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Portugal

February 05, 2024

By Paul Hastings Professional

Portugal

KEY DEVELOPMENTS FOR 2024

As from 1 May 2023, several extensive amendments to the Labour Code entered into force due to the Decent Work Agenda promoted by the current government.

Labour Code amendments: digitalisation

The new law defines a digital platform as “a legal entity that provides or makes available services at a distance by electronic means, including a website or a software application, at the request of users and which includes, as a necessary and essential component, the organisation of work provided by individuals in return for payment, regardless of whether such work is provided online or at a specific location, under the terms and conditions of a business model and a brand of its own”. A presumption of employment will be established on the basis of six different criteria, and it is sufficient that only some of these criteria are met for the presumption to apply. In this case, the rules of the Labour Code that are compatible with the nature of the activity carried out will apply. Separately, in connection with remote work, the employment contract and the collective bargaining agreements may stipulate the amount of compensation to the employee for additional expenses incurred by telework. This amount may be exempted to a maximum value of €22 per month.

Labour Code amendments: redundancies and terminations

There were several amendments focused on redundancy procedures and termination of employment. Firstly, the amount of compensation for collective redundancies will now be 14 days of basic salary and length of service payments for each full year of service. This amendment applies only to the period of the duration of the contractual relationship counted from the date when this latest amendment entered into effect (1 May 2023). As a result, the calculation of severance pay has become more complex and now includes four different periods if the employee was hired before 1 November 2011. Secondly, if the Labour Authority confirms the existence of an unlawful dismissal, a report is drawn up and the employer is given notice to rectify the situation. If the situation is not rectified, the prosecutor has 20 days to apply for an injunction to suspend the dismissal. This may give rise to issues if the employee has no interest in contesting his/her redundancy from the company. Thirdly, any employer who has terminated an employment contract as a result of collective redundancy or the abolition of a job post is prohibited from resorting to outsourcing to meet the same needs within the following 12 months.

Labour Code amendments: fixed-term, temporary and self-employed workers

In relation to fixed-term employment contracts, compensation for termination was increased from 18 days to 24 days of base salary and seniority bonuses per year of service. Also, the termination of a fixed-term contract of employment prevents the employee from being re-hired or re-assigned under a fixed-term or temporary employment contract not only for the same job, but also for the same professional activity, or under a service contract for the same purpose. In relation to temporary workers hired via temporary work agencies, the invalidity of a contract concluded by a temporary employment agency that is not authorised to carry out its activities in Portugal will promote the conversion of the temporary worker contract into a permanent one with the user company. Similar rules concerning successive term contracts also apply to successive contracts for the use of temporary work (hires for the same professional activity). The prohibition will be extended to contracts concluded with a company that has a controlling or group relationship with the user company or that has common organisational structures with the latter. If breached, the temporary worker contract will be converted into a permanent one with the user company. Additionally, a temporary work contract may only be renewed up to four times (instead of six). Finally, in relation to economically dependent self-employed workers, independent workers that earn 50% or more of their annual income from a certain legal entity will be considered as economically dependent of it, and will be entitled to the Labour Code provisions on personal rights, equality and non-discrimination, health and safety at work and may benefit from collective bargaining agreements applicable to the entity to which they are dependent of.

With thanks to Jose Joao Henriques and Nuno Ferreira Morgado of PLMJ for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2023

Portuguese economy

Portugal is one of the countries most exposed to rising interest rates, as the vast majority of loans to individuals and companies are at indexed rates, unlike the average for the euro area. For this reason, the ECB’s decisions will take a significant toll in the economy in 2022 and 2023. The tourism sector has been a significant help in the economic growth of 2022 but it has reached its maximum capacity and is no longer any reason to expect additional aid to the economy.

For 2023, there is likely to be a fall in real wages again, with the rise nominal wages will fail to keep pace with rising prices, especially if inflation rises again by more than expected. That fall is likely to be accompanied by a rise of unemployment. On the private investment side, the context of very high uncertainty and rising interest rates and credit spreads does not allow for great optimism.

In conclusion, it is estimated a slowdown in growth, from between 6.5% and 6.8% in 2022 to between -2% and 1% in 2023. Employers should put in place contingency plans on how to handle the impact of an economic crisis that seems more and more certain, notably linked with potential restructurings and other cost reduction measures.

