Labour and Procedural Reform: What Many Companies Still Haven’t Adapted After Spain’s Organic Law 1/2025

Organic Law 1/2025, enacted on 2 January, is part of Spain’s legislative package for judicial efficiency and modernisation of the justice system.

Following its publication in the BOE and a correction of errors on 11 January, the law came fully into force in October 2025, after the nine-month transition period.

It has undergone minor amendments — the latest on 4 June 2025 via Royal Decree 388/2025 — and has started to be implemented through Royal Decree 530/2025 on the creation of Local Justice Offices.

While its core provisions remain stable, the Ministry of Justice continues to roll out administrative and procedural aspects, so companies should expect further operational updates over the coming months.

1. Employment contracts and stability.
   The law reinforces the presumption of permanent employment and tightens controls on temporary contracts. Employers must provide clear written justification for fixed-term hiring, especially for project-based or short-term roles.
2. Dismissal procedures.
   Stricter requirements now apply to objective dismissals, and judges have greater discretion to assess underlying circumstances. Dismissal letters and supporting documentation must be carefully prepared to avoid disputes.
3. Work–life balance and family leave.
   Paid leave for caring responsibilities has been extended, and employees can now request flexible schedules without reducing their working hours. Internal policies should be updated to reflect these rights.
4. Remote work and the right to disconnect.
   Employers are required to formalise remote-work agreements covering working conditions, tools provided, and expense compensation. The law also strengthens the right to digital disconnection outside working hours.

The reform promotes mandatory mediation before taking cases to court and electronic processing for all labour and social-security proceedings.

Labour courts now have extended jurisdiction over harassment, equality, and fundamental-rights disputes — prompting companies to implement preventive protocols and employee training.

Amendments to the Law on Social-Order Infractions and Sanctions increase penalties for breaches of equality, work–life balance, or teleworking rights.

Fines for serious violations can reach €187,000, making compliance and internal audits essential for SMEs.

Despite the end of the transition period, many small and medium-sized companies still haven’t aligned their contracts, internal regulations, or HR policies with the new law.

Failure to do so can lead to fines, litigation, or a loss of competitiveness compared to businesses that already comply.