Employment relationships in Portugal are extensively regulated by the statutory law and regulations that constitute the Labour Code2 and its complementary legislation on labour and employment matters.
Collective bargaining agreements also play an important part in the Portuguese labour regime. These instruments can even bind an employer that did not sign or is not a member of the employers' organisation that concluded the agreement, if the government decides to extend its provisions to a certain field of business. In addition, employment agreements remain a relevant source of labour law.
In general, employees in Portugal enjoy a comparatively high level of protection, with a special emphasis given to the constitutional principle of stability of the employment relationship. Portuguese law does not recognise the concept whereby the employer terminates the employment simply by giving notice, except in cases of the employment agreement being terminated within the trial period or the expiry of fixed-term employment agreements. Thus, dismissals without cause are forbidden and shall be deemed null and void.
There are several government agencies whose competence includes, or who are connected with the enforcement of, employment law. The two most important regulatory entities are the Directorate-General for Employment and Labour Relations and the supervisory Working Conditions Authority, with the latter having powers to conduct inspections and sanction breaches of employment and labour law.
Individual disputes between employers and employees arising from an employment agreement fall under the jurisdiction of the labour courts, incorporated in the public legal system. Alternative dispute resolution mechanisms, such as arbitration, are irrelevant and hardly enforceable. However, conciliation within judicial lawsuits, before a judge or a prosecutor from the Public Attorney's Office, is mandatory in nearly all types of employment dispute and is of paramount importance in employment litigation.
As happens in civil court litigation, employment litigation covers three levels of jurisdiction: first instance courts (often specialising in labour and employment matters), courts of appeal and the Supreme Court. Access to superior instances, however, depends on the value of the lawsuit.
Legal provisions governing dispute resolution on employment matters are mainly set out in the Labour Procedural Code (LPC), dated 9 November 1999 and amended seven times since then, the most significant reforms being in 2009 and recently in 2019. However, the LPC is not as extensive regarding procedural provisions as the Portuguese Civil Procedural Code, which is the base framework for all litigation. Where the LPC does not provide a specific rule, the civil litigation provisions will apply, meaning that any reform of civil procedural rules will have a direct effect on labour and employment litigation. The Portuguese framework for employment dispute resolution mechanisms has, for several years, faced a slight incompatibility with the default civil procedural rules, as a result of the approval of a new Civil Procedural Code in 2013. The new Civil Procedural Code introduced a few significant changes to proceedings, but the much-needed harmonisation of the LPC only occurred in 2019. We will discuss this reform further in Section IV.
The labour procedural law sets out an extensive list of 'special proceedings' (as opposed to common proceedings), which are often considered urgent procedures and consequently have a significant impact on the rules for determining procedural deadlines (particularly as they are not suspended during judicial holidays), and which benefit from shorter judicial deadlines. Bearing in mind that the main problem that arises in dispute resolution – in general – is the length of time proceedings usually take, the truth is that labour and employment procedures, as a rule, are faster than civil procedures, particularly because of the urgent nature of most of the lawsuits.
The Portuguese framework for resolving disputes in employment matters provides for two types of procedures: the common and the specific.
The common procedure basically follows civil litigation rules, with a few minor differences. Where an employee is seeking to obtain outstanding payment from an employer or challenge the validity of the term of an employment agreement or a verbal dismissal, an initial claim must be filed with the labour court with territorial jurisdiction over the dispute – as a rule, the court of the defendant's place of residence. The counterparty will then be notified of the claim and the court will schedule a conciliatory hearing. If conciliation fails, the court will immediately notify the defendant (at the hearing) to present within 10 days its written statement of defence, in which all arguments against the claim should be laid out. Both the claim and the statement of defence must be articulated. Having analysed both the claim and the statement of defence, the court will either schedule another hearing – the preliminary hearing – with a view to the conciliation of the parties and a discussion of any procedural irregularities (e.g., the parties' capacity, legitimacy and representation, the court's jurisdiction) or, if the matter can be easily resolved and the facts are clearly and comprehensibly laid down in the claim and in the statement of defence, simply issue a preliminary order clearing the process of all irregularities and identifying the main issue of the dispute and the facts to be proven in the trial. Finally, a trial hearing will be scheduled.
