Madrid High Court backs a collective redundancy linked to AI: what matters is the proven economic cause, not the tool

The Labour Chamber of the Madrid High Court of Justice (TSJM) has upheld the collective redundancy plan of a video game studio in one of the first Spanish rulings to examine head-on the role of artificial intelligence in a workforce restructuring. Judgment 864/2026, reported by Merca2, delivers a message that cuts both ways: invoking AI is not a shortcut to dismiss staff, but replacing tasks with AI is not automatically unlawful either. What decides the case is whether the company proves the economic, technical, organisational or production grounds behind the plan.

The tool is not the cause

The court's reasoning follows the classic structure of Spanish collective redundancy law. Under the Workers' Statute, an ERE must rest on objective causes that the employer has to evidence. The chamber refused to treat the introduction of generative AI tools as an autonomous ground of dismissal, but it also refused to disqualify a restructuring merely because automation was part of the background. What carried weight was the documentation: falling revenue, a reorganised production pipeline and a reasoned link between those facts and the number of roles affected.

For employment lawyers the practical consequence is immediate. A company planning an AI-driven restructuring needs the same evidentiary discipline as in any other ERE: financials, a coherent business plan and an individualised justification for each affected position. Conversely, works councils challenging such plans will have to attack the evidence, not the technology. The judgment sits naturally with the issues we follow in our legal AI section.

A signal for the games industry and beyond

The case comes from the video game sector, where generative tools for art, text and code have spread fastest, but the doctrine is sector-neutral. Any employer automating white-collar tasks will face the same test, and any dismissal framed as "replacement by AI" without an underlying proven cause remains exposed to a finding of unfair dismissal.

Labour proceedings over collective redundancies have been rising as automation reaches services industries, and this ruling gives lower courts a workable framework: AI is evidence-relevant context, not a legal category of its own. Law firms advising on restructurings should expect both more transactions and more litigation in this space over the coming year, a trend already visible in the matters reaching employment practices.

Judicial control of the ERE, step by step

The judgment also reviews the procedure followed in the consultation period with the workers' representatives, and finds no defect capable of voiding the plan: documentation was delivered on time, the negotiating committee was properly formed and the criteria proposed for selecting affected workers were objective and reviewable. The chamber insists that judicial control of a collective redundancy is not a second negotiation: the court verifies causes, procedure and good faith, but does not replace the company's business judgment.

For practitioners, the checklist emerging from the case is clear. Before launching an AI-linked restructuring, a company should be able to show management accounts covering a meaningful period, a credible explanation of how the new tools change the production process, and a selection design that survives scrutiny. Works councils, for their part, should demand exactly that documentation during the consultation period, because the courtroom battle will be fought over it later.

Source: Merca2. This piece is informative and does not constitute legal advice.