Grounds for Termination
According to Portuguese law, the termination of an employment contract depends on very strict rules that demand the gathering of grounds and several formal procedures. Meanwhile, the employment contract expires in one of these situations: (i) once its term elapses; (ii) supervening impossibility, absolute and definitive, of the employee rendering work of the employer receiving such work; and (iii) with the employee`s retirement for age or disability.
Collective Dismissals
Employees subject to collective dismissal are entitled to compensation which calculation basis varies. The procedure for collective dismissal begins with a written communication addressed to the Work Council or, if there is no such council, to the company union or inter-union representative structure in the company. If none of these structures exist, the affected employees will be informed, in writing, of the intention to perform a collective dismissal and employees will be invited to nominate a Representative Committee (or up to 5 employees) that will act as representative structure for that purpose. Within a 5-day period following the initial communication, a phase of information and negotiation between the company and the employees’ representatives must be initiated in order to try to reach an agreement on the dimension and effects of the measures taken, as well as to decide on possible alternative measures that could reduce the number of dismissed employees, namely: (i) suspension of work, (ii) reduction of work, (iii) professional reconversion and reclassification and (iv) early retirement. The termination must be communicated to the employees directly (according to set guidelines based on seniority). Until the termination date, the employer must pay the dismissed employee the compensation that is due by law as well as all other existing labour credits.
Individual Dismissals
The employment contract may terminate in the following situations:
- Expiry;
- Mutually agreed termination;
- Dismissal for disciplinary grounds subject to prior internal dismissal disciplinary procedure;
- Collective dismissal (for economical, structural or technological reasons), subject to an internal procedure and prior notice periods which depend on the seniority of the employees affected by dismissal;
- Dismissal for extinction of labour position subject to an internal procedure and prior notice periods in which the notice period will also vary according to the seniority of the employee;
- Dismissal for employee’s failure to adapt to a working position, also subject to internal formalities and prior notice periods.
Is severance pay required?
Employees subject to collective dismissal, dismissal resulting from job extinction or failure to adapt to the job position are entitled to compensation which calculation basis varies, depending on the seniority period under consideration and date on which the contract was initially executed, between 1 month, 20, 18 or 12 days base salary and seniority premiums per year of service (fractions of seniority are to be calculated on a proportional basis).
Is a Separation Agreement required or considered best practice?
In a number of cases, even when other grounds could support dismissal, separation agreements are considered a best practice. Only in specific cases where agreements are made in the context of company restructuring or based on the same grounds that allow collective dismissal (and subject to cap limits of the number of employees involved in separation agreements within each triennial period will the employee be entitled to unemployment allowance. This sometimes restricts the availability of employees to proceed with separation agreements.
Remedies for employee seeking to challenge wrongful termination
Employees may not be dismissed without a valid motive or for political or ideological reasons. In the case of collective dismissal, employees are entitled to a pecuniary compensation as a result of the extinction of the labour position or a failure of the employee to adapt. Pregnant women that have given birth in the last 120 days and those breastfeeding, as well as any employee on paternity license, enjoy special protection. For this reason, dismissal of any of these categories of employee`s is illegal without a prior favourable opinion from the competent authority in the area of equality of opportunities between men and women.
Whistleblower Laws
The Portuguese data protection authority (CNPD) addressed the specific matter of “Whistleblowing Hotlines” in a guideline decision in 2009, containing the authority’s official guidelines for Whistleblowing procedures, which should be taken into account when an employer wishes to set-up and manage such lines. As with other matters that concern personal data, the applicable law for this type of processing activity is now the GDPR. As such, GDPR principles and duties must be fulfilled by the employer when developing and implementing whistleblowing hotlines and similar mechanisms.