Judgment of the Court of Appeal of Porto of 2014-12-17

Action for the Recognition of the Existence of an Employment Contract – Withdrawal from the Claim or Agreement between the Parties

This judgment concerns the interpretation and enforcement of Law No 63/2013, of 27 August, which “established fighting mechanisms to the misuse of service agreements in subordinate work relations”, or, in other words the extinction of false “recibos verdes”.

The aforementioned law made a significant amendment to the Labour Procedure Code, which reinforced the powers of the ACT (Autoridade para as Condições do Trabalho – Authority for Working Conditions) and created a special action for the recognition of the existence of an employment contract.

This new type of action is composed by two stages: the first regards the inspection powers of the ACT, which involves the obligation to promote the legal procedure foreseen in the Law aforementioned, in any situation in which an apparently autonomous activity is provided, with evidences of an employment contract.

In the second stage, when the employer fails to correct the situation within ten days, the Authority must report, within five days, those facts to the services of the Public 

Prosecutor, for the purposes of an action for the recognition of the existence of an employment contract.

In the case under consideration,  the Public Prosecutor  presented an action for the recognition of the existence of an employment contract with evidences of an employment contract.

In this type of action, the proceedings are promoted by the Public Prosecutor, while the employee is only notified, in the final court hearing, to adhere, if he or she so desires, to the facts presented by the Public Prosecutor.

This judgment focused specifically on the preliminary court hearing, in which the judge tries to bring the employer and the employee to reconcile . The Court was requested to rule on whether, in the scope of the “conciliation”, it was admissible for the employer and the employee to agree, without the concurrence of the Public  Prosecutor,  that  the relation between them was a service agreement and whether the same could be approved by the Court.

The Court of First Instance decided on this sense and acquitted the employer from the claim, bearing in mind the agreement between the latter and the “employee” and considering that the subject matter of the agreement did not amount to non -available rights.

On the other hand, the Court of Appeal decided the opposite, stating that “the action brought by the Public Prosecutor is independent of the employer and the employee will (…). Therefore, regardless the will or consent of the employee, the Public Prosecutor must bring an action for the recognition of an employment contract – which shows that the Public Prosecutor is a part of the process and has legitimacy on it, and does not represent nor defends the employee.”. Accordingly, the Court of Appeal of Porto considered that the Public Prosecutor has active legitimacy in this type of actions and must be considered a part in the proceedings, not as representative of the employee, but rather of the public interest foreseen in law.

Therefore, the Court decided that “it is for this reason that we think that the employee is not entitled to withdraw the claim or to simply agree, in the absence of the Public Prosecutor, with the employer that the relation established between them is a service agreement rather than an employment agreement.1