Abreu Advogados

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Employment disputes fall within the jurisdiction of the Labour Courts.

There is also an employment conciliation, mediation, and arbitration system, governed by the Labour Code and Decree-Law No. 259/2009, of 25 September 2009, which provides for mandatory arbitration and necessary arbitration, as well as arbitration in relation to minimum services during a strike and the means necessary to guarantee those services. Mandatory and voluntary arbitration is limited to cases involving collective bargaining disputes and to cases where the judicial courts do not have jurisdiction and the parties are free to agree terms (issues such as the termination of labour agreements, holidays, the working schedule, and overtime work are not matters on which the parties are free to negotiate, and therefore such matters cannot be resolved by arbitration).


The Main Sources Of Employment Law

There are a number of different sources: the Portuguese Constitution, International Law, EC law, the Labour Code and respective Regulation, the Labour Procedure Code, Collective Bargaining Agreements, Extension Regulations, labour uses provided they do not conflict with principles of good-faith and harmonised case law.


National Law And Employees Working For Foreign Companies

The parties are free to agree which law is applicable to their employment relationship. However, in the absence of an express agreement, determining the applicable law will depend on each specific situation and on international law.

Regardless of the law applicable to the contract, the mandatory provisions of Portuguese Labour law (which include provisions relating to maximum working hours, compensatory rest days, health and safety rules, minimum periods of holiday, minimum wage, payment for overtime work, equality, and non-discrimination) will apply to foreign employees living and working in Portugal, whether they are doing so on a permanent basis or simply as temporary expatriated employees.


National Law And Employees Of National Companies Working In Another Jurisdiction

Please see the above section. An employee working in another jurisdiction is entitled to request the application of the mandatory provisions of Portuguese Labour law (as set out above) without prejudice to any more favourable regime which may apply by virtue of working in that other jurisdiction, or by virtue of the parties’ choice of contractual law.


Data privacy

The implementation into Portuguese national law of the General Data Protection Regulation (EU 2016/679) occurred in 2019 (Law 58/2019 of August 8). Among other aspects, this law:

  • Designates the National Data Protection Commission (CNPD) as the national supervisory authority for the purposes of the GDPR and the law;
  • Clarifies which public and private entities are obliged to appoint a Data Protection Officer;
  • Determines the rules concerning the processing of employees’ data in the context of labour relationships, for instance regarding: consent by the employee (not lawful if the processing results in a legal or economic advantage for the employee), video-surveillance systems (remote surveillance images may only be used in disciplinary proceedings if they have been previously used in criminal proceedings) and biometric data (processing is only considered lawful for attendance control and access control to the premises).

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

As a rule, employment agreements do not need to take any particular form and therefore they may be oral or written. However, the exceptions to this general rule are fixed term employment agreements, employment agreements under a commission of service regime, part-time employment agreements, intermittent employment agreements, tele-work, and temporary work. Regardless of the form of agreement, there are a number of key terms and conditions that must be provided to the employee in writing, as follows:

  • The identity of the employer. In the case of a corporate employer, this includes details of the company’s structure (i.e. its holdings and subsidiaries and/or the existence of a group of companies) and its respective headquarters or address;
  • The place where the work must be performed, or, if there is no fixed place, a statement to that effect;
  • The job title or a brief description of its functions;
  • The date of execution and employment commencement date;
  • The duration of the contract in case of a fixed-term contract or the expected duration of the contract in case of an unfixed term contract;
  • Holiday entitlement and/or duration and the relevant method of calculation;
  • The notice period required by the parties to terminate the employment relationship (if any) and the formal requirements that must be complied by the employer and by the employee, as well as the method for calculating such notice;
  • The remuneration ,the frequency and the method of payment of the remuneration, including a description of its constituent elements;
  • The number of hours to be worked per day and per week, specifying that it is defined by average when that is the case, as well as the applicable regime in case of overtime work and shift organisation;
  • The identification of the labour accidents insurance policy and the name of the relevant insurance company;
  • Applicable collective agreements, if any, and the designation of the respective contracting parties;
  • The identification of the wage guarantee fund or equivalent mechanism;
  • In case of a temporary employee, the user's identification;
  • The duration and conditions of the trial period, if applicable;
  • The employee's individual right to continuous professional training;
  • In case of intermittent work, the information provided for in Article 158(1)(b), Article 159(1), (2) and (4) and Article 160(2);
  • Social protection regimes, including benefits that complement or replace those provided by the general social security regime;
  • The parameters, criteria, rules and instructions on which algorithms or other artificial intelligence systems that affect decision-making on access to and maintenance of employment are founded, as well as working conditions, including profiling and monitoring of professional activity.

