Main developments regarding termination of employment contracts due to permanent disability

Our labour lawyers have analysed the amendment to the revised text of the Workers' Statute Act in a practical technical note. These are changes relating to the termination of employment contracts due to permanent disability.

Highlights of the amendment

On 30 April 2025, Law 2/2025 was published, the aim of which is to progressively bring Spanish legislation into line with international regulations and case law on employment and permanent disability.

The main change introduced by this new law is the elimination of the automatic termination of the contract of persons who become permanently incapacitated (whether totally, absolutely or severely disabled), and the employer's decision is now conditional on the wishes of the employee and the possibility of adapting the job or the existence of a vacant position available that matches their professional profile and is compatible with their new situation. 

In short, the company may only activate this cause for termination of the employment contract when the adoption of the above measures represents an excessive burden. In addition, this amendment to the law also has a direct impact on the dynamics and effects of temporary disability and permanent disability benefits, as well as on the transition from one to the other.

When does it come into effect?

The new law comes into force the day after its publication. In other words, from 1 May 2025, it must be applied in cases that arise in companies.

What are the changes to the Workers' Statute Law?

Looking at the operative part of the Law, we can establish that the new Law introduces the following regulatory changes:

1. Extension of the grounds for suspension of the employment contract with job reservation (art. 48.2 ET) 

Article 48.2 ET is amended to expressly introduce as a cause for suspension of the employment contract with job reservation the period during which reasonable adjustments are resolved or the transfer to a vacant and available position, as provided for in section n) of article 49.1 ET. 

2. Repeal of the automatic cause for termination of the employment contract due to a declaration of permanent disability (Art. 49.1.e ET) 

The amendment corresponds to the elimination of the automatic termination of the contract due to a declaration of any type of permanent disability. From 1 May 2025, the automatic termination of the employment contract is limited to the cause of termination due to the death of the worker.

3. Introduction of a new regulation regarding the cases in which the employment contract may be terminated: Termination conditioned by Permanent Disability

A new section is added to Article 49.1 of the ET, according to which contractual termination in cases of severe disability, absolute or total permanent disability will only be possible if:

• Reasonable adjustments cannot be made because they would impose an excessive burden on the company. 
• There is no vacancy suitable for the worker's new profile and functional situation. 
• The worker expressly rejects the proposal for adaptation or redeployment reasonably made by the company. 

The regulations analysed establish that in order to determine whether the burden is excessive for the company, the size, economic situation and turnover of the company must be taken into account. 

Notwithstanding the above, it is established that there shall be no excessive burden on the company when public subsidies are available to cover the adaptations.

In the case of companies with fewer than 25 employees, an excessive burden is presumed to exist when the cost of adaptation exceeds: 

• The severance pay to which the employee would be entitled under the terms established in Article 56.1 of the Workers' Statute,
• Six months' salary of the employee affected by the measure. 

Among the obligations of the employee, we find that they have 10 calendar days from the notification of the permanent disability decision to express their willingness to maintain the employment relationship. 

Meanwhile, the company has a period of three months to: 

• Implement reasonable adjustments. 
• Offer a compatible vacant position. 
• Or justify the termination of the contract with reasons. The process requires the intervention of the prevention services, which will assess the health conditions, the necessary adaptations and the possible alternative positions, with the participation of the workers' legal representatives.

Temporary/permanent disability and the obligation to adapt the workplace

Law 2/2025 also adapts Social Security legislation, amending Article 174.5 of the LGSS, which refers to the adaptation of temporary disability and permanent disability benefits to the new obligations to adapt the workplace. This provision establishes the extension of the economic effects of temporary disability while the classification of permanent disability is being resolved.

Likewise, the regulations establish that, if after the classification of permanent disability, the worker returns to work because the job has been adapted or because they have been relocated, the permanent disability pension is suspended during the performance of said work, pursuant to Article 198 of the LGSS.

In the event of termination of the employment relationship, the effects of the pension are retroactive to the day following the termination of the temporary disability. 

The employer's obligation to pay contributions during this period is maintained, even if permanent disability is not declared after the end of the temporary disability process, until the 545 calendar days have elapsed.

Other modifications

The first final provision amends Article 120 of Law 36/2011, of 10 October, regulating social jurisdiction, introducing a new section 2, with the aim of granting urgent and preferential status to legal proceedings related to the termination of contracts for the reasons set out in the new Article 49.1.n ET. 

The second final provision refers to the regulatory development within a period of six months. The Government must therefore present a bill on compatibility between work and permanent disability, in line with the recommendations of the Toledo Pact.

What conclusions do we draw at CECA MAGÁN Abogados?

As we have analysed throughout this article, Law 2/2025 eliminates permanent disability as an automatic cause for termination of an employment contract.

From 1 May 2025, it will not be possible to terminate the employment contract of any worker who has been declared permanently and totally incapacitated, absolutely incapacitated or severely incapacitated without first attempting to make reasonable adjustments to adapt the workplace to the worker's situation or, where appropriate, attempting to relocate them.

In this regard, it is important to note that during the time in which the aforementioned actions are carried out, the suspension of the contract with job reservation is maintained.

For its part, the express reference introduced in Article 174. 5 of the LGSS regarding the possibility of suspending financial benefits in the event of returning to a job whose reasonable adjustment makes it incompatible with the pension under the terms of Article 198 of the LGSS may be a sufficiently relevant reason to reduce the number of requests for job adaptation and, therefore, limit the effects of the regulatory changes introduced by this rule.

This new regulatory configuration shifts the focus from termination to a model of job retention, in which the will of the worker and the employer's obligation to make reasonable adjustments are key factors.

Our employment lawyers can help you resolve any doubts that may arise in your company, as each case must be reviewed individually in order to assess the specific situation of each worker and thus be able to make the best decision for all parties. You can contact them here.

Labour law area