The trial hearing will mainly focus on the production of evidence of the facts, notably witness hearings. When all evidence has been offered and the trial is to be concluded, the parties are invited to present their final allegations and legal conclusions.
There is also a considerable number of specific procedures that cannot be summed up in one basic set of proceedings. These specific procedures often include the intervention of the Public Attorney's Office as a mediator in the first stage of the process.
In some specific procedures, such as the procedure for challenging a written dismissal, the parties' position is actually inverted: the employee files a very simple written application form with the court and the employer is notified to present a justification for the dismissal and explain to the court why the dismissal proceeding brought against that employee was conducted regularly and lawfully; to which, in turn, the employee will present its statement of defence. This means that although the lawsuit was filed by the employee, he or she will actually be taken as a defendant in the process.
One thing almost all labour litigation proceedings have in common is the various attempts to conciliate the parties from the point when the claim has been filed all the way to the beginning of the trial hearing. Judicial conciliation is an important part of labour and employment litigation and judges tend to be quite persistent when trying to reach that goal in the successive hearings that take place throughout the process. Some judges may prove to be more interventionist than others, offering the parties their views on the legal aspects of the claims and arguments, to make the parties reach a settlement.
III TYPES OF EMPLOYMENT DISPUTES
Employment litigation comprises all disputes that may arise, albeit not exclusively, from:
- employment relationships, or relationships initiated with a view to the conclusion of employment agreements;
- work-related accidents and occupational diseases;
- contracts that are assimilated by law into an employment agreement;
- annulment or interpretation of collective bargaining agreement provisions;
- civil disputes related to strike proceedings; and
- disputes arising from the constitution of trade unions and their relationship with unionised workers.
The most common types of disputes in Portugal include unfair dismissal, damages for outstanding payment arising from the employment relationship, breach of contract and work-related accidents.
Unfair dismissal disputes may arise not only from individual or collective redundancy procedures and dismissals with cause, but also from unlawful expiry of fixed-term employment agreements that should actually be deemed to be open-ended employment agreements.
In cases of individual or collective redundancy, or cases of dismissal with cause, if an employee wishes to challenge his or her dismissal, the LPC sets out a specific type of procedure to be followed: the special procedure for challenging the regularity and lawfulness of a dismissal. This procedure is considered urgent, which means that it is not suspended during judicial holidays3 and is expected to be concluded within one year (although it can, and often does, take longer). The court will ascertain and rule on the validity of the dismissal (i.e., whether the proper legal proceedings were followed and whether there was an actual cause, be it objective (e.g., redundancy) or subjective (e.g., disciplinary), for the dismissal).
In cases where a fixed-term employment agreement was terminated upon expiry, the employee may claim before the court that his or her fixed-term employment agreement was invalid, and for a number of reasons (e.g., because the employer had no valid temporary need that would legally warrant a fixed-term employment agreement). Hence the employee may claim that his or her employment agreement should be deemed an open-ended or permanent one and, as a result, should not have been terminated by expiry. For this type of dispute, the case will follow a common procedure, as described in the previous section. In these cases, the court will have a preliminary query to resolve concerning the validity of the fixed-term employment.
When an employee is claiming unfair dismissal, it is common for him or her also to petition for damages for outstanding payment arising from the employment relationship, such as working overtime, professional training hours or seniority allowances. When these payments are being claimed separately (i.e., not in connection with a claim for unfair dismissal), the case should follow the common procedure rules.
Common claims made by employers are related to breaches of contract, notably non-compete or confidentiality clauses. These disputes will also fall under the common procedure rules.