Although as a general rule employment agreements do not have to be written, there are several advantages to having a written agreement – it allows both parties to agree upon and confirm in writing the main aspects of the employment relationship.


Mandatory Requirements
  • Trial Period

    • The trial period duration depends on the type of contract and/or of the employees’ job title/functions. In most cases the trial period is up to 90 days granted on the commencement of employment; when employees hold positions with technical complexity, perform trust-based functions, are looking for their first job or are long-term unemployed, the trial period is extended to 180 days; the trial period is up to 240 days for employees in senior management positions. In fixed term agreements, the trial period lasts 30 days in case of the duration of the contract is equal or longer than 6 months; for contracts shorter than 6 months, the trial period is 15 days.

    The trial period is reduced or excluded depending on whether the duration of a previous fixed-term contract for the same activity, a temporary work contract carried out in the same workplace, a contract for the provision of services for the same purpose, or a professional traineeship for the same activity, was less than or equal to or greater than the duration of that contract, provided that in either case they are concluded by the same employer. As of the introduction of the most recent amendments to the Portuguese Labour Code, the trial period is also reduced or excluded in case of a first-time or long-term unemployed employee whose previous fixed-term contract with a different employer lasted more than 90 days; or if an employee has completed a professional internship, in the last 12 months for more than 90 days, with a positive evaluation for the same activity and a different employer.

    The amount of the reduction or exclusion depends on the length of the previous contract. The parties may expressly reduce the trial period by agreement or by means of applicable collective agreement. If the employer does not fulfil the duty of information, it shall be presumed that the parties have agreed to exclude the trial period.As a rule, during the trial period each party can terminate the employment contract without notice, cause, or severance payment. However, where the trial period lasts longer than 60 and up to 120 days, the employer is obliged to give seven (7) days’ notice of termination; where the trial period last for more than 120 days, the relevant notice period is 30 days.

  • Hours Of Work

    • Under statute, the normal maximum permitted working period is eight (8) hours per day and 40 hours per week. These maximum amounts may be increased or reduced in certain situations, for example through Collective Bargaining Agreements (CBAs) or agreement between both parties in the context of legal flexible forms of working time organisation. In certain economic sectors of activity or job titles/functions the maximum working period may be lesser than 40 hours per week (for instance in the insurance sector).

  • Special Rules For Part-time Work

    • Part-time employment agreements must be agreed in writing and must detail the number of working hours per week with comparative reference to full time work. Part-time employees must be paid the same rate as their full-time colleagues in the same situation, on a pro-rata basis and failure to do so will be held to be unlawful.

    Employees with children under 12 years of age or, regardless of age if with a permanent disease or disability, are entitled to work part time.

    Parents are also entitled to complementary parental leave to assist their children or adopted children aged six or under, namely in the form of part-time work for three months, with a normal working day equal to half of the full working day, provided that the leave is taken in full by each parent.

    Moreover, the most recent amendments to the Labour Code incorporated the Secondary Care Taker regime, which also granted these employees the right to work part-time, consecutively or interpolated, for a maximum period of four years.

  • Earnings

    • There are minimum wage restrictions which apply in Portugal. For 2023, the minimum wage is equivalent to € 760 per month; in 2024, the minimum wage shall be of € 820.

