The High Court of Justice of the Basque Country (Administrative Chamber) has upheld the appeal filed against a Social Security contribution settlement amounting to five million euros, in one of the first rulings to interpret the Sixth Additional Provision of Royal Decree-Law 8/2020. This provision relates to the employment retention requirement in force majeure furloughs (ERTEs) during the pandemic, in the context of Social Security contribution exemptions. The defense was led by Sagardoy Abogados.
The Labour and Social Security Inspectorate (ITSS) had found that the company breached the employment retention commitment by terminating a single employment contract—even though the ERTE had affected nearly 5,000 employees—thereby claiming repayment of the total amount of previously exempted Social Security contributions for all affected workers.
According to the ITSS’s interpretation, that single termination (which, moreover, was by mutual agreement, as judicially confirmed) was sufficient to consider the commitment breached, thereby triggering full repayment of the exemptions. However, the court rejected this interpretation, stressing that at the time the ERTE was requested (March 2020), the legal framework did not specify the consequences of a potential breach of the employment commitment.
The court accepted the key arguments advanced by Sagardoy. In line with the constitutional principle of legal certainty, employers cannot be required to repay exemptions due to a breach that was not legally defined at the time the ERTE was requested on the grounds of force majeure. The legal consequence of non-compliance was not introduced until the enactment of Royal Decree-Law 18/2020, dated May 12, by which time many companies had already applied for ERTEs and implemented the exemptions.
Furthermore, the judgment recognizes that the company maintained its workforce, thus fulfilling the intended purpose of the rule—to preserve employment during an exceptional crisis. It deemed it manifestly disproportionate to interpret the termination of a single employment contract as constituting a breach of the employment maintenance obligation during the suspension of labor contracts amid the pandemic.
This ruling sets a significant legal precedent by establishing limits on the Administration’s interpretative powers and reinforces the principle of legal certainty, particularly in the retroactive application of legal norms in emergency contexts. It also underscores the principle of proportionality, which must guide the actions of public authorities.
Defense led by the team of Jorge Travesedo and Román Gil, partners at the firm, and Ana Goerlich, associate attorney.