Disputes concerning work-related accidents play a leading part in labour litigation. Official data from the Ministry of Justice shows that, in 2018 alone, 39,216 of the 52,150 cases filed in first instance labour courts were work-related accident claims.4 The reason for this substantial percentage of cases is not that employees, employers and insurance companies are particularly litigious in these matters, but simply that all serious work-related accidents, including those that result in the employee's death, must be notified to the court and will automatically give rise to a special procedure provided for in the LPC. The first phase of this type of procedure is carried out by the public prosecutor's office, with the employer, the insurance company and the injured employee, or his or her beneficiaries, being called for a conciliatory hearing, at which a detailed description of the amounts the injured employee or his or her beneficiaries are entitled to receive for the employee's incapacity or death will be laid down. The large majority of work-related accident cases shall be concluded and closed in that same conciliatory hearing, with only a few residual cases giving rise to a full judgment before a labour court (namely when the insurance company or the employer takes the view that the accident was not work-related).
IV YEAR IN REVIEW
As explained in last year's edition, the Portuguese government's programme was particularly driven by employee-friendly policies combating precarious employment and improving people's living and working conditions. While 2018 was very significant in terms of planning labour and employment law reforms – with the government presenting two long-promised reform statutes, one implementing several changes to the LPC and the other amending the Labour Code – 2019 was the year of their implementation. As 2019 was the last year of the government's term, all anticipated labour reforms were implemented, with particular emphasis on the months of September and October, when the statutes were published and entered into force. The changes to the LPC and the Labour Code are definitely the two main topics of interest from 2019.
Other legislation was also approved, obliging employers to comply with quotas for disabled employees, and a statute on gender equality for salary purposes also entered into force.
Despite a reduced level of media coverage, the battle against false self-employment was not forgotten either. In fact, a number of temporary employees in the public sector were integrated into the relevant services under open-ended employment contracts by virtue of the conclusion of part of PREVPAP,5 the government's programme for extraordinary regularisation of precarious employment contracts in the public administration. In large part, it was the implementation of PREVPAP that led to an increase of 2.3 per cent in the public administration's employment numbers (15,690 more positions), which represents the greatest increase since 2011.6
i The long-awaited reform of the LPC
As explained in last year's edition, the Portuguese framework for employment dispute resolution mechanisms had faced compatibility difficulties with the default civil procedure rules as a result of the approval of a new Civil Procedural Code in 2013. The 2013 Civil Procedural Code introduced significant changes to proceedings, but these were not accompanied by the necessary harmonisation of the LPC until September 2019.
The reform of the Civil Procedural Code had led to an increased level of discussion about introducing corresponding changes to the LPC, and this resulted in the presentation of a bill to amend it in 2018. The proposed statute was finally approved by the Portuguese parliament and published as Law No. 107/2019, of 9 September.
The LPC was truly in need of deep reform, as it was considerably outdated in relation not only to civil procedural law, but also to substantive law.
In light of the incompatible nature of the pre-existing legal regime, which (for no apparent reason) had survived the previous overall revision of the LPC, the core aim of this statute was to update the LPC by carrying out the long-awaited harmonisation with the reformed Civil Procedural Code.
Furthermore, with this reform, the legislature also sought to align the LPC with the Judicial System Organisation Law7 introduced in 2013, and to harmonise the LPC with Portugal's substantive labour law, namely the Labour Code itself and the legal regime on occupational accidents and illnesses specified by Law No. 98/2009, of 4 September.
Finally, the statute also introduced some additional modifications, perfecting aspects of labour-related proceedings that seemed to have been forgotten previously.
Among the changes introduced, and notwithstanding others provided for by Law No. 107/2019, we would highlight the following in particular.
The following significant changes have been made to the common labour procedure, bringing it closer to civil procedure:
- The identification of the facts to be proven in the trial now follows the same terms as the civil procedure. While previously the court had to select the facts to be proven, setting them out in the form of closed questions requiring yes-or-no answers, the facts are now provided as evidentiary topics or themes (e.g., the rendering of overtime work by the employee). The court may, however, refrain from making topic selections, depending on the straightforwardness of the facts at issue.
- Previously, the law established that parties to a proceeding could not offer more than three witnesses for each fact to be proven. With the amendments and the introduction of the evidentiary topics mechanism, this rule was eliminated. This means that all witnesses offered may give testimony about everything brought to the proceedings by the parties.
