Spain – Distribution Agreements

17 May 2016

Spain

Distribution

Agency agreements

Agency Agreements are regulated by the Agency Agreements Law 12/1992 (which has transposed Directive 86/653/EEC into Spanish law).

The main characteristic of the agency agreement is that through this an individual or a legal entity (the Agent) agrees with the Principal on a continuous or regular basis and against payment of a consideration to be agreed, to promote commercial acts or transactions for the account of such Principal not assuming the risk and hazard of such transactions, unless otherwise agreed.

Commercial relationship: Agents are independent intermediaries who do not act in their own name and behalf, but rather for and on behalf of one or more Principals.

There is no labour but commercial relationship between the Principal and the Agent.

It is presumed that the agency relationship is as a matter of fact. On the contrary, there is a labour relationship when the agent in not entitled to organize by his own his business activity nor to fix its own timetable.

Agents Obligations: Agents must, on his own or through his employees, negotiate and, if required by contract, conclude on behalf of the Principal, the business and transactions he is instructed to handle. Agents are subject to a number or obligations, including the following:

An agent cannot outsource his activities unless expressly authorized to do so.
An agent is authorized to negotiate agreements or transactions included in the agency agreements, but can only conclude them on behalf of its principal when expressly authorized to do so.
An agent may act on behalf of several principals, unless the related goods or services are similar or identical, in which case express consent is required.

Main obligations of the Principal are:

To act loyally and in good faith in its relations with the agent.
To provide the agent with all the documentation and the information which he may need to develop his activity.
To pay the agreed consideration.
To accept or reject transactions proposed by the agent.

The agency agreement must always be remunerated/paid. The consideration may consist of a fixed amount, a commission or a combination of both.

Indemnity: the agent is entitled to:

A damages and prejudices indemnity if the contract is terminated by the Principal without cause (not to apply when the termination takes place at the end of the agreed Term).
A compensation for clientele/goodwill if the contract is terminated without cause or terminated through expiration of the agreed term provided the agent has contributed with new clients to the Principal business or increased the transactions with the Principal client portfolio and provided that the Principal can benefit in the future of such activity from the agent. Such compensation cannot exceed the average of the payments/commissions received by the agent throughout the last five years or throughout the contract effectiveness if the duration has been below five years.

Non Competition: non-competition provisions (i.e., provisions restricting or limiting the activities that can be carried out by the agent once the agency agreement has been terminated) have a maximum duration of two years from the termination of the agency agreement and must be: agreed in writing, limited to the geographical area where the agent has been trading and related to goods or services object of the agency agreement.

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Distribution / Concession agreements

There is not a specific regulation for distribution agreements; therefore the Civil Code general contract regulation applies. Through this type of contract the Distributor undertakes toward the Principal – on a continuous or regular basis and against payment of a consideration to be agreed – to promote commercial acts or transactions for the account of such Principal, but assuming the risk and hazard of such transactions.

In practice, distribution agreements are often confused with agency agreements. Nevertheless, they are different and have distinct regulations and characteristics.

Under a distribution agreement, the distributor undertakes to purchase goods belonging to the other party for resale. While under the agency agreement the agent is paid a commission but not purchases and resales.
Under the distribution agreement the Distributor assumes the entire risk of the transaction while under the agency agreement the risk remains with the Principal.

Commercial relationship: under the distribution agreement the link is completely commercial; the risk of a labour relationship being declared is much lower than under the agency agreement due to the fact of the Distributor higher independency and autonomy.

The distribution agreement may be granted under an exclusive or non-exclusive basis. The exclusive may work on both sides: the distributor could be contractually liable to only work with the principal (or not) and the Principal could be contractually bound to only work with the distributor on a given territory.

Parties Obligations: while the Agency Agreement is governed through the Agency Agreements Law (which includes mandatory rules), Distribution Agreements are subject to the Civil Code and therefore the “freedom principle” applies in order to set forth the parties obligations regime.

The Distributor is not paid by the Principal. He makes his benefit through the difference between purchase and sale price.

Indemnity: although the clientele/goodwill indemnity only applies to the agency agreements, the Supreme Court has in various sentences decided that the Distributor could have the right to be paid such an indemnity provided similar provisions as those stated at the Agency Agreements law (see above) where met on an analogy basis.