  • Holidays/Rest Periods

    • In general, all employees are entitled to a minimum of 22 working days paid holiday per year, though there are some exceptions to this rule. During the first year of employment, holiday entitlement accrues at the rate of two (2) working days for each full month of work after a six (6) month period of work but is subject to a maximum of 20 days. It is mandatory for employees to take one holiday period of at least 10 consecutive working days per year.

    Generally, the parties are free to agree between themselves when holiday should be taken. However, if agreement cannot be reached, (unless otherwise prescribed in collective bargaining agreements) the employer is entitled to determine when holidays should be taken provided that it allows the employee to take holiday between 1 May and 31 October. In exceptional circumstances, employees are allowed to carry unused holiday forward to the following year, provided that such holiday days are taken prior to 30 April of the subsequent year. The circumstances previously referred to are agreements between both parties and if the employee wishes to spend the holidays with relatives living abroad. Employees are also allowed to accumulate half of the holiday period that became due at the beginning of the previous year by agreement with the employer. In addition to the above holiday entitlements, employees will also benefit from two (2) kinds of annual public holiday: mandatory public holidays and optional public holidays.

  • Minimum/Maximum Age

    • An employee has to be at least 16 years of age (plus completion of compulsory schooling), although in certain circumstances it is possible to employ someone younger. Different rules apply to children and young workers. In 2023, the retirement age is 66 years and four (4) months but is not compulsory.

  • Illness/Disability

    • Inherent subsidy is granted by the Portuguese Social Security System to eligible employees. Employees maintain all rights and obligations when they are ill, except the rights concerning the remuneration and the obligation to work. The amount of the subsidy varies in accordance with the nature and the period of absence between 55% and 75% of the remuneration according with the duration of the disease or, in case of tuberculosis between 80% and 100% of the remuneration depending on the household, with a minimum limit and a maximum limit (which is the reference remuneration of the employee). The requirements to be granted the subsidy are the registry of remunerations in the six (6) months prior to the beginning of the absence and 12 days of registry of remuneration for effective work in the previous four (4) months preceding the month in which the disability occurs. The maximum period during which it is granted is 1095 days (in case of tuberculosis the subsidy is granted by an unlimited period time).

  • Location Of Work/Mobility

    • Employees may be temporarily or permanently transferred to a different working place, provided there is reasonable justification communicated in writing and prior notice is given. Parties are allowed to agree on the extension of the transfer conditions which expires within two (2) years if it has not been applied within such period.

  • Pension Plans

    • Employers are free to implement/subscribe to Pension Plans to complement the Portuguese Social Security Pension Scheme, which his mandatory.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • There are several statutory right’s granted to pregnant women, puerperal women, and breast-feeding women, as well as to parents or adoptive parents or candidates to adoption.

    Employees (male or female) are entitled to take up to 120 or 150 consecutive days of initial parental leave where they are entitled to a subsidy equal to 100% or 80% of their remuneration, respectively. This leave may be increased by 30 days if both parents share the initial parental leave – i.e. both parents must enjoy 30 consecutive days or two (2) periods of 15 consecutive days after the mandatory six (6) week period enjoyed by the mother. Therefore, when shared, the initial parental leave may achieve 180 days and a subsidy equal to 83% of their remuneration will be granted. After the 120 consecutive days leave, parents can cumulate in each day the remaining days of leave with part-time work.

    Fathers of new-born children are entitled to take paid leave of up to 28 calendar days as follows: 28 mandatory calendar days, from which seven (7) days must be taken immediately after birth and the other 21 days during the following forty two (42) days after birth. After taking this leave, the father is also entitled to a seven (7) days' leave, whether consecutive or interpolated, if taken at the same time as the mother's initial parental leave.

