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Bankruptcy epidemic slays Spain’s businesses

Washing machines, fish fingers and football teams: not even household names are safe from a Spanish bankruptcy epidemic ravaging big and small businesses alike.

Bankruptcy epidemic slays Spain's businesses
Workers of Spanish electrical appliance maker Fagor and Edesa march during a demonstration in defense of their jobs in the town of Basauri on November 14th, 2013. Photo: Rafa Rivas/AFP

The number of companies filing for bankruptcy in Spain rose from 1,147 in 2007, the year before Spain's real estate bubble disastrously burst, to nearly 6,200 in 2009, according to the National Statistics Institute.

It topped 9,000 in 2012 and "I think that in 2013 we are going to get close to 10,000," said Carlos Sancho, a lawyer and expert in financial management at IESE Business School.

One big name after another has succumbed in recent months.

Real estate developer Reyal Urbis went under in February, sunk by €3.6 billion ($4.9 billion) of debt.

The giant frozen fish maker Pescanova, which employs 10,000 people, followed in April. In November it was the turn of Fagor, one of Europe's biggest maker of household appliances such as washing machines.

The bankruptcy reaper has also come knocking on the door of more glamorous businesses, such as Deportivo A Coruna league football club and the organizer of the Miss Spain beauty contest.

About a third of recent bankruptcies have affected real estate firms — the sector whose collapse in 2008 triggered Spain's financial crisis and double recession, driving unemployment up to nearly 26 percent currently.

Brokerage Axesor is forecasting an increase of about 25 percent in bankruptcies in 2013 and a slight easing in 2014, said Javier Ramos, its research director.

The companies formally filing for bankruptcy reflect only a part of the toll from the crisis, however.

"In Spain the rate of bankruptcies is still very low," accounting for just a quarter of all business shutdowns in January to September this year, Ramos said.

Spanish industry is largely composed of small companies, which "are very afraid of filing for bankruptcy", said Celia Ferrero, vice-chairwoman of the small business federation ATA.

"What the small businessman normally does is close down the business directly," settling its affairs without applying for court supervision in a formal bankruptcy procedure, she said.

Although a bankruptcy procedure, in which a judge regulates negotiations with debtors, offers hope that a company may be saved, in practice fewer than one in ten firms that make the filing in Spain avoid being liquidated.

"We all rather have the feeling that if a company files for bankruptcy protection, it is clearly not going to be able to carry on," said Sancho.

He said bankruptcy laws should be reformed to "hold out an umbrella to the businessman so he can weather the storm".

Spain's official economic figures show that it technically emerged from recession in the third quarter of this year, with timid growth of 0.1 percent.

But "we are now seeing the judicial consequences of the crisis," said Sancho.

After the crisis erupted in 2008, many companies took out more loans to try and keep them afloat, which are now due for repayment.

Spanish banks — who themselves had to tap €41 billion ($56 billion) from a eurozone rescue fund last year — are less willing than before to extend new ones.

"I think that if we could hold on a little longer, if credit started to flow again, then a lot of the companies that are on the verge of shutting down could survive until the economy gets a bit better," said Ferrero.

Some of the public authorities contracting services delay their monthly payments for up to five months, worsening the difficulties of small businesses, she said.

"One in four small businesses has had to close precisely because of this defaulting by public administrations," Ferrero said.

"Nearly half a million small businesses have disappeared during the crisis."

Enrique Bujidos, a restructuring specialist with consultancy PricewaterhouseCoopers, forecast: "2013 is going to be the year with the most bankruptcy filings in Spain's history, without any doubt."

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Do I have to take most of my annual leave in August in Spain?

Many Spanish companies still expect their workers to take their holidays at specific times of the year, primarily in August, right in the height of summer when many hotels are fully booked. So what are your rights, are you obliged to take your vacation in one particular month?

Do I have to take most of my annual leave in August in Spain?

While it’s your right as an employee to be able to take holiday days, do you have to take them when your company wants you to take them, or are you able to choose and have more flexibility?

Despite August being one of the hottest months in Spain and the one month of the year when many official companies and offices shut up shop, not everyone necessarily wants to take their break at the same time as everyone else.

Taking your holidays in August means less availability in hotels, overcrowding and more expensive transport and accommodation. If you don’t have children who are off from school during the summer months, then you may wish to take your vacation days at another time of the year, when it’s less busy and cheaper.

To answer the question it’s important to know the details about what the law says about how paid time off is taken, requested, imposed, or granted.

What laws or regulations dictate the rules about paid holiday time?

There are three different sets of rules and regulations, which are responsible for regulating the laws on vacation time in Spain. 

Firstly, you need to look at the Spanish Workers’ Statute, which includes rights, duties and obligations applicable to all salaried workers in Spain.

Secondly, you need to be aware of the collective sector and/or company agreements, which may dictate the rules for a particular industry for example.

Thirdly, you need to look at the contract, which you signed with your employer when you started working for them. This sets out your individual circumstances and the rules you must abide by.   

Workers Statute

As a general rule, all employees are subject to the Workers’ Statute. Holidays are part of this and are the subject of article 38. These conditions can never be contradicted by individual companies and are set as a guaranteed minimum. 

The minimum number of holidays in Spain is 30 calendar days per year. This equals two and a half days per month worked, in the case of temporary contracts. The statute states that vacations must be taken between January 1st and December 31st in separate periods, but one of them must be for at least two weeks. They are always paid and cannot be exchanged for financial compensation.

The period when you can take them is set by a common agreement between the employer and the worker, in accordance with what is established in the collective agreements on annual vacation planning. If there is disagreement, the social jurisdiction is resorted to.

At a minimum, the company must offer vacation days at least two months before the beginning of the holiday period, so that the employee has time to organise and book.   

When the planned time to take vacations coincides with a temporary disability, pregnancy, or childbirth, you have the right to enjoy the vacations at another time, even after the calendar year is over.

Collective agreements on vacations  

Your sector’s collective agreements may also help to answer this question. These aim to improve upon the basic and general rights that are included in the Workers’ Statute. They seek to adapt the rules to each type of industry or company. They could, for example, set out extra vacation days, which are greater than the standard 30 calendar days. 

You will need to find out what your specific sector or company’s collective agreement is. There is a possibility that your sector or company has mandatory summer vacations for the month of August and in that case, you can choose vacation dates, but only within this month.

Your work contract 

Lastly, you will need to consult your individual contract which you signed with the company when you were hired.  As well as the minimum conditions set out in the Workers’ Statute, your contract sets out your particular agreement with your employer in terms of holiday duration, the work calendar and other details.

Therefore, you should state in your contract whether you have to take your holidays during August, or if you’re free to take them at other times of the year.

If after consulting these three sets of regulations and there are still in doubt or in disagreement with your company about vacations, such as having to take them during the month of August, you should consult a lawyer specialising in labor law. They should be able to give you an answer specific to your situation.  

Can I appeal or disagree and what are the consequences? 

To appeal or express disagreement with what is proposed by the company, there is a period of 20 business days from when the vacation schedule is sent out, after which time you don’t have the right to show that you disagree.  

Companies can proceed to disciplinary dismissals due to abandonment of the job if you decide to take vacations that have not been granted or agreed upon with your employer. To avoid this type of problem, always make sure you have a record in writing of your request for vacation time and subsequent approval by the company.

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