Labour Law Update: Key Court Rulings and Legislative Developments – March 2026

This is a summary of several recent court rulings addressing key issues in the field of labour law. These decisions, issued by the Supreme Court and the High Court of Justice of Galicia, deal with matters relating to the accrual of days of discretionary leave during periods of temporary incapacity, the starting point for taking leave due to the hospitalisation of a family member, and the commencement of the 20‑working‑day period to challenge a substantial modification of working conditions where such modification has not been notified in writing.

Supreme Court judgment of 14 January 2026 (appeal no. 189/2024)

In this collective dispute, the Supreme Court addresses two issues concerning the interpretation and application of Article 53.1(b) of the State-wide Collective Agreement for Care Services for Dependent Persons and the Promotion of Personal Autonomy, which regulates discretionary leave. Specifically: (i) whether this leave may be taken at any time during the year, including in advance of accrual, or whether it requires the prior completion of three months of effective service before it can be taken; and (ii) whether periods of temporary incapacity should be counted as working time for the purposes of accruing entitlement to such days.

As regards the first issue, the relevant provision states that “in any event, employees shall be entitled to enjoy these four days, without justification, before 15 January of the following year. The taking of these four days shall require a prior period of work of three months for each discretionary day.” The Supreme Court interprets this provision as meaning that each discretionary day accrued may be taken after the completion of each quarter, and that such days may be accumulated. Accordingly, the first discretionary day accrued may be taken in the second quarter of the year; the second day in the third quarter; the third day in the fourth quarter; and the fourth day during the first 15 days of the following year. The Court also confirms that discretionary leave days may be taken cumulatively. For example, if by the fourth quarter none of the three previously accrued days has been taken, they may all be taken during that quarter.

As regards the second issue, namely whether periods of temporary incapacity count for the accrual of discretionary leave, the Supreme Court finds that the collective agreement recognises a form of unconditional rest leave that does not require justification. Accordingly, it considers that the accrual of such discretionary days is comparable to annual leave under Article 2.2 of Directive 2003/88/EC. Furthermore, it holds that Article 5 of ILO Convention No. 158 does not allow periods of absence due to reasons beyond the employee’s control, such as temporary incapacity leave, to be excluded from the accrual of annual leave. Referring also to the case law of the Court of Justice of the European Union (including, inter alia, the Schultz‑Hoff and Others judgment, cases C‑350/06 and C‑520/06), the Court reiterates that employees on sick leave must be treated in the same way as those who have effectively performed work during the same period. In conclusion, it holds that discretionary leave days continue to accrue during periods of temporary incapacity.

Supreme Court judgment of 4 February 2026 (appeal no. 251/2024)

The Supreme Court rules on a cassation appeal against the judgment of the National High Court of 12 September 2024, delivered in collective proceedings brought by several trade unions. The substantive issue concerns whether an employer may require that the paid leave provided for in Article 37.3(b) of the Workers’ Statute, in cases of serious accident or illness, hospitalisation, or surgical intervention without hospitalisation but requiring home rest, must necessarily commence on the first working day following the triggering event.

The dispute arose from an internal note issued by the company on 29 November 2023 to adapt its leave arrangements to the reform introduced by Royal Decree‑law 5/2023, which stated that leave under Article 37.3(b) of the Workers’ Statute “shall commence on the first working day for the employee following the event giving rise to the leave”.

The Court reasons that these types of leave are functionally linked to a genuine need to provide care and assistance to the ill or convalescent family member, a need that does not necessarily end in the days immediately following the event and may require more flexible planning of care. Rigidly tying the start of the leave to the triggering event undermines its protective purpose and prevents effective assistance. Neither the law, nor the applicable collective agreement, nor Directive (EU) 2019/1158 contains an express rule imposing such automatic linkage.

