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Country snapshot

Key considerations

Which issues would you most highlight to someone new to your country?

The Portuguese economy started growing again in early 2013, and since then the country’s employment rate has improved significantly – much more so, in fact, than what one would have expected given the pace of recovery. However, many challenges remain. Unemployment remains high and is linked to an increase in poverty rates, even though long-term unemployment itself is showing signs of reducing.

Tackling segmentation should be a key priority for the Portuguese government, and this could be partly achieved by further reducing the regulatory gap between permanent and temporary contracts. Competitiveness needs to be improved by aligning collective bargaining agreements more closely with companies’ performances. In particular, the potential for negative impact of the government’s frequent extension of collective agreements to non-signatory firms should be minimised, and the procedures for firms facing economic hardship to opt out of such agreements should be clarified.

What do you consider unique to those doing business in your country?

A key aspect of Portuguese employment law is the fact that employers may not unilaterally terminate employment contracts without legal grounds (ie, by simply providing adequate notice), except by mutual agreement with the employee concerned, in which case the parties are free to negotiate the terms and conditions of the termination, as well as the amount of compensation. Additionally, unilateral termination of employment contracts must always follow the appropriate proceedings.

The courts tend to be very protective of employees’ rights and interests in their decisions.

Further, collective bargaining agreements often apply to companies’ employment relationships – irrespective of whether the companies are part of any employers’ associations and the employees are unionised. In fact, the Portuguese government usually extends the terms and conditions established in a certain collective bargaining agreement to all the companies operating in a certain economic sector – whether they have signed the agreement or not.

Is there any general advice you would give in the employment area?

Portuguese employment law affords special protection to employees, which gives both the General Labour Inspectorate and unions grounds for their roles. Foreign companies must thus be aware of Portugal’s labour requirements in order to enter the country. This includes all companies’ administrative and reporting duties in order to avoid fines and claims from employees.

Thus, employers should make the most of any flexibility under the law with regard to employment contracts and the day-to-day management of their business.

Emerging issues/hot topics/proposals for reform

Are there any noteworthy proposals for reform in your jurisdiction?

 The previous government had significantly reduced severance pay and eased the definition of ‘lawful dismissals’ as part of one of the most substantial reforms of employment protection legislation among members of the Organisation for Economic Cooperation and Development in recent years. The reform brought Portugal’s regulations closer into line with the (lower) EU average. It is likely, however, that the current left wing coalition will revert some of these measures over the next two years.

What are the emerging trends in employment law in your jurisdiction?

Rapid technological progress, globalisation and the financial crisis have fundamentally changed the labour markets and created space for growth of atypical or non-standard forms of work. These atypical employment relationships (eg, telecommuting and telework, cloud working, zero working hours contracts and gig economy workers) are becoming increasingly popular – even among large and multinational corporations, which try to implement them in Portugal. However, they force companies to adjust the way they operate to ensure they are in compliance with the employment legal framework.

The effect of technology on employment is a hot topic as it creates vast opportunities and raises concerns in equal measures. The effect of technology is likely to transform working patterns with increases in globalised workforces, mobile work and working from home.

Executives’ compensation is also an area to watch as companies try to be creative and sophisticated in their benefits structures.

The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

The employment relationship in Portugal is governed by:

  • the Portuguese Constitution;
  • European legislation and other international conventions to which Portugal is party;
  • the Labour Code;
  • other employment and labour laws and ministerial ordinances; and
  • collective bargaining agreements.

Who do these cover, including categories of worker?

The Labour Code protects every employee, regardless of the specific type of agreement entered into with the employer. Nevertheless, there are specific regulations applicable to certain types of employee (eg, domestic employees, professional athletes, artists and performers).

Employment relationships between public institutions and their employees are also governed by special legislation.

Misclassification

Are there specific rules regarding employee/contractor classification?

An employment contract exists when “a natural person undertakes to, for retribution, provide his or her activity to another person or persons, within the organization and under their authority” (Article 11 of the Labour Code).

By contrast, self-employed individuals (contractors) enter into services agreements – that is, “agreement[s] whereby one of the parties undertakes to make available the result of his/her intellectual or manual work, with or without pay” (Article 1154 of the Civil Code). Self-employed workers can claim that they are employees and are in fact bound by an employment agreement if they can provide evidence of some elements that are inherent to an employment relationship, which include:

  • having a working time schedule;
  • receiving orders and instructions from the employer; and
  • the employer having disciplinary power over them.