    The termination of pregnant women, puerperal women, or breast-feeding women or employee on parental leave on grounds of dismissal (with objective or subjective cause) benefits from a special legal regime. There is a presumption that such a termination is unfair, and it is necessary to obtain a previous favourable legal opinion issued by the Portuguese Equality Entity (CITE) prior to the dismissal decision being issued by the employer.

  • Compulsory Terms

    • Please see the answers to paragraph 2 above – Legal Requirements as to the Form of Agreement.

  • Non-Compulsory Terms

    • Without prejudice of the existence of mandatory rules that allow the parties to provide otherwise, parties are free to agree non-compulsory provisions provided such provisions are more favourable to the employee than the mandatory ones.


Types Of Agreement

Employment agreements may be open ended, and this is the rule, or for a term which is fixed either by time (fixed term) or by the completion of a task (unfixed term). Term employment agreements may only be executed to satisfy temporary needs of the employer and only during the period strictly required for that purpose, otherwise they will be deemed as an open-ended employment agreement. There are also temporary agreements, part-time agreements, intermittent work agreements, telework agreements and labour agreement under a commission of service regime.


Secrecy/Confidentiality

The parties may insert in the employment agreements clauses where it is established that during its execution, as well as after its termination, the employee shall not disclose any trade secrets or confidential information related to the employer.


Ownership of Inventions/Other Intellectual Property (IP) Rights

Both Portuguese Industrial Property Code and the Copyright Code contain several provisions on this regard.

An invention created during the course of employment belongs to the employer, provided that the creation of inventions is one (1) of the intentional purposes of the employee’s employment and he is remunerated accordingly.

If separate remuneration has not been agreed, the employee will be entitled to receive reasonable compensation based on the value of the invention to the employer.

If the invention is made during the regular course of employment and within the scope of activity of the employer, and although it is not part of the employee’s specific job function, the employer shall be entitled to assume ownership of it or to reserve the right to the exclusive working of the invention. The employer shall be entitled to the acquisition of the correspondent right and title and the right to apply and acquire a foreign correspondent title.

Copyright for the work created during employment will belong to the employee unless agreed otherwise within the contract of employment or if the work is not signed by its author. Moreover, if the employer decides to sell or to exploit such copyright, the employee/author may claim compensation based on the profits made by the employer.


Pre-Employment Considerations

Both parties are to negotiate the employment contract in good faith, and otherwise may be held accountable for damages caused to the other party. If the parties desire to enter into a promise of employment contract it must be executed in writing and contain the following information: the identification, signature, and address of both parties; a declaration clearly stating the will to celebrate the employment agreement; the activity to be performed and corresponding remuneration.


Hiring Non-Nationals

Citizens from countries that are not members of the European Union (nor of countries that have a similar regime, like Switzerland) must request a visa to entry, stay and a residence authorisation to work in Portugal without any special requirement or formality other than having a valid Identity Card or Passport and must have an employment contract or the promise of an employment contract. In case of EEA nationals, if their permanence in national territory lasts more than three (3) months those citizens should formalise their right of residence. They may do so by obtaining a Certificate of Register but there is no need to request a visa or a residence authorisation. Due to Brexit agreement UK employees are no longer covered by the previous referred special rules with regard to the contracting of EU nationals.

A foreign or stateless employee who is authorised to perform a subordinated professional activity in Portugal is entitled to the same rights and is subject to the same duties as an employee with Portuguese nationality.

The agreement signed with a foreign or stateless employee is subject to written form and must contain several mandatory information, namely a reference to the employee's work visa or residence or stay permit in Portugal and the identification and address of the person or persons entitled to a pension in the event of death resulting from an accident at work or an occupational disease.


Hiring Specified Categories Of Individuals

There are several restrictions regarding the performance of activities by young employees, pregnant, disabled or people with chronic disease (including cancer), as well as secondary care takers, namely activities involving risks to their health and safety.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

These issues are ruled by the Portuguese Civil Code and, in case of Work Agencies by Decree Law 260/2009, of 25 September of 2009, amended by Law 5/2014 of 12 February 2014, and Law 28/2016 of 23 August 2016.