Non Competition: non-competition provisions (i.e., provisions restricting or limiting the activities that can be carried out by the distributor once the distributor agreement has been terminated) are valid provided that they are expressly agreed through the agreement and its reasonability can be defended and sustained (in terms of territory, term and consideration).

Commission agency agreements

Through this type of contract, the commission agent undertakes to perform or to participate in a commercial act or agreement on behalf of the Principal.

Commission agents may act:

In their own name, acquiring rights against the contracting third parties and vice versa or
On behalf of their principal, who acquires rights against third parties and vice versa

Obligations of commission agents:

To protect interests of the Principal as if they were their own and to perform their engagement personally. Commission agents may delegate their duties if authorized to do so and may use employees at their own liability.
To account for amount that they have received as commission, to reimburse any excess amount and to return any unsold merchandise.
Commission agents are barred from buying for their own account or for the account of others, without the consent of their principal, the goods that they have been instructed to buy.

Commission: The principal undertakes to pay a commission to the commission agent, usually linked and only accrued if the Transaction is closed.

Differences and similarities between agency agreements and commission agency agreements.

Main similarity: In both cases, and individual or legal entity undertakes to pay another compensation for arranging a business opportunity for the former to conclude a legal transaction with a third party, or for acting as the former’s intermediary in concluding the transaction.
Main difference: Agency agreements involve an engagement on a continuous or regular basis, whereas commission agency agreements involve occasional engagements.

Franchise Agreements

Franchise Agreements are governed through (i) the Law 7/1996, of January 15, regulations retail trade, regarding the basic conditions for the franchise activity and creating the Register of Franchisors; (ii) Royal Decree 201/2010, of February 26, regulating the exercise of the commercial activity under a franchise arrangement and the communication of information to the Register if Franchisors; and (iii) Royal Decree 378/2003, which refers to Regulations (EC) No. 2790/1999, of December 22, 1999, relating to the application of Article 81(3) of the Treaty to certain categories of vertical agreements. Through the Franchise Agreement the franchisor grants a right to, and imposes an obligation on, its individual franchisees, for a specific market, to pursue the business or commercial activity (sale of goods, services or technology) previously carried out by the Franchisor with sufficient experience and success, using the knowhow, system, trademarks, IP rights etc. defined by the Franchisor.

The Franchise Agreement entitles and obliges the Franchisee to use the brand name and/or trade or service mark for the goods and/or services, the know-how and the technical and business methods, which must be specific to the business, material and unique, the procedures and other intellectual property rights of the Franchisor, backed by the ongoing provision of commercial and technical assistance under, and during the term of, the relevant franchising agreement between the parties, all of the above regardless of any supervisory powers conferred on the Franchisor by contract.

Formalities: In Spain, prior to start franchising activities, Franchisors must register in a public administrative Register of Franchisors.

Although the very short regulation of the Franchise Agreement leaves ground for the freedom principle, usually the franchisee pays a royalty to the Franchisor (commonly linked to the volume of sales but could also be a fix royalty), and a publicity royalty (so as to contribute to the Principal publicity cost of which the franchisee benefits).

Non Competition: throughout the life of the agreement, non-competition clauses (reciprocally) are common and admissible; after the termination of the contract, the Spanish Court usually admits the validity of the one year non-competition clause but limited to the location where the franchise had been working.

Collective dismissals

Collective dismissal means the extinction of the contract based on economic, technical, organizational or production causes when, in a period of nineteen days, the extinctions affects at least to:

Ten employees, in companies with fewer that one hundred employees.
The ten per cent of the number of employees in companies with between one hundred and three hundred employees.
Thirty employees in companies which employ more than three hundred employees.

The collective dismissal must be preceded by a consultation period of no more than thirty days, or fifteen in case of companies with fewer than fifty employees, with the legal representatives of the employees. The consultation with the legal representatives of the employees must be, at the very least, about the possibilities of avoid or reduce the collective dismissals and attenuate its consequences through the use of accompanying social measures (e.g.: outplacement activities, training activities…).

The communication of the opening of the consultation period will start by means of a document by the employer to the legal representatives of the employees, and one copy which has to be sent to the labour authority. In this document shall be specified the following points:

The specification of the causes of the collective dismissal.
Number and professional qualification of the affected employees by the dismissal.
Number and professional qualification of the employees employed in the last year.
Period of time expected for the realization of the dismissals.
Criteria used for the designation of the affected employees by the dismissal.
Copy of the communication directed to the employees or their representatives.
Representatives of the employees who will be part of the negotiating committee.