This classification depends on many factors that are frequently adjusted by case law.

Contracts

Must an employment contract be in writing?

As a rule, employment agreements do not have to be in writing.

However, the following must be in writing:

  • promissory agreements;
  • term employment agreements;
  • teleworking;
  • temporary and pre-retirement employment agreements; and
  • employment agreements with a foreign employee.

Are any terms implied into employment contracts?

All employment relationships implicitly include the employer’s obligation to:

  • provide work;
  • pay for the work rendered; and
  • provide a safe working environment.

As for the employee, every employment agreement implies that the employee:

  • will carry out the work; and
  • be loyal to his or her employer.

In addition, employment agreements are always subject to an implied probation period, unless the parties choose to reduce or exclude it in writing.

The Labour Code (and the applicable collective bargaining agreement) provides for supplementary rules governing the employment agreement.

Are mandatory arbitration/dispute resolution agreements enforceable?

Under Portuguese law, mandatory arbitration and dispute resolution agreements are unenforceable.

However, employment litigation procedural rules include a mandatory conciliation act before the claim is discussed during a judgment hearing. This conciliation act can be presided over by the judge or the Public Attorney’s Office, depending on the type of judicial action and claim at stake.

How can employers make changes to existing employment agreements?

In principle, any change to an employment agreement requires mutual consent between the employer and employee. However, the law recognises an employer’s right, in certain cases, to regulate some aspects of the performance of work (eg, the working schedule and the place of work) and amend them unilaterally, provided that the requirements established by the law are complied with.

The most common mechanisms to change terms and conditions consist of:

  • the employer’s management unilateral decision (when applicable and to the extent possible);
  • the employee’s consent (eg, through an addendum to the employment agreement); and
  • variation clauses in the employment agreement that allow the employer to make the change unilaterally.

Regarding changing terms and conditions of employment in general, only in very limited situations is it possible to reduce the employees’ salaries and other benefits of employment, regardless of consent.

Certain changes that affect multiple employees may be subject to prior consultation with the relevant employees’ representatives.

Foreign workers

Is a distinction drawn between local and foreign workers?

The law distinguishes between Portuguese and foreign employees by establishing certain obligations and legal thresholds regarding employment agreements concluded with foreign employees (eg, the employment agreement needs to be in writing and contain an appendix with the identification and addresses of the people that will benefit from the employee’s pension in case of death resulting from a work-related accident or occupational disease, as well as a copy of the employee’s visa or work permit). Further, all employment agreements entered into with foreigners must be notified to the labour authorities (Autoridade para as Condições de Trabalho).

Apart from these obligations and formal thresholds, foreign employees authorised to exercise a professional activity in Portugal have the same rights and are subject to the same duties as Portuguese nationals.

However, a distinction can be made between employees on international assignments in Portugal and employees under a Portuguese contract. The first are subject to core mandatory rules (eg, health and safety, holidays, maximum working time limits, minimum wage, etc), rather than the entire Labour Code. Further, when a foreign company seconds an employee to Portugal, the labour authority must be notified.

Recruitment

Advertising

What are the requirements relating to advertising positions?

There are no specific rules for advertising jobs in Portugal. Nevertheless, in compliance with the constitutional equality principle and non-discrimination rules, job advertisements must not include discriminatory criteria or conditions (eg, age, nationality, race, gender, physical appearance and religion).

Background checks

What can employers do with regard to background checks and inquiries in relation to the following:

(a) Criminal records?

Companies are allowed to request a job applicant’s criminal record only when there are grounds to do so (eg, because of the nature of the activity or the specific duties to be carried out by the applicant). In addition, a written request justifying the need for such information must be provided to the employee.

That said, requests for criminal records should still be assessed on a case-by-case basis, as the information contained is not always essential to verify the ability of the job applicant to perform certain professional activities.

In addition, the information contained in a criminal record is deemed sensitive data and, therefore, an authorisation from Data Protection Agency is required in order to allow the company to collect the job applicant’s personal data. The consent of the job applicant must also be obtained.

