Judgment of the Court of Appeal of Lisbon of 2013-12-18

Lapse of employment contract and retirement due to old age

In this judgment, the Court of Appeal of Lisbon was requested to examine, among other questions, the possible existence of unlawful dismissal in a situation of alleged lapse of an employment contract in connection with a situation of retirement due to old -age.

Clarifying the meaning of Articles 392 and 387 of the Labour Code of 2003 (“LC 2003”) – the provisions in force on the date of the retirement in question – the court maintained that those provisions aim to regulate a specific situation : the existence of an employment relation based on an permanent employment contract, which, despite the retirement due to old age, continues for a period of more than 30 days from the date of the communication by the Social Security that the pension is granted , which implies the conclusion of a new employment contract for a fixed 6-month period.

To begin with, the court described the doctrinal divergence that arises in this scope – a part of the doctrine considers that there is only one employment contract that at the end of the 30-day period referred above becomes a fixed six-month employment contract; for another part of the doctrine the original employment contract lapses after the term in question, and a new contractual relation is born – and then adopted the latter position.

However, there are other relevant particular traits in this case, notably the fact that there are two legal-professional relations with the same employee: one of a public character and another of a private one.

The situation of retirement and subsequent fixed term contract mentioned above would only be applicable in the scope of two successive employment relations between the same employee and the same employer.

According to the court, if the situation of retirement of the employee only affected the public relation, the employer could not terminate the employment contract in question by reference to the private activity, based on the alleged lapse of the same .

Indeed, and despite the position adopted with regard to the existence of more than one professional relation in the cases in which the employee continues to carry on his or her professional activity despite the retirement, the court concluded that the employer could not put an end to the employment contract relying on its lapse .

Accordingly, the Court of Appeal of Lisbon decided that the termination of the contract under consideration should be regarded as an unlawful dismissal , inasmuch as, considering that the lapse relied on did not occur, the same should have been preceded by disciplinary proceedings and the invocation of just cause for dismissal.