- The limit of 10 witnesses for each party in the dispute is maintained, and for lawsuits in which the value of the claim is less than €5,000, the maximum number of witnesses is reduced by half.
- Written replies (rejoinders) to the objections raised by the defendant shall no longer be admissible; they shall be answered by the opposing party at the beginning of the preliminary hearing or, in the absence of a preliminary hearing, at the beginning of the final hearing. Rejoinders shall be admitted only in response to any counterclaim presented by the defendant.
- The recording of the final hearing is now mandatory.
- Following the evolution of the civil procedure law, the obligation to expressly and separately allege the nullity of the decision in the appeal request (made to the first instance court) is now eliminated. The nullity of the final ruling may now be claimed in the appeal itself (made to the court of appeal).
- The deadline for filing an appeal is extended from 20 to 30 days, and 15 days in urgent cases and others specifically provided for by law (mostly regarding interim rulings). If the appealing party wishes to challenge the decision regarding the proven facts, the aforementioned deadlines will be increased by 10 days (because the parties will need to hear the audio recordings of the trial sessions).
Protection of the employee's personality rights
The Protection of the Employee's Personality Rights is a special urgent procedure provided for by the LPC, and now substantially improved by Law No. 107/2019. Previously, the law only provided that defendants (i.e., employers) were summoned to answer within 10 days and that, regardless of whether or not an answer was provided, the court would decide the matter after examining the evidence produced. This type of action is now duly regulated as follows:
- Once the request has been filed by the employee who wishes to prevent the consummation of an alleged violation of his or her personality rights, or to mitigate the effects of an offence allegedly committed, the court shall immediately designate a date and time for the hearing, to be held within 20 days, unless there is reason to reject the employee's request.
- The defence shall be presented directly at the hearing.
- In the absence of any of the parties or if conciliation is not achieved, and regardless of whether or not a defence is presented by the employer, the court shall order the production of evidence and shall issue its final ruling, with a brief statement of the reasoning for the ruling.
- If the employee's claim is granted, the court shall determine the specific measures to be taken by the defendant and, where appropriate, the deadline for compliance, as well as the penalty payment for each day of non-compliance or for each infraction.
- A preliminary decision (which may not be subject to an appeal) subject to subsequent amendment or confirmation in the course of the proceedings may be given if the examination of the evidence offered reveals the possibility of imminent and irreversible damage to the physical or moral personality of the employee or if, alternatively, the court cannot firmly establish the threat or consummation of the offence, or if justifiable reasons of particular urgency require the order to be given without hearing the opposing party.
- If the defendant has not been heard before the preliminary decision has been given, he or she may answer within 20 days of the notification of the decision.
Law No. 107/2019 came into force on 9 October 2019 and, in general, its amendments were immediately applicable to the actions, proceedings and incidents pending on the date of its entry into force. There have, however, been some exceptions.
ii Changes to the Labour Code
As anticipated, the proposed changes to the Labour Code were implemented in 2019, through Law Nos. 93/2019 and 90/2019, both of 4 September 2019, realising several modifications to the Labour Code and the Code of Contributory Regimes of the Social Security Welfare System, particularly with regard to fixed-term employment agreements, temporary (agency) work, working-schedule organisation, and the protection of parenting rights. Notable among these changes are the following.
Term employment agreements
The maximum duration of fixed-term employment agreements was reduced from three to two years and the duration of non-fixed-term employment agreements from six to four years. In addition, the range of justifications for hiring fixed-term employees was limited, with prospective employees looking for their first job (i.e., individuals who have never been hired under a permanent employment agreement) and long-term unemployed candidates (i.e., individuals registered with the unemployment services for 12 months or more) no longer allowed as providing justification for fixed-term employment contracts. Moreover, the justification of fixed-term employment contracts by the launch of a new activity of an uncertain duration, or on account of the commencement of activity of a business or establishment, is now limited to companies with fewer than 250 employees (whereas before the limit was 750 employees), and can only be used within the first two years in any of these scenarios.
