October 2026
Revisiting the employment retention commitment and the repayment of COVID-19 ERTE contribution exemptions
Judgment 249/2025 of 7 May, handed down by the Administrative Chamber of the High Court of Justice of the Basque Country, annulled an assessment of social security contributions requiring the repayment of all exemptions granted under a COVID-19 ERTE. The assessment was based on the view that the termination of a single employment contract amounted to a breach of the employment retention commitment applicable at the time. The Court held that requiring repayment of all the contributions exempted, in connection with a termination by mutual agreement that had been recognised by the courts, was contrary to the principle of legal certainty and disproportionate. It therefore accepted that the employment retention commitment did not operate as an absolute rule.
Subsequently, however, the Administrative Chamber of the Supreme Court concluded, in Judgment 458/2026 of 15 April, that a breach of the employment retention commitment required repayment of the exempted social security contributions relating to the entire ERTE covering the dismissed employees, even where the ERTE extended to several workplaces or to the company as a whole. Accordingly, the Supreme Court’s only judgment on this issue establishes that, where a company breaches its employment retention commitment, even through a single termination, it must repay all the social security contributions from which it had been exempted, rather than a proportionate or partial amount.
The Supreme Court’s case law appeared to rule out any adjustment to the amount repayable based on the isolated nature of the termination or the fact that the remainder of the workforce had been retained. The appeal on a point of law lodged by the General Treasury of the Social Security against the judgment of the High Court of Justice of the Basque Country referred to above could therefore have resulted in the application of that approach and the judgment being overturned, ultimately requiring repayment of all the exemptions on the basis that the employment retention commitment had been breached.
However, by an order dated 30 September 2026, the Supreme Court refused to admit the appeal lodged by the General Treasury of the Social Security. This is a noteworthy outcome and calls for an explanation as to why an approach that appears to diverge from the principle established in April regarding full repayment of contributions has been allowed to stand.
The explanation lies in the reasoning of the order itself, which holds that the interpretation of the employment retention commitment adopted by the lower court “is consistent with the particular circumstances of the case”.
Those particular circumstances had a regulatory dimension. The High Court of Justice of the Basque Country proceeded on the basis that the benefit had been applied for, granted and applied under the original wording of Additional Provision Six of Royal Decree-Law 8/2020, which provided for a general commitment to maintain employment. The specific scope of that commitment and the obligation to repay all exempted contributions were introduced by Royal Decree-Law 18/2020. In the Court’s view, applying that subsequent framework altered the conditions under which the exemption had originally been granted and was therefore contrary to the principle of legal certainty.
Proportionality also plays a role in interpreting the commitment, as the Supreme Court highlights both the isolated nature of the termination within the ERTE and the fact that it was consensual. The lower court’s judgment also took into account the retention of the workforce and the absence of any restructuring. Against that background, requiring repayment of all the exempted contributions was considered disproportionate to the alleged breach and inconsistent with the objective of preserving employment that had justified the exemption.
This reasoning helps explain how the two rulings can coexist. The general principle established by the Supreme Court determines the scope of repayment in respect of all employees covered by an ERTE where the employment retention commitment has been breached, while the particular circumstances of the Basque Country case concern the interpretation of that obligation and the determination of whether it was breached.
Although the Supreme Court’s refusal to admit the appeal does not establish new case law on appeal, it leaves intact an exceptional outcome that the Supreme Court itself considers legally justified in the particular circumstances of the case. In other words, the Supreme Court acknowledges that exceptions to the requirement to repay all exempted contributions may arise even where there has been a breach of the employment retention commitment.
In my view, this is precisely where the significance of the decision lies: an exception to the repayment obligation has been allowed to stand in circumstances involving a ground for termination that was not expressly exempted. This demonstrates that full repayment is not necessarily an inevitable consequence in every case. Before requiring repayment of all exempted contributions, it is therefore necessary to consider whether the particular circumstances support a legally justified exception, with due regard to the principles of legal certainty and proportionality.
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