To reinforce this reasoning, the Court refers back to its previous case law distinguishing between hospital discharge and medical discharge, applying it a contrario: just as leave cannot be maintained once the need for care has ceased, its commencement cannot be artificially restricted while such needs persist. The judgment thus establishes a balanced rule: the leave cannot become a pool of days off detached from the protected situation, but nor can it be deprived of its substance through an excessively rigid interpretation of the triggering event.

Accordingly, the Supreme Court holds that leave under Article 37.3(b) of the Workers’ Statute cannot be managed in such a way that its commencement is necessarily tied to the triggering event where neither the law nor the collective agreement expressly so provides, and that there must be scope for a rational distribution allowing for planned and effective care of the person in need. The cassation appeal is therefore dismissed, and the judgment of the National High Court is upheld.

Supreme Court judgment of 9 February 2026 (appeal no. 734/2025)

The Supreme Court examines whether a transfer of undertaking occurred in the context of the termination of a lease agreement relating to a tourist apartment complex. The main issue is whether the reversion of the operation to the owning company upon expiry of the lease with the former operator constitutes a transfer of an economic entity under Article 44 of the Workers’ Statute, thereby requiring the subrogation of the permanent seasonal workforce.

The background to the dispute dates back to December 2022, when the lease expired after ten years. The outgoing company informed employees that a transfer of undertaking would take place and that they would become part of the new operator’s workforce. However, the incoming owner refused to subrogate the staff, arguing that it would not continue the tourist activity but would instead proceed to sell the apartments individually. Following the lack of a call‑back for the next season (March 2023), the claimant employee brought unfair dismissal proceedings, which were upheld at first instance, the dismissal being classified as null and void as it constituted a disguised collective dismissal.

The Court bases its decision on an analysis of whether there was a transfer of an economic entity retaining its identity. It reasons that in the hospitality sector the infrastructure (the property and its equipment) constitutes the essential element of the activity. Since ownership reverted not only of the buildings but also of all furniture, fittings, licences and utilities necessary for immediate operation, there was in fact a transfer of decisive tangible assets. The subsequent decision by the new owner to change the purpose of the business (to property sales) does not preclude the application of Article 44 of the Workers’ Statute, as the complex was capable of continuing to operate as an economic entity at the time of reversion.

As regards liability, the Supreme Court clarifies the consequences of partially upholding the appeal. While it confirms the existence of a transfer of undertaking, it holds that the outgoing company is absolved from liability for the consequences of the dismissal (reinstatement or compensation), which fall instead on the new owner due to its refusal to subrogate. However, the outgoing company remains liable for employment‑related debts accrued prior to the transfer.

Accordingly, the Supreme Court partially upholds the appeal for the unification of case law, confirming the existence of a transfer of undertaking and declaring that the obligation to subrogate and the consequences of dismissal due to failure to call back employees lie with the new owner of the economic entity.

Supreme Court judgment of 18 February 2026 (appeal no. 243/2024)

In this case, the Supreme Court examines whether the action brought by UGT against the removal of employees’ entitlement to one paid day of leave for personal matters in a company in the province of Alicante was time‑barred and, subsidiarily, whether that entitlement constituted a more favourable employment condition.

The claimant union brought the action under the procedure for substantial modification of working conditions (SMWC) pursuant to Article 138 of the Law Regulating the Labour Jurisdiction, which requires claims to be filed within 20 working days following written notification of the employer’s decision. In this case, the workforce had been entitled to one day of paid personal leave under the provincial hospitality collective agreement. However, from 2013 onwards, the applicable agreement changed to the company’s own collective agreement, which did not provide for such leave. Despite this, the company continued to grant the paid leave to employees who had previously enjoyed it under the provincial agreement until December 2022, when the state‑wide sectoral collective agreement for modern restaurant brands was published in the Official State Gazette, also making no provision for such leave. It was not until January 2024 that a request for mediation and arbitration was filed against the company’s decision not to recognise the leave, at which point the company formally stated that it no longer granted it because it was not provided for in the state‑wide agreement.