The communication to the legal representatives of the employees and to the labour authority shall be accompanied with an Explanatory Memorandum about the causes of the collective dismissal and the other aspects indicated in the previous paragraph, and also the financial and accounts documentation and the technical dossier.

During the consultation period, the Parties shall negotiate with good faith, aiming to reach an agreement.

That agreement shall require the approval of the majority of the legal representative of the employees or, where appropriate, the majority of the members of the representative commission of the employees.

The termination of the consultation period can finish with an agreement or without agreement; if it finishes with an agreement a Deed of Agreement has to be drafted, or a Deed of Final Decision in case no agreement can be reached. After the consultation period, the result of the communication period has to be communicated to the labour authority and to the employees individually. In case of objection, this can be individually or collective.

Termination of the contract due to objective causes

The employment contract may be terminated for the following causes:

For known or for subsequent ineptitude of the employee after his effective placement in the company.
Because a lack of adaptation of the employee to the technical modifications operated in his works placement, if those changes are reasonable. First, the employer shall offer to the employee a guided course to facilitate the adaptation.
When any of the causes of the collective dismissal concurs and it affect to less than the thresholds established for the collective dismissals.
For non-attendance faults to the work, even if justified but intermittent, which are more than the twenty per cent of the working days in two consecutive months, as long as the total of non-attendance faults in the last twelve months exceed the five per cent of the working days, or the twenty five per cent in four discontinuous months.
The absences caused by legal strike, exercise of legal representation activities, accident at work, maternity, risk during pregnancy or breastfeeding shall not be count as non-attendance faults to the work, nor if the absences obey to a medical treatment of cancer or serious illness.

Form and effects of the extinction due to objective causes

The adoption of an extinguishment agreement demands the following requisites:

Written communication to the employee explaining the cause.
Make available to the employee, at the same time of giving the written document, the compensation of twenty days per worked year, prorating as months the periods of time less than a year and with the maximum of twelve monthly pays.
Fifty days prior notice of the termination of the contract, to commence from the moment of the official notification to the employee, until the end of the contract.

During the period of notice, the employee shall have the right of 6 hours per week licence to look for a work.

Against the termination decision the employee is able to appeal in the same way as with a disciplinary dismissal.

If the decision is based in reasons of the types of discrimination forbidden by the Constitution or by the Law, or it is made with violation of the fundamental rights and civil liberties, the termination decision will be null and void.

It will be also null the termination decision in the next situations:

Employees when their contracts are under suspension caused by maternity, risk during pregnancy, risk during breastfeeding, adoption or family placement…
To the pregnant employees, from the beginning of the pregnancy until the start of the period of suspension.
Employees after the return from the situations mentioned in paragraph a) if there has not passed nine month since the date of birth or date of the family placement.

The qualification by the judicial authority as null, fair or unfair dismissal of the same will produce the same effects than in case of disciplinary dismissal with the following modifications:

In case of fair dismissal, the employee shall be entitled for a compensation of 20 days per worked year, prorating as months the periods of time less than a year and with the with the maximum of twelve monthly pays.
In case of unfair dismissal, if the employer proceeds to readmit the employee, the employee has to reintegrate the perceived compensation and corresponding procedural salary. In case of substitution of the readmitting for financial compensation, the amount of that compensation will be deduced from this compensation.

Disciplinary dismissal

The contract can be terminated by decision of the employer, through a dismissal based on serious and negligent breach of duty by the employee.

Shall be regarded as contractual breaches:

Repeated an unjustified absenteeism.
The indiscipline or disobedience at work.
Verbal or physical offences to the employer, or other employees of the company, or relatives who live with them.
The breach of the contractual good faith, as well as the breach of trust in the course of the work.
The voluntary and continuous decline on working output.
Habitual drug or alcohol abuse which adversely affects to the work performance.
The harassment based on racial or ethnic origin, religion or convictions, disability, age or sexual orientation or sexual harassment.

Form and effects of the extinction due to disciplinary effects

The dismissal must be notified in writing, with an explanation of the causes and the date when it takes effect.

If the employee is a legal representative of the employees or a trade union representative will proceed to open a contradictory dossier, in this will be heard, besides the interested employee, the other members of the representation.

