Small businesses in Spain could now be forced to rehire employees or pay them more than €22,000 in compensation if they make a certain costly mistake while firing them, a court has ruled.

Specifically, they could land in hot water if they announce a dismissal before giving the worker a chance to defend themselves.

It comes after a company informed staff by email that an employee had been fired before he was able to respond to allegations made against him.

The court found that the dismissal process had effectively been decided in advance, making the subsequent disciplinary hearing little more than a formality.

As a result, the employer must now choose between reinstating the worker or paying €15,172.26 for unfair dismissal, plus a further €7,501 in damages for breaching the employee’s fundamental rights.

The ruling from the Court of First Instance in San Sebastian builds on a recent Spanish Supreme Court doctrine requiring employers to hear an employee’s side of the story before carrying out a disciplinary dismissal.

Email to colleagues proved costly

The case dates back to June 2025, when an employee was questioned during a video call over allegations that he had incorrectly charged hours to projects he had not worked on.

The following day, the company disabled his work account and emailed colleagues informing them that he had been dismissed because of the alleged irregularities.

Three days later, the business attempted to reverse course, telling the employee he had not actually been dismissed and that a formal disciplinary investigation would now begin.

He was invited to submit his defence.

However, he received his dismissal letter on the very same day he filed his response.

The judge concluded that the company had already made up its mind before hearing his explanation, meaning the disciplinary process was not genuine.

Employers must genuinely consider the employee’s response

Employment lawyer Valeria Alcazar de la Vega told business publication Diario A y E that the ruling makes clear that employers must give workers a real opportunity to influence the outcome.

‘It is not enough simply to allow an employee to submit a written response if earlier actions clearly show their explanations cannot change the decision,’ she said.

The court ruled that the internal email was particularly damaging because it presented the dismissal as final and accused the employee of misconduct before he had been heard.

Businesses face growing legal risk

The obligation to hear an employee before dismissing them stems from a recent Supreme Court interpretation of International Labour Organisation Convention 158, which applies to dismissals based on conduct or performance.

The judgment warns that employers risk undermining the entire disciplinary process if they:

• Announce the dismissal before hearing the employee.
• Disable company accounts or remove equipment in a way that suggests the decision is already final.
• Tell colleagues the employee has been dismissed before completing the disciplinary procedure.

If a dismissal is declared unfair, the employer must choose between reinstating the worker under the same conditions or paying statutory compensation.

Where the court also finds that the employee’s fundamental rights were breached, additional damages may also be awarded, significantly increasing the cost.

In this case, although the worker sought €90,000 in damages, the judge limited the additional award to €7,501, finding that the reputational harm was confined to the workplace.

Legal experts say the ruling serves as a warning to businesses across Spain that even where there are legitimate disciplinary concerns, announcing a dismissal too early can render the entire process unlawful.