Salary equality between genders

In 2018, the Portuguese Parliament enacted legislation with specific measures destined to ensure that companies observe salary equality between genders. Such legislation had an adjustment period which already passed. This year it is becoming a priority for labour authorities who are starting to notify companies to explain the existence of differences in salaries between men and women that perform similar roles. This may entail significant salary increases in arrears for those differences that cannot be explained.

Employers should make their own diagnosis in advance of the notification by labour authorities, to prepare the corresponding justification and evidences. It will also be necessary to prepare gender neutral and transparent remuneration policies that prepare the forthcoming exercises, as this control will continue to be applied each year.

Labour code amendments

The Parliament is currently discussing a significant amendment to the Portuguese Labour Code.

The final text is not yet fully known, but the main expected changes will focus on the following aspects:

Combat forms of precarious and misclassified work (particular notice should be given to measures introduced regarding platform workers);
Combat the illegal use of term employment and agency work;
Strengthen the protection of parental rights;
Extend the outsourced workers the same terms & conditions of employment as the one applicable to company employees;
Limit the use of outsourcing services following a dismissal on grounds of redundancy;
Increase the minimum severance payments due in cases of redundancy dismissals

Limit the possibility of lapsing collective bargaining agreements.

It is expected that the final sessions to discuss the amendments will take place in December, the new law will be approved in January 2023 and will come into force in February 2023.

Employers should continue to monitor this area for developments and prepare any measures to be adopted in 2023 considering the expected amendments.

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

KEY DEVELOPMENTS FOR 2022

New legal framework regulating teleworking

Although Portugal was one of the first countries in Europe to establish a teleworking regime in 2003, it was still uncommon for people to work from home before the COVID-19 pandemic. With the restrictions imposed by the pandemic and the subsequent rules that were put in place regarding compulsory working from home, companies and employees identified that there are a number of advantages that come from teleworking (for example, the adoption of work management schemes by objectives and results, flexibility in working hours, and the reduction of costs associated with travel, equipment, premises and energy).

In light of this, the Parliament approved a new legal framework on teleworking, which significantly amends the teleworking regime that was in force until 31 December 2021.

The new law introduces the following changes which came in to effect from 1 January 2022:

The scope and concept of "teleworking" has been extended - previously, the concept of teleworking covered any work predominantly performed outside the premises of the company, but it will now extend to situations of total absence from the workplace, as well as partial absences.
The rules concerning equipment and systems, the organization, direction and control of work, and rules regarding health and safety at work also apply to service providers who are economically dependent on the company.
Previously, workers who were victims of domestic violence and workers with children under the age of 3 had the right to telework. Under the new regime, there are additional categories of workers that are entitled to telework (such as single parent families, informal carers, etc.).
The capture and use of images, sound, writing or history, or the use of other means of control that may affect an employee's right to privacy are prohibited. It is now the responsibility of the worker to organize working hours in a manner appropriate to achieving the objectives of the contracted activity, with due observance.
Remote work meetings, as well as tasks which must be carried out at precise times and in articulation with other workers, must take place within working hours and be scheduled 24 hours in advance.
Workers are obliged to be present at the company's premises (or another location designated by the employer) for meetings, training sessions and other situations requiring physical presence, provided they have been given at least 24 hours' notice. The employer must bear the cost of such travel insofar as it may exceed the normal cost of transport between the employee's home and the place where the employee would normally carry out their work.
Powers of direction and control over the provision of teleworking work are exercised, in principle, by means of the equipment and communication and information systems allocated to the worker's activity, in accordance with procedures previously known by the worker and compatible with respect for his/her privacy. Non-compliance constitutes a very serious administrative offence.
Teleworkers are entitled to the same remuneration as they would earn in a presential regime, with the same category and identical function. Non-compliance constitutes a serious administrative offence.
Employers are now fully responsible for the direct expenses arising from teleworking, the use of any equipment necessary for the work, the increased costs of energy and of the network installed at the place of work in conditions of speed compatible with the service communication needs, as well as the maintenance of such equipment and systems. For tax purposes, the compensation paid to the employee to cover these expenses does not constitute income.
It is now essential to have clear internal regulations on the conditions of use of equipment (preventing undue or illicit use).
Employers are obliged to carry out health examinations at work before the implementation of teleworking, and annual examinations to assess employees' physical and mental aptitude to carry out their activities, as well as identify any preventive measures that may be deemed appropriate.
Employers have a duty to evaluate and control the health and safety conditions at work and to ensure that the place where employees are carrying out their work complies with the health and safety conditions foreseen by law.
Employers have a duty to refrain from contacting the employee during rest periods, except in situations of force majeure. Non-compliance constitutes a serious administrative offence.