(b) Medical history?

From a labour law standpoint, as a general rule companies cannot require job applicants to undertake medical examinations. However, this rule has two exceptions:

  • if such an examination is intended for the protection and safety of the job applicant or third parties; or
  • if it is justified by the particular requirements of the activity.

In any case, it is mandatory that companies justify, in writing, the need for such an examination.

The physician responsible for any medical examination cannot inform the company of the specific results of such exams, but only of whether the job applicant is fit for the job or not.

From a personal data standpoint, the results of medical examinations are deemed to be sensitive and, therefore, an authorisation from the Data Protection Agency is required in order to allow the companies to collect the job applicant’s personal data.

(c) Drug screening?

Drug screening of applicants and employees is generally not allowed. An examination can only be carried out by an occupational doctor and only in order to assess whether the employee is fit for work.

(d) Credit checks?

Credit checks are not allowed, since they involve privileged personal data.

(e) Immigration status?

Employers must ensure that applicants are allowed to work in Portugal and that they hold legitimate entitlement to do so (visa or work permit).

(f) Social media?

This type of background check is not specifically regulated. Researching candidates via social media is not prohibited by law, provided that the information is retrieved from freely accessible public sources.

(g) Other?

The possibility of conducting backgrounds checks on employees is very limited. However, employers are allowed to request for referrals directly from the applicants, as well as for their authorisation to collect certain information.

Wages and working time

Pay

Is there a national minimum wage and, if so, what is it?

The national minimum wage is set as follows:

  • €557 in the continental territory;
  • €570 in Madeira; and
  • €584.85 in the Azores.

Are there restrictions on working hours?

The normal work period cannot exceed eight hours a day or 40 hours a week, except when otherwise established in a collective bargaining agreement. Extensions of up to 15 minutes a day are permissible.

Portuguese employment legislation allows flexibility of working hours (eg, exemption from working time, bank of hours, adaptability).

Hours and overtime

What are the requirements for meal and rest breaks?

Weekly rest Employees are entitled to at least one day of rest per week, which is normally Sunday. The employee can be given a full or half day of rest for every week or for specific weeks of the year in addition to the mandatory one day per week.

Daily break Work days must be interrupted by a break of not less than one hour and not more than two hours, normally taken in the middle of the day (lunch time), since the law forbids more than five hours of work without a break or six hours of work without a break when the work day lasts more than 10 hours. The law allows for exceptions in some specific circumstances.

Daily rest Employees are entitled to a minimum of 11 continuous hours of rest between two consecutive working days. This does not apply to activities that require continuous service or production, provided that the corresponding time off is subsequently given to the employee, this includes activities at:

  • hospitals;
  • ports;
  • airports;
  • telecommunications companies; and
  • industries involving continuous work.

How should overtime be calculated?

Employees working over the regular working time are, as a rule, entitled to overtime pay. Overtime limits are:

  • 175 hours per year in micro companies or small-sized companies;
  • 150 hours per year in large and medium-sized companies;
  • for part-time employees, 80 hours per year or the ratio between the part-time and full-time if higher; or
  • two hours per day.

Overtime pay is paid as follows:

  • on business days, an additional 25% for the first hour or fraction thereof and 37.5% for the following hours; and
  • on mandatory or complementary weekly rest days and bank holidays, an additional 50% for each hour or fraction thereof.

Overtime payment is based on the employee’s hourly salary and calculated as follows:

  • monthly base salary times 12; or
  • 52 times weekly work schedule.

The employer must keep an accurate record of the employee’s working time and overtime.

What exemptions are there from overtime?

Employees exempt from a working time are not entitled to overtime pay for the work rendered in certain periods but, as a rule, receive a monthly allowance for such exemption.

Is there a minimum paid holiday entitlement?

As a rule, employees are entitled to 22 paid working days of annual leave per year in addition to bank holidays. Employees are also entitled to a holiday allowance corresponding to their remuneration.

What are the rules applicable to final pay and deductions from wages?

On termination, an employer must pay the employee:

  • his or her final salary;
  • any accrued credits (eg, overtime pay); and
  • final salary credits arising from the termination.

