The reform amends the Workers' Statute (WS) and a series of other legislations in three main regulatory fields: temporary employment contracts, collective bargaining and internal flexibility measures or temporary lay-offs.

The main provisions can be summarized as follow:

• Temporary contracts: fixed-term contracts are now allowed only for production reasons or to substitute a worker. The limitation in successive temporary contracts is reinforced and administrative sanctions imposed for fraudulent use of temporary contracts are increased.
• Training contracts: the law sets out a training contract with two different objects: (i) work-study training and (ii) obtaining professional experience in accordance with the level of education.
• Discontinuous permanent contract: it may be entered into for the performance of seasonal work or work linked to seasonal activities, for the performance of work that is not seasonal in nature but which, being intermittent, has certain, determined or undetermined periods of execution. They can be used for the execution of contracts that, being foreseeable, are part of the ordinary activity of the company.
• Contracting and outsourcing: the possible limitation of the outsourcing of services was one of the main issues in the negotiation stages of the labour reform. At the end, the previous regulations are maintained and the collective bargaining agreement applicable to the contractor and sub-contractor company will be the one in the sector of the business involved in the contract or sub-contract, unless there is another applicable sector collective bargaining agreement.
• ERTE and RED Mechanism: new provisions are introduced in Article 47 of the Workers’ Statute, which regulates temporary labor force adjustment plans (ERTE) for economic, technical, organizational and/or production reasons (ETOP) and due to force majeure. The so-called Red Mechanism for Employment Flexibility and Stabilization is created with two modalities, cyclical and industry-related. This will allow companies to request measures to reduce working hours and to suspend employment contracts. It must be activated by the Spanish Council of Ministers.
• Collective bargaining and collective agreements: the priority of application of the company or group of companies’ collective bargaining agreement with respect to the amount of the salary is eliminated, as well as the one-year limit for ultra-activity of reported collective bargaining agreements. They will remain in force, even if expired, until a new agreement is reached.

The new law came into force on 31 December 2021, while provisions on new training contracts, fixed-term contracts and permanent-discontinuous contracts will come into force on 30 March 2022.

The Spanish Confederation of Business Organizations (CEOE) welcomed the reform, referring to it as “one of the most important milestones of social dialogue in the country in recent times”. The reform, which must be now validate by Congress, addresses fundamental aspects in the field of hiring, internal flexibility and collective bargaining.