If the employee is a labour union member and the employee knows it, has to give prior hearing to the union representatives.

If the dismissal is done not respecting these requirements, the employer can make a new dismissal with all of the necessary requirements omitted in the previous. This new dismissal, will only be effective since its date of execution, and can only be done within the term of twenty days since the first dismissal.

The dismissal will be qualified as fair, unfair or null.

The dismissal shall be fair when the breach is accepted by the employer. It will be unfair in the opposite case or if its form is not adjusted to the Law.

It will be null in case the dismissal has been done by causes of discrimination prohibited in the Constitution or in the Law, or when is done with a violation of the fundamental rights or the public liberties of the employee.

It will be also null and void the dismissal in the following causes:

The employees who have their contracts under suspension caused by maternity, risk during pregnancy, risk during breastfeeding, adoption or family placement…
To the pregnant employees, from the beginning of the pregnancy until the start of the period of suspension.
Employees after the return from the situations mentioned in paragraph a) if there has not passed nine month since the date of birth or date of the family placement.

The previous specifications will be also null, except if the dismissal is qualified as fair by reasons which are not related with the pregnancy or the exercise of the rights to leaves or other licenses pointed.

The effect of the null dismissal is the automatic reinstatement of the employee, with the payment of the salaries they did not receive since the date of dismissal to the declaration of null dismissal.

The fair dismissal may validate the extinction of the work contract, without the right of compensation and nor procedural salaries.

Unfair dismissal

If the dismissal is qualified as unfair, the employer, within five days since the notification of the sentence, may elect between the reinstatement of the employee or to pay an indemnity equal to thirty-three days of salary per worked year, prorating as months the periods of time less than a year and with the maximum of twenty-four monthly pays.

If the employer chooses the reinstatement, the employee has the right to obtain the procedural salaries.

If the employer does not choose between the reinstatement and the compensation, it is understood that he choose the first.

If the dismissed employee is a legal representative of the employees or a trade union representative, the option will always correspond to him. If he does not choose between reinstatement and compensation, it is understood that he choose the reinstatement, and he will have right to receive the procedural salaries.

Legal representation of the employees

The employees have the right to participate in the Company through the representative bodies. There are two different representative bodies, which are the Personnel Delegates and the Works Council.

Personnel Delegates

The representation of the employees in a company or in a workplace which has less than 50 and more than 10 employees correspond to the Delegates. The employees shall elect through free, personnel, secret and direct suffrage the personnel delegates depending on the number of employees, 1 delegate if are 30 or less employees, and two personnel delegates if the company has more than 31, till 50 employees.

The personnel delegates will exercise together before the employer the representation of the employees, and the will have the same conditions established for the works council.

Works Council

The works council is the representative and collegiate body of the employees in the company or workplace, its function is to defend the interests of the employees, in every workplace where the census is more than 50 employees.

The company which has in the same community two or more workplaces or in the bordering communities and their census are less than 50 individually but more than 50 employees in the whole workplaces will have a works council for all of the centers. And if there are one with more than 50 employees and more with less, the first will have one works council and in the others will constitute other.

Information and consultation rights

The works council will have the right of being informed and consulted by the employer about those questions that can affect to the employees, and also about the situation of the company and the evolution of the employment in the same.

The works council has the right of being informed quarterly:

About the general evolution of the economic area of the company.
About the economic situation of the company.
About the forecast of the employer to celebrate new contracts.
About the statistics regarding the index of absenteeism and the causes, the accidents at work, occupational illnesses and its consequences.

The works council will also have the right of receive information, at least annually, related with the implementation in the company the right of equal treatment and opportunities among men and women.

The works council will have the right to obtain the following documents:

The balance, the P&L account, the memory and, other relevant documents.
The model of the contracts which are used in the company and the documents related with the dismissals.
The severe sanctions targeted.

The works council will have the right of being informed about the situation and structure of the employments in the company or work place, and about the evolution of the same.

The number of the members in the works council will be depending on the number of employees in the company, and will be:

From 50 to 100 employees, five.
From 101 to 250, nine.
From 251 to 500, thirteen
From 501 to 750, seventeen.
From 751 to 100, twenty-one.
More than 1000, two per each thousand, with the maximum of seventy-five.

The works council will choose between their members one president and a secretary, and the will elaborate their own procedural regulation, which cannot contravene the Law.