Final salary credits include:

  • untaken holidays and the corresponding holiday allowance;
  • compensation for the holidays that would accrue in the following year if the employment agreement was not terminated (calculated in proportion to the execution of the employment agreement in the termination year) and the corresponding holiday allowance; and
  • Christmas allowance proportional to the execution of the employment agreement in the termination year.

Deduction from wages is restricted and can occur only in certain situations.

The salaries paid to employees are subject to personal income tax and social security contributions. Employers have to withhold part of the employees’ salaries for personal income tax purposes, the rates being progressive depending on the salary amount, marital status and number of dependants. Social security contributions are shared between the employer (as a rule, 23.75% – although farmers, fishermen, footballers and other groups of employees warrant different rates) and the employee (as a rule, 11% – although some groups of employees warrant different rates). Employees’ contributions are withheld by the employer (deducted from the employee’s monthly salary) and paid to Social Security.

Record keeping

What payroll and payment records must be maintained?

Employers must provide employees with a payslip each month, including the final payslip on termination. Tax and social security payment forms must also be kept on file.

Discrimination, harassment & family leave

What is the position in relation to:

Protected categories

(a) Age?

Discrimination based on age is prohibited under Portuguese law.

(b) Race

Discrimination based on race is prohibited under Portuguese law.

(c) Disability?

Discrimination based on disability is prohibited under Portuguese law. In light of their condition, disabled people are entitled to some rights and special protections.

(d) Gender?

Discrimination based on gender is prohibited under Portuguese law.

(e) Sexual orientation?

Discrimination based on sexual orientation is prohibited under Portuguese law.

(f) Religion?

Discrimination based on religion is prohibited under Portuguese law.

(g) Medical?

Discrimination based on medical needs is prohibited under Portuguese law.

(h) Other?

The following categories are also protected under Portuguese law:

  • family heritage;
  • language;
  • place of origin;
  • political or ideological convictions;
  • education;
  • economic situation;
  • rank;
  • union representation and activities;
  • pregnancy; and
  • marital status.

 

Family and medical leave

What is the position in relation to family and medical leave?

Working parents are entitled to parental leave of 120 or 150 consecutive days per new-born child, which they can share after the child’s birth, without prejudice to the mother’s exclusive initial parental leave (six weeks’ initial parental leave immediately after giving birth). This leave may be extended by 30 days (up to a maximum of 180 days) when each parent takes exclusive leave of 30 consecutive days or two periods of 15 consecutive days, after the mother’s mandatory leave.

In the event of more than one child being born at the same time, the leave period is increased by 30 days for each additional child.

Male employees are entitled to 15 business days of leave within a month of the birth.

Employees are also entitled to unlimited medical leave provided that their absence is duly supported by a medical certificate.

Where the absence is duly supported, employees are entitled to their full pay in the form of medical leave pay by the employer or Social Security in the case of ordinary illness or by the insurance company (in the case of occupational or professional illness).

The employment contract is suspended if the employee is absent from work for more than 30 consecutive days or whenever it is foreseeable that he or she will be unable to work for more than 30 days. While the contract is suspended, employees lose the right to pay as of the date of suspension, without prejudice to his or her right to continue taking medical leave.

Payment of medical leave by Social Security works as follows:

  • medical leave allowance is not due during the first three days of sick leave; and
  • medical leave is granted for a maximum period of three consecutive years, corresponding to 1,095 days.

The daily amount of sick leave is a percentage of an indexed salary (between 55% and 75% of the salary), depending on the duration of the employees’ inability to work or sickness.

Harassment

What is the position in relation to harassment?

‘Harassment’ is defined as being any undesirable behaviour, which includes discrimination from access to employment or employment, work or professional training, with the aim or effect of:

  • disrupting or embarrassing the person;
  • impairing his or her dignity; or
  • creating an:
    • intimidating;
    • hostile;
    • degrading;
    • humiliating; or
    • destabilising environment.

‘Sexual harassment’ is defined as being the unwanted sexual behaviour, whether verbal, non-verbal or physical, with the same purpose or effect referred to above.

Portuguese law expressly prohibits harassment in the workplace and some obligations for employers regarding this issue have recently been established (eg, the publishing and implementation of a code of conduct and good practice for certain companies). Anyone who reports harassment is protected.

