By Belén Carreño

MADRID, Reuters – Spain’s left-wing government reached a labor deal with employers and unions, according to the Labour Ministry. This agreement ended months of negotiations and brought it closer to overturning a pro-business administration.

This new agreement will increase the power of unions in collective bargaining negotiations and limit the amount that companies can rely upon temporary contracts. It also makes permanent the furlough program created to offset the economic impact from COVID-19.

Yolanda Diaz, Labour Minister, tweeted: “We conclude 2021 meeting the government’s commitment: A new labour law that restores rights for decent work,”

Spain made commitments to the European Commission regarding reforming its labour law in order to be eligible for the second tranche European recovery funds. Spain hopes to be paid 70 billion euro ($79.14 trillion) but only 19 billion euros has been granted.

The negotiations with trade unions and employers to replace the text that was created in 2012, without any broad consensus, has dragged out for several months.

Spain was required to agree to the 2012 law in order for it be granted a bailout. It also had to accept concentrated collective bargaining within companies that did not have union representation.

This led to the formation of companies paying wages lower than sectoral agreements. It caused tension not only with unions, but also between companies that saw this practice as unfair competition.

The right of flexibility for companies around working hours will still be available, but wages will now be determined through sectoral agreements where unions are bargaining.

Spain, which is one of the EU countries with the highest number of temporary contracts used, has been subject to the strictest conditions. The new regulations limit their use to brief periods where it is justified.

Inappropriate use of Temporary Contracts will result in social security and financial penalties.

($1 = 0.8845 euros)