Substantial changes in working conditions

The business management may agree substantial modifications in the working conditions if there exists real economic, technique, organizational, or production reasons. They shall be consider related with the competitiveness productivity or technique organization or work in the company.

The modification in the next causes will be considered as substantial change in working conditions:

Working day.
Timetable and working time arrangements.
Scheduled working hours.
Compensation package and the amount of salary.
Functions, if exceed the limits from article 93 of the Works Statute.

The Substantial changes in the working conditions could affect to the recognized conditions to the employees in the work contract, agreements or collective agreements.

It is consider as collective character the modification that, in a period of 90 days, affect at least to:

Ten employees, on companies with fewer 100 employees.
The ten percent of the number of employees in the company in the companies which have more than one hundred and less than three hundred.
Thirteen employees, in the companies of more than three hundred employees,

The decision to change the working conditions individually shall be notified by the employer to the affected employee and his/her legal representatives no later than fifteen days before effective date.

If the Substantial change in working conditions has a collective character, this decision has to be preceded by a consultation period of no more than fifteen days.

The temporary employment agencies are the companies where their main function is to provide to another company (User Company), temporarily, employees contracted through it. The hiring of employees to release temporarily to another company may occur only through a temporary employment agency.

The contract may be temporally or undefined, and the maximum will be six months if the contract has been concluded for circumstances of the market, or accumulation of work. And if it is to cover a workplace temporarily, the maximum will be for three months.

Manpower supply contracts

Manpower supply contract is the contract which is celebrated between the temporary employment agencies and the User Company being his subject the assignment of an employee, and the employee through the assignment will be subject to the instruction and discipline of the User Company.

It will only be possible to execute a contract between a temporary employment agency and a User Company in the same circumstances and under the same conditions and requirements that the article 15 of the Employees Statute.

Additionally, it will only be possible to conclude a contract between a temporary employment agency and the User Company, in the same terms that in the contracts of apprenticeship contract and training for work according to the article 11 of the Employees Statute.

If after the available deadline the employee continues working in the User Company, the employee will be considered an employee of the User Company under an undefined term contract.

The working time will be the scheduled by the User Company. The clause that bans the possibility for the employee to be hired by the company after this kind of contract shall be void.

The companies may not conclude these contracts in the following cases:

To substitute employees in strike.
To carry on dangerous works.
Where in the previous twelve months the company has cancel the work places, which are looking to cover, under an unfair dismissal or by any other the causes of the article 20, 21 and 52 c, of the Employees Statute.
To assign employees to other temporary employment agencies.

The User Company is responsible of the protection in safety and hygiene matter in the work.

The User Company will respond collaterally of the wage guarantees and of Social Security contracted with the employee during the effect of the manpower supply contract.

If the contract is for a defined period, the employee after the contract will have the right of a compensation of 12 days per worked year.

General Aspects

Definition – Employment contract means the contract by which one individual (employee) assumes the obligation to execute a work or to provide a service to one or several persons (employer), under the dependence of those persons, in return for remuneration in any kind or form.

Dependency and otherness are essential elements of the contract.

Minimum age – The minimum age to enter into a labor contract is the age of sixteen. For the employees under the age of eighteen there exist special rules depending on the work type of works, the working hours and benefits surcharges.

Types of contracts

Verbal or written

Both types are valid but written contracts are recommended.

Time

The contract could be for a full-time workday or part-time workday. The workday duration will be agreed through the collective bargaining agreements; if not agreed through the collective bargaining agreements, the maximum will be 40 hours per week.

Term

The contract could be permanent (indefinite) or temporary (valid for a pre-determined time period). Unless indicated otherwise, a contract shall be presumed as permanent and for full-time workday.