To offset the limitation on the justification of fixed-term employment, employment agreements entered into with individuals looking for their first job or long-term unemployed persons now benefit from a trial period of up to 180 days. However, this measure has been called into question by several left-wing parties and a claim regarding its constitutionality is currently pending in the Portuguese Constitutional Court, notably on the grounds that it is a discriminatory provision because it does not differentiate the applicable trial period on the basis of the tasks performed but rather on the individual situation of the employees.
Temporary (agency) work
The new statute limited temporary fixed-term employment agreements through agencies to six renewals (where previously these contracts could be renewed an unlimited number of times), except in those cases where the temporary work is justified by the absence of an employee (e.g., in cases of sickness, accident, parental leave or other similar situations). Additionally, the liability arising from the failure to enter into a temporary employment agreement (between the beneficiary company and the agency) now lies with the company benefiting from the work, which is obligated to take on the temporary worker under a permanent employment agreement.
The statute eliminated the possibility of individual agreements between the employer and one or several employees on the implementation of a bank-of-hours regime (under which the daily working hours could be increased by up to two hours, subject to a maximum of 50 hours per week and 150 hours of additional work per year, which would be compensated either through a proportional reduction of the working hours, an increase in the holiday period, the payment of a certain amount, or a combination of these options). However, a group mechanism may be implemented regarding the employees of a given unit or department, provided that the project of the bank of hours proposed by the employer is approved by at least 65 per cent of the targeted employees in a referendum on the subject.
Law No. 93/2019 also included other amendments, with regard to rights of employees with cancer, and in relation to vocational training and deadlines for individual redundancy procedures, among other matters. The changes highlighted above are merely those that will, in our opinion, have a substantial effect on the everyday life of employment relationships in Portugal.
Other changes were implemented with regard to parenting rights (e.g., an increase of fathers' mandatory parental leave from 15 to 20 business days, and a reduction of the subsequent voluntary period of leave from 10 to five business days, and an increase of initial parental leave for the period of the child's hospitalisation (in cases of special medical care) immediately following the postpartum hospitalisation), although some of these rules will only enter into force with the next state budget, which has yet to be approved.
iii Case law
Although they have only a limited impact on employment dispute resolution (because of the absence of a precedent rule), decisions of the higher courts often serve as guidelines in those areas where there is no relevant employment regulation or where the law is ambiguous enough to leave the ultimate interpretation to the courts.
In the past year, there have been a great number of rulings issued by the higher courts with regard to moral harassment (mobbing), although the decisions themselves did not come as a surprise.
Another hot topic in Portuguese case law throughout 2019 was, as usual, working time. For instance, the Supreme Court of Justice was called upon to decide whether the periods of availability of mobile workers should be considered working time and remunerated as such (notably as overtime).8 In the case at hand, the employees were subject to the Portuguese statute that applies to mobile workers employed by undertakings established in Portugal, participating in road-transport activities covered by Regulation (EC) 561/2006 or by the AETR Agreement (thus having implemented Directive 2002/15/EC, of 11 March 2001).
Much like Common Position (EC) 20/2001 adopted by the Council on 23 March 2001, the Portuguese statute specifically stated that periods of availability are not regarded as working time. Therefore, considering the definition of periods of availability in both the Portuguese statute and Directive 2002/15/EC, and on the basis of its own case law, the Supreme Court of Justice stressed that the court's common understanding was that the cornerstone in determining whether periods of availability should be considered working time was whether the employee was required to remain at the place of work. If yes, then those periods should be considered working time. If not (i.e., the employee is free to dedicate himself or herself to his or her personal life without reasonable constraints), the period of availability cannot be considered working time and, thus, is not remunerated as such.
A surprising decision came from the Court of Appeal of Porto, with regard to a special protection granted to a breastfeeding employee. Under Portuguese law, pregnant employees, new mothers and breastfeeding employees, as well as male employees on parental leave, benefit from special protection against dismissal, which includes, among other things, a requirement for an employer to submit a dismissal decision to the Portuguese Authority on Work Equality (CITE) for a preliminary opinion. A disciplinary dismissal brought against these employees is presumed to be ungrounded and thus unlawful.