The most recent amendments to the Portuguese Labour Code have forbidden the acquisition of external services in order to satisfy the needs that were provided by an employee whose agreement was terminated in the previous 12 months due to a collective dismissal or an individual redundancy/extinction of the job position.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

As a rule, employers may not unilaterally change the employment agreement provisions, unless they foresee terms and conditions that may not be considered as individually/specifically agreed by parties. All terms and conditions individually agreed between the parties (that is, that are not determined by one (1) of the parties, usually the employer), may only be changed by mutual agreement, otherwise will be deemed null and void and cannot be enforced.


Change In Ownership Of The Business

Where there is a change in the person of the employer, the Portuguese Labour Code provides for an automatic transfer of the individual contracts to the transferee. All the obligations and benefits related to the individual contracts are transferred, thus remain unaltered. Several information and consultation obligations must be complied with by both the transferor and the transferee. Employees can only oppose to a transfer if the transfer causes him/her serious damage notably in case of obvious lack of solvability or difficult financial situation of the transferee or if its internal work organisation is not worth of trust.


Social Security Contributions

As a rule, for the majority of employees mandatory monthly contributions are as follows: 23.75% and 11% of the reference salary to be paid by employers and by employees, respectively. In some specific economic sectors and under certain circumstances provided for by legislation that aims to promote employment, the amount of the contributions may vary. The percentages referred to above are also mandatory to the members of the executive board of the companies in the same terms as employees. The contributions of the members of the statutory bodies are as follows: executive members: 23.75% paid by the company and 11% paid the employee; non-executive members: 20.3% paid by the company and 9.3% due by the statutory member of the board.


Accidents At Work

The employer is obliged to insure employees against accidents in the workplace with an authorised insurer. The employer is also responsible for safety in the workplace. In case of an accident at work the employer is responsible for communicating it to the insurer and in case of death or serious damages to the Authority for the Labour Conditions in due time.


Discipline And Grievance

As a rule, employers cannot terminate employment agreements “at will” and/or by giving notice, unless there is just cause: either objective, due to economic or market reasons, or subjective. The latter generally relates to a serious misconduct for a serious incident that prevents the maintenance into force of the employment relationship. Subjective ‘just cause’ has to be evidenced through a disciplinary proceeding, which might be used not only to apply the most serious sanction – the dismissal – but also for a series of warnings or other sanctions for minor offences or misconduct. This procedure implies a formal accusation and allows the employee to state his/her case in defence before making the ultimate decision to dismiss.


Harassment/Discrimination/Equal pay

Along with constitutional principles, the Labour Code expressly establishes the prohibition of discrimination at work, forbids any type of harassment and foresees the principle of equal work equal pay. Indeed, the Labour Code expressly establishes the prohibition of discrimination at work, complying discrimination based namely on ascendancy, age, sex, sexual orientation, marital status, family situation, genetic patrimony, reduced capacity to work, disability, incurable disease, ethnical origin, religion, political or ideological orientations and union membership.

The Labour Code defines it as the employer's duty to adopt codes of good conduct aiming to prevent and abolish harassment at work, whenever the company has seven (7) or more employees. Moreover, the employer is obliged to initiate disciplinary proceedings if and when it receives an harassment notice.


Compulsory Training Obligations

Each employee is entitled to professional training (40 hours per year minimum) if their employment is deemed to be continuous. Despite the possibility of postponing the yearly training by up to two (2) years it should involve at least 10% of the employees per year.

Regarding fixed-term labour agreements, the employer has to provide professional training only if the contract duration is equal or exceeds three (3) months and in this case the number of hours is proportional to the duration of such contract.

If the employer does not provide the 40 hours of professional training in the period of two (2) years, the employee acquires the corresponding credit hours, which can be claimed within the following three (3) years.

Where the employment agreement is terminated, the employee is entitled to claim credits of professional training he was not offered during the last three (3) years.