Types:

Permanent contract – The permanent contract is the one who is concluded with no limits in the provision of services. It must be announced in the Employment Service Office within ten days following its execution. The condition of permanent employee will be acquired, whatever modality of contract has been executed, by the employees who have not been registered in the Social Security once the trial period has expired.
Temporary contract – The temporary contract is the contract executed to be valid for a fix term and can be a full-time or part-time workday contract. The temporary contract shall be made in writing, but it can be verbal in the case of casual contract due to production overload if the term of the same is less than four weeks and full-time workday.
specific project or service contract – This type of contract is intended for the completion of works or services with autonomy inside the normal activity of the company and its duration , limited in time, is initially uncertain, but never for more than three years. The collective bargaining agreements are able to identify those works or task with own autonomy within the normal activity of the company that can be performed with contracts of this nature. The contract for a specific project or service can be done through full-time or part-time contracts. And the term will be the term of the realization of the work or service. The contract shall be made in writing and should specify with detail and clearly the type of hiring and identify sufficiently the work or service which constitute its object, the term, and also the work that is going to be developed.
Temporary contract depending on production circumstances – This contract is concluded to attend to the circumstantial requirements of the market, amount of task/works or excess of orders, even if is it is the normal activity of the company. It can be executed for a first professional experience, first youth employment, for an unemployed person who is under thirty years with no professional experience or less than three months. It could be concluded for a full-time or part-time workday. In case of youth employment the minimum of the part-time workday has to be the 75% of the workday from a full-time employee. The maximum term of this type of contracts will be six months inside a period of twelve months. And in case of first youth employment the minimum will be three months. These contracts must be concluded by writing if the duration exceeds four weeks and always in the event of part-time contracts. The contract must specify the reasons which justify it, the duration and the work to be done. The temporary contract depending on production circumstances will be extinguished, following denounce by any of the Parties at the expiry of the agreed period.
Provisional contracts – The aim of this contract is to substitute employees with a reserved right to their job, or to temporarily cover a work place during the selection process of a permanent candidate. The working time must be full-time. The term of this contract will be equal to the term of the absence of the employee with reserved right of his work place. And if the contract is caused by a selection process of a permanent candidate it has to be for the same time of that period, but never more than three months. The contract must be concluded in writing, specifying with precision and clearness the nature of the hiring, identifying the substitute employee and the cause of the substitution and, where appropriate, the work place whose coverage will be done after the selection process, and also specify the circumstance which determinates its duration, the term of the contract and the work to be performed. This contract will be extinguished, following denounce by any of the Parties, if any of the following circumstances occurs:
- The return of the replaced employee;
- Expiry of the legal period or expiry of the period conventionally established for the reintegration;
- The extinction of the cause which brought the reserved right of the work place;
- The fulfilment of the three month period for the selection process.
Compensation in case of expiration of the temporary contracts – The compensation established in the Law, in case of expiration of the temporary contracts will be implemented gradually according to the following timetable:
- Nine days of salary per worked year for the temporary contracts celebrated after the 1st of January of 2012;
- Ten days of salary per worked year for the temporary contracts celebrated after the 1st of January of 2013;
- Eleven days of salary per worked year for the temporary contracts celebrated after the 1st of January of 2014;
- Twelve days of salary per worked year for the temporary contracts celebrated after the 1st of January of 2015.
Apprenticeship and training contract – The aim of this contract is the professional qualification of the employees through a training and professional activity. This contract can be executed with employees over 16 years old and under 25, who do not yet have the required professional qualification for an internship contract. The previous age restriction shall not apply if the contract is executed with disabled people and those social groups that are at risk of exclusion. Once the duration of this type of contract has expired, the employee may not be hired under this modality of contract by the same or other company, unless if the inherent training of the new contract has the purpose to obtain a different professional qualification. The effective working time cannot be over 75%, during the first year, or the 85%, during the second and third year, of the maximum working day established in the collective bargaining agreement. The remuneration of the employee hired for the apprenticeship and training shall be established in proportion to the effective working time, set forth through the collective bargaining agreement.
Internship contract – The internship contract shall be concluded with those who are in possession of a university degree or technical education degree in the next five years, or seven for a disabled employee, from the finishing date of the studies according to the following rules:

The workplace shall allow the obtaining of the professional practice suitable with the study or formation level completed.
The term of the contract cannot be less than six month and more than two years.
No employee could be hired in the same or different company for more time than two years under the same degree or professional certificate.
The remuneration of the employee shall be the remuneration which is agreed in the collective bargaining, which must not, however, be less than the 60% or the 75% during the first or the second year of the contract.

If at the end of this contract the employee continues in the company, it is not possible to state a new probationary period. In this sense, the total duration of the internship contract must be computed to the effects of the seniority in the company.

Distance work – Through this type of contract the provision of the professional activity is mainly executed in the residence of the employee or in a place freely chosen by the employee, alternatively to the on-site development in the working place of the company. The agreement shall be formalized in writing. The distance employees will have the same rights that the employees who work in the work place of the company.