Employers have a duty to keep the workplace free from harassment, as they can be held liable for any injury caused to employees if they were aware of such conduct and did nothing to stop it.

Whistleblowing

What is the position in relation to whistleblowing?

The Portuguese Labour Code does not specifically address whistleblowing, apart from in harassment cases. Accordingly, whistleblowing is usually governed by internal policies that should take into account general principles and rules on data privacy and disciplinary procedures.

In harassment cases, whistleblowers and the witnesses on whom they rely cannot be subject to disciplinary sanctions based on declarations or facts contained in the records of proceedings, judicial or administrative, triggered by harassment until a final decision has been issued.

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

Employers may not use remote monitoring mechanisms in the workplace for the purpose of monitoring the worker's professional performance. However, the use of such technological equipment shall be lawful where its purpose is the protection and security of people and goods (eg, in a shop) or when particular requirements inherent to the nature of the activity justify it (eg, places that need to be guarded or supervised).

Where monitoring is in place, the employer shall inform the employees of the existence and purpose of the means of surveillance used and display a sign warning of such surveillance (eg, a notice which states: "these premises are under ccTV surveillance"), followed by an identifying symbol.

The Labour Code protects the employees’ right to privacy regarding personal messages.  Nevertheless, this does not affect the employer’s right to enforce policies on the use of IT tools. In any case, the employer is obliged to notify employees of the terms and restrictions of the use of company equipment and data processing.

Monitoring IT tools pause a risk to employees’ privacy and, therefore, should be carefully analysed and assessed on a case-by-case basis and accompanied by a set of measures that ensure a minimum level of intervention. Further, control of the employees’ movements during their free and personal time is prohibited.

To what extent can employers regulate off-duty conduct?

There are no specific provisions governing this matter. However, as a rule, employers cannot impose restrictions on their employees’ conduct out of the workplace in light of the employees’ constitutional right to protection of privacy. Nevertheless, certain behaviours may affect the company’s activity and the employment agreement. For instance, if an employee reveals confidential information, even when off-duty, the company is entitled to take disciplinary action against that employee.

Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

There are no rules governing social media passwords and accounts.

Trade secrets and restrictive covenants

Intellectual property

Who owns IP rights created by employees during the course of their employment?

IP rights are owned by the person who created them, unless agreed otherwise. In Portugal, it is common for parties to agree on this point in the employment contract.

Restrictive covenants

What types of restrictive covenants are recognised and enforceable?

In principle, covenants that restrict the employees’ freedom to provide and search for work are deemed null and void as a violation of a constitutional right. However, the Portuguese Labour Code sets out some exceptions – notably:

  • permanence covenants, which restrain the employee from leaving the company during a certain period, as a compensation for extraordinary expenses incurred by the employer with the employee’s professional training;
  • confidentiality clauses; and
  • non-compete clauses.

Non-compete

Are there any special rules on non-competes for particular classes of employee?

Non-compete clauses may last for at most two years after the termination of the employment relationship. This may be extended to three years for employees whose activity involves a relationship of trust or who have access to sensitive information concerning competition matters.

All non-compete clauses must meet the following requirements:

  • the clause must be in writing, in the employment or termination agreement;
  • the jobs or activities covered must cause damage to the employer; and
  • the employer must pay the employee compensation for restricting his or her professional activities during that period. This sum may be reduced when the employer has spent large sums on the employee’s professional training.

Discipline and grievance procedures

Procedures

Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

The Labour Code sets forth specific rules regarding disciplinary procedures brought against employees. Disciplinary penalties include:

  • verbal warning;
  • recorded warning;
  • pecuniary sanction;
  • loss of annual leave days;
  • suspension with loss of pay and length of service; and
  • dismissal without right to any compensation or indemnity.

Whatever the penalty, a proper procedure must be followed, which includes a written statement of defence by the employee and the communication of a final decision.

Disciplinary infractions are subject to a statute of limitations of one year and must be initiated within 60 days of the acknowledgement of the fact by the employer or the supervisor with disciplinary power over the employee.

There is no specific grievance procedure.

Industrial relations

Unions and layoffs

Is your country (or a particular area) known to be heavily unionised?

No.

What are the rules on trade union recognition?