The Court of Appeal of Porto ruled that because the disciplinary dismissal brought by the company was grounded in facts relating to a period in which the employee was still a breastfeeding employee, this circumstance required the dismissal decision to be submitted to CITE, and furthermore that this obligation remains even where, during the disciplinary procedure, the employee no longer has protected status as a breastfeeding employee.9
This decision is somewhat surprising, particularly given that a disciplinary procedure may be initiated, for instance, eight months after a certain breach has been committed by the employee, and, even then, he or she shall still be protected. It calls into question whether the lawmaker's intention was to protect the employee from dismissal on account of his or her existing (protected) status, or to grant some sort of immunity for breaches made during the period in which the employee qualifies for protected status.
Finally, another ruling worth mentioning is the one issued by the Constitutional Court on 17 December 2019 regarding a rule of the Portuguese Commercial Companies Code but with significant implications for labour relations.10
Under the rules set jout in the Commercial Companies Code, the members of a board of directors may not perform any duties under an employment agreement in the relevant company, or in companies in a group or domain relationship, during the term of the office to which they have been appointed.
The law states therefore that if an employee who is appointed director has concluded his or her employment agreement within the year before the appointment, it shall be immediately terminated ('extinguished' is the actual wording used). The Constitutional Court had already ruled this legal provision to be unconstitutional three times, but because these rulings were issued in specific cases they were not yet generally binding for all cases.
However, in the decision of 17 December 2019, the Constitutional Court ruled, now with general binding effect, that this provision of the Commercial Companies Code is indeed unconstitutional.
In light of the finding of unconstitutionality, the underlying employment agreement of a recently appointed director should not be deemed terminated but suspended (as is already provided for in respect of employment agreements concluded with individuals more than one year before their appointment as directors).
V OUTLOOK AND CONCLUSIONS
The employment relationship and the legislation governing it are constantly mutating, influenced by the rotational change in government policies.
As regards dispute resolution, considering the recent reform of the LPC, no further amendments to labour and employment procedural law are expected to occur in the next 12 months. However, courts and legal practitioners will face the challenge of accommodating pending procedures under the procedural rules that have newly entered into force.
On labour and employment matters, legal practitioners and labour and employment professionals in general are keen to see what the effects of the changes made to the Labour Code will be in practice, and wide discussion is expected with regard to certain aspects of the approved statute that are still not entirely clear. The year 2020 will also be marked by changes in social security provisions regarding the protection of parenting rights and the implementation of an extraordinary tax rate to discourage the hiring of employees under fixed-term employment agreements.
In the coming months, as a result of the changes that entered into force on 20 March 2018 (and which may, by now, be reaching the higher courts), we expect to see further developments in Portuguese case law regarding the protection of employees in the event of a transfer of an undertaking. IT policies and data protection may also be a hot topic in employment and labour case law in 2020, following the entry into force of the General Data Protection Regulation and the recently approved Portuguese law on data protection.
Overall, the year 2020 is expected to produce a considerable number of developments in the area of case law, but a marked decrease in legislative activity.
1 André Pestana Nascimento is a counsel and Susana Bradford Ferreira is an associate at Uría Menéndez – Proença de Carvalho.
2 Law No. 7/2009 of 12 February 2009.
3 There are three periods of judicial holidays in Portugal: (1) between 22 December and 3 January (inclusive); (2) between Palm Sunday and Easter Monday (inclusive); and (3) between 16 July and 31 August (inclusive).
4 Data available at https://estatisticas.justica.gov.pt/sites/siej/pt-pt. Official data for the whole year 2018–2019 is not yet available for consultation. However, in the first two quarters of 2019, 25,448 out of 32,289 labour judicial disputes were occupational accident claims.
5 Programa de Regularização Extraordinária de Vínculos Precários na Administração Pública (PREVPAP).
7 Law No. 62/2013, of 26 August.