Salary and wage

Salary shall include all l kind of considerations received by the employees in money or in kind.

The in-kind salary may not exceed 30 per cent of all of the considerations received by the employee.

The national minimum wage is established by the Government each year, and for 2015 it is € 9.080 per year (€ 648.60 per month). The employee has the right to receive two extraordinary payments, one in Christmas and the other at the time to be negotiated with the company. The minimum salary includes these two extra wages.

Working time

The maximum working hours are those agreed in the collective bargaining agreements, but in general, the maximum is 40 hours per week. Between the end of one working day and the beginning of the next working day must mediate twelve hours.

The time worked in excess over the 40 hours per week will be considered overtime. The amount of overtime may not exceed 80 hours per year. Overtime will be voluntary in general.

Night work

The Statute of Employees considers as night work the work realized between 10 pm and 6 am. The employer who resorts regularly to this kind of work has to inform to the labor authority.

Weekly rest, holiday

The employees have the right for a weekly rest period of one day and a half, this time has to be uninterrupted, and as a general rule it shall include the Saturday evening or Monday morning and the whole Sunday.

The bank holidays cannot exceed the number of fourteen days per year including local holidays.

The employee, with prior notice and justification, may be absent from the work, with the right of remuneration, under the reasons established in the Statute of Employees, for e.g.: marriage, birth of a child, change of domicile.

The annual period of paid holidays will be, at least, 30 calendar days.

Special labour relationships for senior management personnel

The employees who are empowered to represent the company and in connection with the general objectives of the same, with autonomy and full responsibility are considered as senior management personnel.

The special relationship of the senior management personnel is based on the mutual confidence of the Parties.

The contract shall be made in writing and shall contain as a minimum:

Identification of the Parties.
The purpose of the contract.
The agreed compensation, specifying, if it is the case, the amount in money or in in kind.
The term of the contract.

This contract may be entered into for a trial period, but for not more than nine months. If the trial period has expired with no abandonment, the contract will produce full effect.

The Parties are free to agree the term of the contract but if they do not agree a specific term it shall be deemed as an indefinite contract.

The employee cannot conclude other contracts with other companies, unless expressly authorization of the employer.

The non- competition clauses, which cannot be for more than two years, shall be valid only if they comply with the requirements set forth at the RD 1382/1985.

Termination by decision of the senior executive.
The contract shall cease by the will of the senior executive, with an advance notice of three months.
Termination by decision of the Company.

The senior executive can be ceased with the right to obtain the agreed indemnities, and in the lack of agreement with the amount set out in RD 1382/1985 (seven days of salary in cash per worked year, with the limit of six months’ salary.

The Company must serve a minimum advanced notice of three months. In case of non-compliance with the advance notification, the senior executive shall have the right for a compensation equivalent to the salaries that he will not obtain during that period.

In the event of disciplinary dismissal, (provided that it is qualified as unfair by Court), the indemnity amount will be the figure agreed through the contract, or if not agreed the equivalent to twenty days of salary per worked year, with the limit of twelve months salary.

Agency agreements

Agency Agreements are regulated through the Agency Agreements Law 12/1992 (which has transposed Directive 86/653/EEC into Spanish law).

Commercial relationship: Agents are independent intermediaries who do not act in their own name and behalf, but rather for and on behalf of one or more Principals.

There is no labour but commercial relationship between the Principal and the Agent.

An agent cannot outsource his activities unless expressly authorized to do so.
An agent is authorized to negotiate agreements or transactions included in the agency agreements, but can only conclude them on behalf of its principal when expressly authorized to do so.
An agent may act on behalf of several principals, unless the related goods or services are similar or identical, in which case express consent is required.

Main obligations of the Principal are:

To act loyally and in good faith in its relations with the agent.
To provide the agent with all the documentation and the information which he may need to develop his activity.
To pay the agreed consideration.
To accept or reject transactions proposed by the agent.

The agency agreement must always be remunerated/paid. The consideration may consist of a fixed amount, a commission or a combination of both.