Companies should (i) assess the impacts of the legal amendments; and (ii) adjust their policies regulating work from home to ensure that they are compliant with the new law.

Prospects for a new labour legal framework for digital platform workers

The development of information and communication technologies and the emergence of new digital platforms has had a major impact on the structure of the labour market. Political decision-makers have indicated that the current legislation is not sufficient to regulate work on digital platforms, particularly by home delivery couriers. In addition, political decision-makers are concerned about the development of artificial intelligence, especially the use of algorithms in order to ensure the protection of personal data, equality and non-discrimination.

The Government has indicated that it intends to pass specific employment legislation for all employees of digital platforms. Currently, Portuguese legislation only regulates work provided through digital platforms for passenger transport. For these cases, the relationship between the driver and the digital platform is mediated by a TVDE (ridesharing) operator, which, if certain requirements are met, is considered to be the employees' employer. The Government intends to extend the regulation to other employees of digital platforms, but it is not yet known how this will be done.

A regulation focused on artificial intelligence may also be introduced in the future to combat discrimination against users (i.e. to avoid disproportionately favouring employees who continuously use the platform for many hours a day to the detriment of other employees who want more flexibility in their work).

There are still many issues to be addressed in this regard. It is believed that legislation will continue to recognise that digital platforms provide a quick way of labour readjustment and a tool to fight unemployment. The approval of new legislation may result in changes being made to current usage policies, in particular, favouring flexibility in the availability for work, and perhaps the creation of maximum daily working hours for employees of the platforms.

Although the regulation of artificial intelligence is still in the very early stages, it is anticipated that it will result in changes in terms of how job candidates are selected and in supervising how employees do their work. Employers should continue to monitor the developments in this area of law and may be required to implement a number of changes with respect to these regulations in 2022.

Measures to be introduced to promote the mobility of employees and to allow redeployment

As part of the Green Papers on the future of employment, the Government has indicated that measures would be introduced to promote the mobility of employees by allowing figures such as redeployment. In general terms, redeployment consists of the relocation of employees from companies facing an economic crisis and/or lay-off situations to companies who are suffering from a labour shortage. This would be done through collaboration and assignment agreements, and it would allow the employees in question to maintain their professional activity and acquire new work experience.

The current legislation only allows for the occasional transfer of employees between companies within the same group. However, the COVID-19 pandemic has demonstrated that the legislation in this regard is insufficient. For example, restrictions on international travel have led to overstaffing at companies that build aeroplanes, and understaffing at companies that manufacture hospital ventilators.

Redeployment allows knowledge, skills and talent to be retained within the company, reduces the costs of collective redundancy procedures and reduces the additional costs of recruiting and training new employees. At the same time, it also allows employees to acquire new skills.

If the legislation is approved, employers will have an incentive to collaborate in a shared economy between different sectors as an alternative to making redundancies. Employers should continue to monitor the developments in this area of law.

KEY DEVELOPMENTS FOR 2021

COVID‑19 company and employment aids

The Portuguese Government will continue to support companies affected by the COVID‑19 pandemic in order to maintain employment.

Amongst other measures (for which terms and conditions are yet to be disclosed), the Government has approved:

the payment of 100% remuneration of the employees' covered by reducing working time measures (e.g., furlough); and
the suspension of the collective bargaining agreement expiry for a period of two years.

Legal framework to be developed to regulate teleworking

Although Portugal was one of the first in Europe to establish a teleworking regime in 2003, such framework has not been able to answer all the issues that arose from the massification of such form of work during the pandemic, most notably in terms of working time and work‑life balance management.

Therefore, considering the companies and employees interest to keep resorting to telework in the future, the Portuguese Government has already announced that envisages to develop the existing legal framework, being expected that further developments may take place.

New legislation being prepared to regulate digital platforms

Acknowledging the growth of the work carried out through digital platforms, the Government has announced that it is preparing new legislation to regulate it, following what has been done by other European countries, as well as the guidelines of European Commission and ILO.

Given the risks associated to platform work, the Government envisages, amongst other aspects, to ensure that platform professionals have access to adequate social protection, to promote their access to collective bargaining and representation and to regulate the use of algorithms in the distribution and organisation of work.

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, Nuno Ferreira Morgado and José João Henriques of PLMJ Advogados for their invaluable collaboration on this update.