Offsetting Earnings

Allowed only under exceptional circumstances, namely in case of deductions in favour of the State, Social Security or ordered by law or court, amortisation of capital or interests on loans granted to the employee, expenses with meals or related with the use of telephones at the workplace, among others. As a rule (exceptions exist in case of deductions in favour of the State, Social Security or ordered by law or court) the maximum amount of the deduction is one-sixth of the remuneration of the employee.


Payments For Maternity And Disability Leave

These payments are granted by means of a subsidy by the Portuguese Social Security. Please see point 2 above on Parental Rights (Pregnancy/Maternity/Paternity/Adoption) and note that often those subsidies are complemented by the employer up to the amount of the remuneration of the employee or such a complement is mandatory through CBAs.


Compulsory Insurance

An Employer’s liability for accidents at work (latu sensu) must be transferred to an insurance company. Failure to do so – apart from constituting a very serious offence, which may imply the payment of a fine – will constitute the employer liable for any damages suffered by the employee as a consequence of the labour accident. For this reason, this aspect is becoming highly relevant in the cases of remote working, as working from home must be covered by work accident insurance, otherwise the employer may incur in costs.


Absence For Military Or Public Service Duties

Although military service is nowadays voluntary, it is an example of the circumstances under which an employment agreement will be suspended for the period of its duration. Candidates to public offices are also entitled to absence according to the electoral law and in general candidates are entitled to absence during (and often before) the electoral campaign.


Works Councils or Trade Unions

There are several rules concerning the election, powers and the protection of Trade Unions and Works Council’s representative bodies.

Employees in Portugal have the constitutional right to be represented by works councils. Works councils have certain rights which are recognised constitutionally and statutorily, namely –

  • to receive from the employer all and any information relevant to its function and activities;
  • to exercise some control over the management of the company;
  • to be involved in any proposals to reorganise the structure of the business;
  • to organise or be involved in the company’s social activities;
  • to meet regularly with management to discuss issues of interest (such meetings to take place at least on a monthly basis);
  • to be provided with a place at the employer’s premises to meet and carry out its activities generally; and
  • to express an opinion on issues prior to the management of the company making a formal decision (that opinion should be given genuine consideration but need not be followed).

In addition to representation by works councils, the Portuguese Constitution recognises the right for employees to organise themselves into trade unions and other similar organisations.


Employees’ Right To Strike

This is a Constitutional right. Trade unions are principally responsible for organising official strike action. Employees may also organise a strike provided that majority of the employees are not trade union members, the meeting is convened by 20% or 200 workers and the majority participate in the voting and the strike is approved also by the majority following a secret ballot. If the majority of employees are trade union members, then it is the union that should organise the strike and any strike organised by employees would be held to be unlawful.

Prior to taking strike action the entity that decided it must give the employer or employers’ association at least five (5) working days’ notice and such notice must also be given to the Labour Ministry or published through the media. Where strike action may impact on public services, at least 10 working days’ notice must be given.


Employees On Strike

During strike action the contracts of employment of participating employees are suspended and employers are prohibited from employing temporary or permanent labour to replace those on strike (but the notice referred above must contain a proposal for a definition of services necessary for the safety and maintenance of equipment and facilities). Employers are also prohibited from offering incentive to prevent employees from going on strike.


Employers’ Responsibility For Actions Of Their Employees

As a rule, employers are responsible for the actions of their employees while working, except where the latter are acting against their labour duties.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

Please refer to Discipline and Grievance above.


Instant Dismissal

This is unlawful. Doing so will determine the “dismissal” as illegal and will entitle the employee to file a claim before a Labour Court and claim his/her reinstatement or compensation for unlawful dismissal (which varies between 15 and 45 days of basic remuneration and seniority allowance per each year of seniority or fraction of seniority), as well as to receive the salaries vested since the dismissal occurred until the final judgement and other damages (e.g. moral damages).