The Portuguese Constitution recognises the right of employees to freedom of association, thus guaranteeing:

  • the freedom to form trade unions at any level;
  • the freedom of membership (affiliation);
  • the freedom to decide the organisation and internal regulations of trade unions;
  • the right to engage in trade union activities within the company; and
  • the right to have political opinions.

What are the rules on collective bargaining?

Collective bargaining instruments exists at a national level or at a company and group level, and are negotiated either:

  • between an association of employers and a union (collective bargaining agreements); or
  • between the company and a trade union.

Further, the law sets out other collective regulation instruments such as minimum employment conditions ordinances and extension ordinances, which are both issued by the Ministry of Labour, and arbitration awards on mandatary or necessary arbitration proceedings.

The most commonly used collective regulation instruments are the collective bargaining agreements and the extension ordinances (through which collective bargaining agreements are extended on an industry or sector level).

Where a collective bargaining agreement is concluded, its terms and conditions of employment cannot be undermined by an individual employment agreement, except if the latter establishes more favourable conditions.

Termination

Notice

Are employers required to give notice of termination?

As a rule, permanent employment agreements cannot be terminated by simply giving notice to the employee. Terminations follow a proper procedure strictly established by the Labour Code.

However, for fixed-term employment agreements, the employer must serve notice to the employee with 15 days’ notice. For fixed-term employment agreements concluded for the duration of a certain task, activity or temporary need, there must be a minimum notice of seven, 30 or 60 days (depending on the duration of the agreement being up to six months, between six months and two years or longer).

In addition, the termination of an employment agreement during the trial period must comply with a seven or 15 days’ notice requirement, if that trial period has lasted more than 60 or 120 days, respectively. In this case, if the required advance notice is not given, the employer will have to pay compensation corresponding to the missing notice period.

In redundancy procedures, the employer also has to comply with a certain notice period after issuing the final grounded decision for the redundancy.

Redundancies

What are the rules that govern redundancy procedures?

Redundancy procedures (terminations for business-related reasons based on market, structural or technological grounds) must follow a complex procedure.

Employees made redundant are entitled to compensation, the amount of which depends on the employee’s length of service.

Are there particular rules for collective redundancies/mass layoffs?

Yes, redundancies can be individual or collective with different applicable rules.

‘Collective redundancy’ is defined as successive or simultaneous termination of employment agreements over a three-month period by the employer, affecting at least two or five employees, depending on the size of the undertaking – two if the employer is a company with fewer than 50 employees and five if the employer is a company with more than 50 employees.

Protections

What protections do employees have on dismissal?

Employees affected by dismissal procedures triggered by the employer are legally entitled to compensation.

The following enjoy additional protection against dismissal:

  • employees who are pregnant;
  • employees who have recently given birth;
  • employees who are breastfeeding;
  • employees who are on parental leave; and
  • employees’ representatives.

Courts/tribunals

Jurisdiction and procedure

Which tribunals or courts have jurisdiction to hear complaints?

The Labour Court, presided by one judge, has jurisdiction over employment-related complaints at first instance.

The Social Division of the Court of Appeals, ruling with a panel of three judges, has jurisdiction over appeals from the Labour Court. The Supreme Court of Justice, also ruling with a panel of three judges, is the ultimate instance.

What is the procedure and typical timescale?

The procedure will differ according to the nature of the complaint, since special procedures will apply to different types of claim. As a rule, in employment-related judicial complaints the court must promote a conciliatory hearing. In some special procedures, this conciliatory phase will occur not before the court, but before the Public Attorney’s Office. In order to submit a claim, an employee must pay court and justice fees. The employee may be exempted from this payment in some situations.

Employment-related complaints typically take between one and two years to be decided by the first-instance court.

Appeals

What is the route for appeals?

It is possible to appeal a first-instance decision before the Court of Appeals. However, the admissibility of the appeal will, in principle, depend on the type and value of the claim. An appeal will always be admissible, regardless of the value of the claim, where the case concerns:

  • the determination of the professional category of the employee, his or her dismissal, and reinstatement and validity of employment agreement;
  • work-related accidents or occupational diseases; and
  • legal proceedings of welfare institutions, family allowance and syndicates.

Appeals on substantial matters (ie, on the claim itself and not related to procedural matters) usually take between one and two years to be decided.