The decree that overturns a previous conservative administration's pro-business reforms by granting more power to unions in bargaining contracts is a cornerstone of a raft of conditions for Spain receiving the next 12 billion euro disbursement of European pandemic recovery funds.
The result of the vote was so close that House Speaker Meritxell Batet initially said the bill had been rejected, causing consternation among government members present, but quickly corrected herself.
The Socialist-led government's usual allies in the house for the past two years, such as the Catalan separatists ERC, voted against the legislation.
Unprecedented support by the opposition centre-right Ciudadanos and the conservative Catalan pro-independence PdeCat allowed the bill to narrowly pass in a 175-174 vote.
A lawmaker from the People's Party voted remotely for the reform, which the party blamed on a computer error, claiming in a statement that the MP "voted no, but on the screen the vote appeared as yes".His attempts to alert house officials about the error were allegedly ignored, which the party said infringed remote voting protocol that requires confirmation of the vote by telephone. It lodged a complaint with the governing body of Congress and promised legal action if the error was not acknowledged.
The landmark reform is a long-standing electoral commitment of the Socialists and their coalition partners Unidas Podemos.
"This is the most important law of the legislature," Labour Minister Yolanda Diaz told parliament before the vote. She said the legislation would counter Spain's chronic problem of unemployment, the European Union's second-highest after Greece, and precarious work.
Spain is the EU country with the highest use of temporary contracts, covering around a quarter of the workforce.
The new regulation tightens conditions for their use, limiting them to short periods of time. Also, providers of outsourced staff will have to adapt workers' terms to those of the company they are assigned to.
Parliament is highly fragmented and polarised, making the administration reliant on a number of small regional parties to pass laws.
Although positive for the reform and government's immediate goals, support from Ciudadanos could drive a wedge between some of the leftist parties, particularly junior ruling coalition partner Podemos, and Catalonia's ERC.
Whether the vote will redefine or diminish support for the government still remains to be seen.
One of the labour groups that stands to benefit the most from the new legislation are hotel housekeepers, known locally as Kellys, long a symbol of precarious work in the tourism-dependent country. Diaz said such workers' annual income would increase by about 2,500 euros in some cases.
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