Employee's Resignation

Depending on the length of service and on the type of agreement in force, prior notice is due by the employee. Prior notice is of 15 days for fixed-term contracts which duration is less than six (6) months, 30 days for longer fixed-term contracts or indefinite term contracts which have lasted up to two (2) years, increasing to 60 days where the latter has lasted for two (2) years or longer. If the required notice period is not provided, the employee should indemnify the employer in the amount equal to the basic remuneration (and seniority allowance) corresponding to the notice not given plus, if applicable, the amount correspondent to the damages/losses caused to the employer due to such employee’s behaviour.

An employee who has been recognised as a victim of domestic violence, under the terms of specific legislation, is exempt from complying with the notice period.


Termination On Notice

This is not possible for the employer in open-ended employment agreements. Only fixed term employment agreements can be terminated by the employer on notice.


Termination By Reason Of The Employee's Age

Retirement age is currently of 66 years and four (4) months; however it is up to the employee to retire at that age or from that age on. Notwithstanding, by reaching the age of 70 without having retired, the employment agreement may be conveyed into a six (6) months fixed term agreement, which means that the employer can terminate it unilaterally, by notice, for its term. In such case, the employee is not entitled to compensation.


Automatic Termination In Cases Of Force Majeure

This is feasible where it is impossible for the employee to carry out his/her duties or for the employer to receive them, in which case the agreement terminates/expires. In certain situations, the termination under this context (for instance the closing of the company) entitles the employee to a compensation of 14 days basic remuneration and seniority allowance for each year of seniority (the fraction of seniority is calculated in proportion).


Collective Dismissals

The minimum number of employees dismissed under collective dismissal depends on the size of the employer, varying between two (2) and five (5) employees. Collective dismissal must be grounded in either market, structural or technological reasons. The employer must follow a demanding, formal, and mandatory procedure. Employees affected are entitled to a compensation which corresponds to 14 days’ pay and seniority allowance (if applicable) for each full year of service. The fraction of year is considered on a pro rata basis.


Termination By Parties’ Agreement

Termination can be mutually agreed between employer and employee “at will” and under the correct conditions.


Directors Or Other Senior Officers

A Commission of Service Agreement is a specific modality of open-ended employment agreement, that may be used only in management positions or functions that imply a special relation of trust with the employer. Its particularity is that in case employees are hired under the commission of services it may be terminated by any of the parties at all time by giving a minimum of 30 or 60 days written prior notice to the other party, depending on if the agreement lasted less or more than two (2) years. Upon termination of the agreement, the employee might be entitled to compensation, except if termination is caused by fault or initiative of the employee.


Special Rules For Categories Of Employee

Employees with parental rights are pregnant employee, employees who have recently given birth and employees who are breastfeeding, employees in parental leave, secondary care takers, members of trade unions and corporate bodies and trade union representatives, works councils representative and health and safety officers. Special regime is applicable in what concerns termination of agreement by just cause – i.e. those employees benefit, in general, from the presumption that the dismissal is unlawful and in case they are successful in a judicial claim the amount of the compensation will be increased.

A special regime is also applicable to victims of domestic violence regarding transfer of place of work and exemption from prior notice in the event of termination of the employment agreement by the employee.


Specific Rules For Companies in Financial Difficulties

Lay off, collective dismissals and redundancies’ provisions are set out by the Portuguese Labour Code along with other rules foreseen in the Portuguese Insolvency Code. The law distinguishes between collective dismissals, that is, where a certain number of people are dismissed depending on the company´s dimension and by reason of redundancy and individual redundancy. The first condition to be met is that an objective reason must exist, which may be either market, structural or technological reasons. The employer must comply with a demanding, formal, and mandatory procedure. Employees affected are entitled to a compensation which corresponds to 14 days’ pay and seniority allowance (if applicable) for each full year of service. The lay-off (suspension or reduction of the company’s activity for up to a six (6) month or one (1) year period, depending on its grounds, which may be renewed for equal period) often presents as an important measure to employers. The special procedure for corporate recovery or the insolvency of the company does not determine the automatic termination of the employment agreement, only the closing of the premises does or a decision of the insolvency director prior to the mentioned closing.


