Judgment of the Lisbon Court of Appeal of 23-09-2015 – Retirement on grounds of age – Expiration of contract – Conversion to fixed-term contract

In the present case, the Lisbon Court of Appeal was asked to give a ruling on the lawfulness of terminating an employment contract on the grounds of expiry by dint of the employee having reached the age of 70 without having taken retirement.

The Court sustained that there is a fundamental difference between an employment contract which expires owing to the employee’s retirement on the grounds of age, and an employment contract in which an employee reaches the age of 70 without having retired – as, in the latter, the contract does not expire.

The Court further clarified that on the day the employee reaches the age of 70, the employment contract does not expire, but is converted ope legis into a renewable fixed-term employment contract with a duration of six months. Thus, notwithstanding its conversion into a fixed-term contract, in view of the fact that the employment relationship continues, the contract can only be terminated after the first six months have lapsed.

In this way, the Court took the view that the notice of termination the employer sent to the employee amounted to an unlawful dismissal, taking into account that it corresponded to a statement of termination of the employment relationship prior to the term of the contract, without justified grounds and with no prior disciplinary procedure.

Judgment of the Lisbon Court of Appeal of 09-10-2015 – Collective dismissal

This judgment concerns the collective dismissal carried out by a company in its diamond wheel division, as a result of winding up its disc assembling activity in Portugal and its subsequent de-localization to another country.

The employees challenged the dismissal in court, claiming their reinstatement in the company. They contended that (i) there were no grounds to dismiss permanent employees and retain employees on term contracts, transferring the later to other divisions within the company and (ii) the company could and should have redeployed the employees affected by the dismissal to other areas of production and that (iii) in general terms, it was not impossible to maintain the employment relationship.

The Court of Appeal upheld the decision of the Court of First Instance, taking the view that the company had undertaken a lawful dismissal.

Indeed, the Court ruled that “even taking a more interventionist view of the court’s power to assess the grounds upon which a company decides to make a collective dismissal”, there were no doubts concerning the merits of the causation of the dismissal undertaken by the company, which had merely closed down one of its divisions in order to relocate it to a lower cost site and, under these circumstances, dismissed the employees allocated to that division.

The Court additionally stated that the company was under no legal obligation to offer employees included in the collective dismissal other positions within the company that were compatible with their job category and, even less, to move them to a new job category for this purpose.

In this regard, the Court took the view that the redeployment of employees on term contracts or with a shorter length of service to another division was not relevant for judging the lawfulness of the dismissal, in view of the aforementioned fairness of the causation. Such redeployment would only be relevant should the plaintiffs have proved its unfairness, proving that the redeployment artificially created grounds for the specific termination of the employment contracts of the employees remaining in the closed area of activity – since the burden of proof laid with the employees, and not with the company that undertook the collective dismissal. Hence, since such proof was not provided by the employees, the Court of Appeal concluded that the collective dismissal was lawful.