Indemnity: the agent is entitled to:

A damages and prejudices indemnity if the contract is terminated by the Principal without cause (not to apply when the termination takes place at the end of the agreed Term).
A compensation for clientele/goodwill if the contract is terminated without cause or terminated through expiration of the agreed term provided the agent has contributed with new clients to the Principal business or increased the transactions with the Principal client portfolio and provided that the Principal can benefit in the future of such activity from the agent. Such compensation cannot exceed the average of the payments/commissions received by the agent throughout the last five years or throughout the contract effectiveness if the duration has been below five years.

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Distribution/Concession agreements

In practice, distribution agreements are often confused with agency agreements. Nevertheless, they are different and have distinct regulations and characteristics.

Under a distribution agreement, the distributor undertakes to purchase goods belonging to the other party for resale. While under the agency agreement the agent is paid a commission but not purchases and resales.
Under the distribution agreement the Distributor assumes the entire risk of the transaction while under the agency agreement the risk remains with the Principal.

The Distributor is not paid by the Principal. He makes his benefit through the difference between purchase and sale price.

Commission agency agreements

Through this type of contract, the commission agent undertakes to perform or to participate in a commercial act or agreement on behalf of the Principal.

Commission agents may act:

In their own name, acquiring rights against the contracting third parties and vice versa or
On behalf of their principal, who acquires rights against third parties and vice versa

Obligations of commission agents:

To protect interests of the Principal as if they were their own and to perform their engagement personally. Commission agents may delegate their duties if authorized to do so and may use employees at their own liability.
To account for amount that they have received as commission, to reimburse any excess amount and to return any unsold merchandise.
Commission agents are barred from buying for their own account or for the account of others, without the consent of their principal, the goods that they have been instructed to buy.

Commission: The principal undertakes to pay a commission to the commission agent, usually linked and only accrued if the Transaction is closed.

Differences and similarities between agency agreements and commission agency agreements.

Main similarity: In both cases, and individual or legal entity undertakes to pay another compensation for arranging a business opportunity for the former to conclude a legal transaction with a third party, or for acting as the former’s intermediary in concluding the transaction.
Main difference: Agency agreements involve an engagement on a continuous or regular basis, whereas commission agency agreements involve occasional engagements.

Franchise Agreements

Franchise Agreements are governed through the Law 7/1996, of January 15, regulations retail trade, regarding the basic conditions for the franchise activity and creating the Register of Franchisors; (ii) Royal Decree 201/2010, of February 26, regulating the exercise of the commercial activity under a franchise arrangement and the communication of information to the Register if Franchisors; and (iii) Royal Decree 378/2003, which refers to Regulations (EC) No. 2790/1999, of December 22, 1999, relating to the application of Article 81(3) of the Treaty to certain categories of vertical agreements. Through the Franchise Agreement the franchisor grants a right to, and imposes an obligation on, its individual franchisees, for a specific market, to pursue the business or commercial activity (sale of goods, services or technology) previously carried out by the Franchisor with sufficient experience and success, using the knowhow, system, trademarks, IP rights etc. defined by the Franchisor.

Formalities: In Spain, prior to start franchising activities, Franchisors must register in a public administrative Register of Franchisors.

Non Competition: throughout the life of the agreement, non-competition clauses (reciprocally) are common and admissible; after the termination of the contract, the Spanish Court usually admits the validity of the one year non-competition clause but limited to the location where the franchise had been working.

Selling via e-commerce

E-commerce agreements are regulated by the Information Society and Electronic Commerce Services Law (which has incorporated the Directive 2000/31/CE into Spanish law). The Law includes the contracting for goods and services through electronic means, the provision of information by such means (as the newspapers or magazines that are on the network), the intermediation activities about the provision of the access to the network, the transmission of information through telecommunication networks, the realization of temporary copy of the web sites requested by the users, the hosting in their own servers of information, services or applications provided by others or the provision of searching tools or links to other web sites, just as other services provided by individual petition of the users.

These services are offered by telecommunication operators, Internet access providers, webs portals, search engines or other subjects that provides any of the activities mentioned.

Scope: The Law applies to (i) service providers for the Information Society established in Spain and to the services provided by them and also (ii) to service providers from other countries offering their services though a permanent establishment in Spain.

Formalities: The provision of services for the Information Society is not bounded to prior authorization.

The provision of services from a Member State of the European Union or from the European Economic Area will be made under the principle of freedom to provide services.

Place: The contracts executed electronically between a service provider and a consumer will be deemed as executed at the location where the consumer has his permanent residence.