Restricting Future Activities

Non-compete clauses may be applicable for a maximum of two (2) years (which can be increased to three (3) years for top management employees), either when the parties enter into the employment agreement or on its termination. Compensation should be paid to the employee during the inactivity period. There is no statutory amount which means that the parties have to enter into an agreement on this, by foreseeing a fair amount. Such clauses are enforceable as long as the competition and the respective damages are evidenced, and the compensation agreed is adequate.


Whistleblower Laws

On the 20th December 2021 the Law 93/2021 was published, which transposes Directive (EU) 2019/1937 of the Parliament and of the Council of 23 October 2019 and establishes the general regime for the protection of whistleblowers. This law defines the mechanisms and applicable procedures to report of offences based on information obtained in the course of professional activity, as well as measures to protect whistleblowers.

  • In this context, companies that employ more than 50 employees are obliged to have internal whistleblowing channels;
  • Internal whistleblowing channels must allow the secure submission and follow-up of reports, in order to guarantee the completeness, integrity and preservation of the report, the confidentiality of the identity or anonymity of the whistleblowers and the confidentiality of the identity of third parties mentioned in the report, and to prevent access by unauthorised persons;
  • It is forbidden to retaliate against the whistleblower.

Special Rules For Garden Leave

Employees have the right/duty to effective occupation and may not be paid to be absent of work. In other words, unilaterally garden leaves are not admitted but may be agreed. Alternatively, in the context of a termination subject to prior notice, employees may be instructed to use the accrued holidays immediately before the termination date.


Severance Payments

Severance payments are calculated according to the seniority of the employee and the ground for dismissal. It should be noted that termination with subjective just cause does not entitle the employee to a severance payment. Also, the law does not provide for the payment of compensation in case of termination agreement. Thus, in such cases the Parties are free to establish its payment and amount.


Special Tax Provisions And Severance Payments

Compensations paid to employees (directors are excluded from this regime) are only subject to taxation in the amount exceeding the average amount of regular remuneration considered as salary subject to taxation, earned in the last 12 months prior to termination, multiplied by the number of years or fraction of seniority or performance of functions.

However if in the following 24 months, a new professional or business relationship is executed, directly or indirectly, between the same parties or related parties (for instance with family of the employee or with a parent company of the employer), tax will apply to the total amount received. Severance payments are subject to social security contributions in the same terms as provided in the tax provisions referred to herein.


Allowances Payable To Employees After Termination

Unemployed people are entitled to receive unemployment subsidy, whenever specific requirements are met, during a period of time that may vary between 150 and 900 days, depending on the particular contributory situation of the unemployed, namely, the years with registry of contributions and the age. An additional of up 60 days for every 5 years of pay records in the last 20 years may apply. The subsidy is paid by the Portuguese Social Security Services and its amount may not be:

  • Greater than two (2) and half times the Indexation Mechanism for Social Supports (IAS, €1.201.08 for 2023), nor lower than one IAS (€480.43 for 2023);
  • Greater than 75% of the net value of the remuneration used as reference, without prejudice of a minimum guaranteed subsidy equal to one IAS or the net value of the remuneration used as reference if the remuneration is lower than one IAS; and
  • Greater that the disability pension in case of a disability ex-pensioner.

Time Limits For Claims Following Termination

The time limit for filing a claim following termination is 60 days, in cases of formal dismissal, except for collective dismissal which is six (6) months. The time limit for claiming other credits is one (1) year. The said time limits are counted from the date of the termination of the agreement.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

Not applicable.



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Abreu Advogados
Lisbon, Portugal


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Lisbon, Portugal


Rosário Mexia Alves
Abreu Advogados
Lisbon, Portugal

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The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: February 2024