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Portugal

January 26, 2021

By Nuno Morgado

Back to International Employment Law

Portugal

KEY DEVELOPMENTS FOR 2020


 

Amendment of the legal framework on term employment and agency work

The Portuguese Parliament has recently approved and enacted a substantial amendment of the Portuguese Labour Code, which will significantly impact the following topics:

Term Employment

  • reduction in the maximum duration of unfixed term contracts from six years to four years, and the duration of fixed-term contracts from three years to two years;
  • reduction in the number of possible extensions of fixed-term contracts from three years to two years;
  • limitation of term hiring on the grounds of the launch of new activities to companies with under 250 employees;
  • introduction of additional social security contributions to companies who register an excessive use of term hiring; and
  • extension of the trial period applicable to permanent employment contracts entered into by workers looking for their first job and long term unemployed workers.

Agency work

  • introduction of a maximum number of extensions (6) of use of agency work agreements;
  • elimination of the minimum period of duration of such contracts that excluded the applicability of the User Company's collective bargaining agreement to temporary workers (temporary workers will now be covered by the collective bargaining agreement from day one);
  • introduction of an information duty to the temporary worker that justifies the execution of the agency work agreements; and
  • the execution of an agency work agreement in breach of legal requirements will result in the worker being considered to be a permanent employee of the client company.

Banked hours

  • banked hours are a mechanism provided by Portuguese Law under which the employee may work up to two additional hours per day. These hours do not qualify as overtime work and are compensated, at the employer's choice, with payment in lieu (under the standard hourly rate) or with additional annual leave; and
  • according to the changes introduced, the banked hour scheme may only be implemented if at least 65% of the workforce approves it or if provided in the collective bargaining agreement.

 

Changes to be implemented by the re-elected Portuguese Government

There are no significant amendments to Portuguese Labour Law that are expected for the year 2020. However, the recently re-elected Portuguese Government has announced that it intends to:

  • reinforce the means of the Authority for Labour Conditions and hire 80 new inspectors;
  • apply a heavy tax burden on companies with a salary span that falls in the S80/S20 ratio; and
  • create mechanisms of representation of workers in the board of directors of large corporations and those that are enrolled in the stock market (notably for salary and dividend distribution purposes).

 

KEY DEVELOPMENTS FOR 2019


 

Amendment of the legal framework on term employment and agency work

The Portuguese Parliament is currently debating a Draft Law which envisages the introduction of further limitations to term employment.

The measures currently being debated include the following:

  • reduction in the maximum duration of unfixed term contracts from 6 to 4 years and the duration of fixed term contracts from 3 to 2 years;
  • reduction in the number of possible extensions of fixed term contracts from 3 to 2 years;
  • limitation of term hiring on the grounds of the launch of new activities to companies with under 250 employees;
  • introduction of an additional social security contributions to companies who register an excessive use of term hiring; and
  • extension of trial period applicable to permanent employment contracts entered into by workers looking for their first job and long term unemployed workers.

The Agency work legal framework is also impacted by the forthcoming amendments to the Portuguese Labour Code. The objective of such amendments is to limit the use of agency work.

The changes under discussion can be summarized as follows:

  • introduction of a maximum number of extensions (6) of use of agency work agreements;
  • elimination of the minimum period of duration of such contracts that excluded the applicability of the User Company CBA to Temporary Workers. The latter will be covered by the CBA from day 1;
  • introduction of an information duty to the temporary worker that justifies the execution of the Agency work agreements; and
  • the execution of an Agency work agreement in breach of legal requirements will have the consequence of the worker being considered to be a permanent employee of the client company.

 

Banked hours by collective agreement

Another forthcoming change to labour law is the elimination of establishing a banked hour agreement directly with the employee.

Banked hours are a mechanism provided by Portuguese Law under which the employee may work up to 2 additional hours per day. These hours do not qualify as overtime work and is compensated, at the employer’s choice, with payment in lieu (under the standard hourly rate) or with additional annual leave.

Under the proposed change the banked hour scheme may only be implemented if at least 65% of the work force approves it or if provided in the collective bargaining agreement.


 

Amendment to rules on the transfer of undertakings or business establishments

The legal framework on transfer of undertakings has recently been amended and is expected to increase workers’ guarantees and the transparency of such transfer processes.

The changes introduced seek to clarify the concept of economic unit and to avoid contradicting decisions, depending on the sector or case-by-case evaluation. It also seeks to expand the joint liability of the transferor for labour credits, to introduce an information duty to labour authorities with supervisory powers and provide administrative offences related with the breach of these obligations. The aim of such measures is to avoid fraudulent conduct by certain companies and to safeguard the professional status of impacted workers. The amendments also introduced a right of workers to object to the transfer if the latter causes a serious damage to their careers.

 

KEY DEVELOPMENTS FOR 2018


 

Harassment at Work

The Labour Code has been amended to incorporate specific measures to prevent harassment. These include:

  • the obligation to adopt a code of conduct in companies with 7 or more employees;
  • the right to compensation for victims, provisions to protect the victim and witnesses during harassment proceedings; and
  • an obligation to start disciplinary proceedings if the employer becomes aware of harassment.

 

Fight Against Undeclared Work

The judicial procedure to recognize the existence of an employment contract has been amended so that it encompasses an expanded scope of undeclared subordinate work in order to combat false “green receipts” (used by the self-employed) including false internships or false volunteering.


 

Amendment of the Legal Rules on the Transfer of Undertakings or Business Establishments

The Portuguese Parliament is debating legislation designed to amend the legal framework on the transfer of undertakings. The proposed amendments increase workers’ guarantees and the transparency of the transfer processes.

 

KEY DEVELOPMENTS FOR 2017


 

Legal challenge to classification of internships

The public prosecutor will bring legal proceedings against companies with the aim of ensuring that all internships are classified as employment contracts subject to regular employment conditions.


 

Restrictions and additional cost for the use of fixed-term employment contracts

Fixed-term employment contracts will be subject to severe limitations in 2017, particularly regarding the hiring of long-term unemployed workers and workers looking for their first job.

In addition, there is a plan to increase the employer’s social security contribution for companies that resort to fixed-term employment.


 

Additional collective bargaining protections

It is anticipated that there will be severe restrictions to prevent collective bargaining agreements lapsing.


 

Ban on agreeing additional hours by individuals

The government has announced its intention to ban agreements to “bank of hour” schemes whereby employees agree on an individual basis to work longer hours and to limit this flexibility to arrangements agreed pursuant to collective bargaining agreements.

 

KEY DEVELOPMENTS FOR 2016


 

Increases in the national minimum wage

Following the years of the bailout programme, the national minimum wage was increased to €530 per month for full-time workers. It is expected that the national minimum wage will be increased to €557 by 2017, €580 by 2018, and €600 by 2019.


 

Reinstatement of bank holidays

During the bailout programme, four bank holidays were suspended. In 2016, these bank holidays were fully reinstated.


 

Regulation against forced work

The government introduced new legislation extending the liability for employment credits and pecuniary fines applicable for employment-related administrative offences to (i) companies that use agency work, and (ii) to entities benefiting from services rendered by third parties who allocate workers to those entities’ premises.

With thanks to Nuno Morgado of PLMJ Advogados for his invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department