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
The closing down of a company or of one or more of its departments and the reduction of personnel based on market, structural, or technological grounds allows for a collective employee dismissal to take place, provided the grounds affect at least two or five employees, depending on whether the company has less than 50 employees or more than that. Employees subject to collective dismissal are entitled to compensation (the calculation basis varies).
The procedure for collective dismissal begins with a written communication addressed to the Works 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, within five working days of receiving the notice, a Representative Committee (of up to three or five members, depending on whether the dismissal concerns up to five or more workers) that will act as a 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 normal working periods, iii) professional reconversion and reclassification and iv) early retirement or pre-retirement.
Individual Dismissals
Extinction of a labour position is applicable only when the company lacks grounds to proceed with a collective dismissal as a result of an insufficient number of employees involved (i.e., the company has more than 50 employees and the closing of the section affects only three employees) in a redundancy caused by the above-referred market, structural or technological motives.
If there are at least two similar work positions that may be extinct, the employer must comply with a sequence of non-discriminative legal criteria (starting with the worst performance assessment carried out on the basis of previously disclosed parameters), in order to select which employees will be affected by the extinction. Employees subject to the extinction of their labour position are entitled to compensation equal to that set for collective dismissal situations. Together with the communication, the employer must indicate the grounds for the extinction of the affected labour positions, identify the relevant section they belong to, provide an explanation on the need to dismiss and indicate the professional categories of the employees affected by the job extinction, and the criteria used to select the employees to be dismissed. The employees involved, if the employee is the trade union representative, the respective trade union association and the employees’ representatives, have a 15-day period from the initial date of the communication to oppose the extinction measure, in writing, notably alleging the lack of grounds or that the employer has failed to comply with the requirements described above, and alternatives to mitigate the effects of dismissal.
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). Should the basis for the decision to dismiss an employee be non-existent or should the employer fail to comply with the procedural requirements, the termination of the labour agreement is unlawful and the employee is entitled to the payment of her salary from the date of dismissal until the final court decision. The employee is also entitled to choose one of two remedies: her reinstatement into the company or payment of a compensation for dismissal to be set by the court. The indemnity may vary between 15 and 45 days’ base salary plus the seniority premiums for each year (or fraction of a year) of seniority, with a minimum of three months’ remuneration.
Separation Agreements
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. Legislative measures towards transposing the EU Whistleblower Protection Directive are on their way as the deadline of December, 31 2021 moves closer.