The Supreme Court holds that Article 138 of the Law Regulating the Labour Jurisdiction requires written communication of the employer’s decision in order for the 20‑working‑day limitation period to begin. In the absence of such written notification, the time limit does not commence, and the claim must therefore be deemed to have been filed in time. Furthermore, the Court finds that a more favourable employment condition existed, given that the paid personal leave had been maintained uninterruptedly for nine years (from the application of the provincial agreement in 2013 until the application of the state‑wide agreement in 2022). Consequently, if the company wished to remove that more favourable condition, it should have followed the SMWC procedure set out in Article 41 of the Workers’ Statute.

Judgment of the High Court of Justice of Galicia of 10 December 2025 (appeal no. 2683/2025)

In this judgment, the High Court of Justice of Galicia rules on the appeal brought by an employee against judgment no. 108/2025 of Social Court No. 4 of Vigo, which had partially upheld the claim by declaring the objective dismissal unfair while rejecting the claim of nullity for lack of evidence of infringement of fundamental rights.

By way of background, the employee, who held a managerial position, was on sick leave from August to December 2023. Meanwhile, on 12 December 2023, while the employee was still on sick leave, the company agreed with the trade union representatives that employees who had been on temporary incapacity for more than three months in the calendar year would not be entitled to the MIP bonus (individual variable remuneration linked to objectives). When the employee did not receive the bonus in February 2024, she challenged this internally, arguing that the agreement could not be applied retroactively as her sick leave had begun prior to its entry into force. The High Court of Justice of Galicia agrees with this position, noting that as of the date of medical discharge (1 December 2023) the required three‑month period had not yet elapsed. Two weeks after reiterating her claim regarding the bonus, the employee received a letter notifying her of dismissal on objective grounds.

In light of these circumstances, the High Court declares the dismissal null and void on two grounds. First, due to a breach of the guarantee of indemnity, given the close chronological link between the bonus claim and the dismissal. Second, due to discrimination on grounds of sex, as the company filled the position previously held by the employee without any selection process, directly appointing a man, particularly given that 89.29% of managerial positions were held by men.

Consequently, the company was ordered to reinstate the employee immediately, pay back wages, compensate her with EUR 20,000 for moral damages, and include the MIP bonus in the calculation of the reference salary for dismissal purposes.

Royal Decree‑law 3/2026 of 3 February, on the revaluation of public pensions and other urgent Social Security measures

Royal Decree‑law 3/2026 of 3 February addresses the revaluation of public pensions and other urgent Social Security measures. Its adoption was prompted by the absence of a General State Budget Act for 2026—resulting in the automatic extension of the 2023 Budget—and by the failure of Parliament to ratify Royal Decree‑law 16/2025 of 23 December, which had updated pensions in January 2026. The enactment of this new decree‑law was therefore deemed urgent and necessary in order to safeguard the rights of pensioners whose pensions had been increased in January 2026.

Royal Decree‑law 7/2026 of 20 March approving the Comprehensive Response Plan to the Crisis in the Middle East

Article 62 of Royal Decree‑law 7/2026 establishes a “dismissal prohibition” for companies benefiting from the direct aid provided for under this decree‑law. Specifically, such companies may not carry out dismissals on grounds of force majeure or on economic, technical, organisational or production grounds derived from the situation the decree‑law seeks to address, until 30 June 2026. Breach of this obligation will result in the repayment of the aid received and the classification of the dismissal as null and void.

In addition, the deadline for companies with more than 200 employees, or more than 100 employees per shift, to comply with the obligation to implement sustainable commuting‑to‑work mobility plans is brought forward by twelve months, through an amendment to Article 26 of Law 9/2025 of 3 December on Sustainable Mobility. The new deadline is therefore set at 5 December 2026, pursuant to Article 63 of Royal Decree‑law 7/2026. Furthermore, an additional penalty is introduced for companies benefiting from the direct aid provided for under Royal Decree‑law 7/2026: failure to comply with the obligation to have sustainable mobility plans in place within the prescribed time limit will entail repayment of the aid received (Article 64).