (ET), should asses periods of time of a duration of less than one year by months, and not by days, in order that the days that exceed the last month served be treated as a whole month.

This important ruling clarifies one of the main issues that tend to pose juridical uncertainty to companies when trying to determine the length of service for purposes of setting the compensation, and specifically, whether it should proceed by month or by day with the apportionment of payments, concerning a period of less than one year. Up until now there have been autonomous communities that have had different criteria to this end. Article 56.1 of the ET sets compensation at forty-five salary days per year of employment, dividing by months for periods of time of less than one year, up to a maximum of forty-two monthly instalments. The Supreme Court expects Art.56.1a) ET to be interpreted literally due to the clarity of this version.

Thus, there is no basis for using two calculation models for compensation for time periods of less than one year: the apportionment attributed to whole months of completed service and that attributed to individual days.

Therefore in all cases of service of less than one year in length, apportionment must be carried out “by month” and not, under any circumstances, by days. The result is as if they had worked the whole month.

For further information, please contact Ana Gómez Hernández: