Navigating employment termination in Portugal requires a thorough understanding of the country's labor laws, which are designed to provide significant protection to employees. The legal framework governs everything from the valid grounds for dismissal to the specific procedures that must be followed and the compensation due to the employee. Employers must adhere strictly to these regulations to avoid potential legal challenges and penalties.
Understanding the nuances of Portuguese labor law is crucial for any company operating in the country, whether they have a local entity or are employing individuals remotely. Proper management of the termination process ensures compliance, mitigates risk, and maintains fair treatment of employees in accordance with local standards.
Notice Period Requirements
The required notice period for termination initiated by the employer in Portugal depends on the employee's length of service with the company. These are minimum periods, and longer periods may be agreed upon in the employment contract or collective bargaining agreement.
| Length of Service | Minimum Notice Period |
|---|---|
| Up to 90 days | 7 days |
| From 91 days to 2 years | 30 days |
| More than 2 years | 60 days |
During the notice period, the employee is generally entitled to their regular salary and benefits. Failure to provide the correct notice period typically requires the employer to pay the employee compensation equivalent to the salary they would have received during the unfulfilled notice period.
Severance Pay Calculations
Severance pay, also known as compensation for termination, is generally required in Portugal for terminations initiated by the employer without just cause (e.g., collective dismissal, extinction of position). The calculation is based on the employee's length of service and their base salary plus seniority allowances.
The standard calculation for severance pay is 12 days of base salary and seniority allowances per full year of service.
- The calculation is based on the average of the base salary and seniority allowances received in the last 12 months.
- For fractions of a year, the severance is calculated proportionally.
- There is typically a cap on the total amount of severance pay, often linked to a multiple of the national minimum wage or the employee's monthly salary, depending on the specific circumstances and the date the contract was signed.
It is important to note that different rules may apply to contracts signed before certain dates (e.g., November 1, 2011, or February 1, 2013), potentially resulting in higher severance entitlements based on previous legal frameworks for the period of service under those rules.
Grounds for Termination
Portuguese law specifies limited grounds upon which an employer can lawfully terminate an employment contract. These are broadly categorized as termination with cause and termination without cause.
Termination With Cause (Just Cause)
Termination with just cause occurs when the employee commits a serious offense that makes the continuation of the employment relationship immediately impossible. Examples of just cause include:
- Serious disciplinary infractions (e.g., repeated unjustified absences, insubordination, theft, damage to company property).
- Lack of productivity or quality affecting the company's operations, provided the employee was given opportunities to improve.
- Breach of confidentiality or company rules.
This type of termination does not typically require the employer to pay severance compensation, but the burden of proof for the just cause rests entirely with the employer.
Termination Without Cause
Termination without cause is permissible under specific circumstances related to the company's economic or structural situation, not the employee's conduct. The main types are:
- Collective Dismissal: Termination of multiple employees simultaneously due to market, structural, or technological reasons. Specific thresholds apply based on company size and the number of employees being dismissed.
- Extinction of Position: Termination due to the elimination of a specific job role or position for economic, technological, or structural reasons, provided the tasks are not assigned to another employee.
- Inadequacy: Termination due to the employee's inability to adapt to new work processes or technology, provided specific conditions are met, including training opportunities.
These types of terminations require strict adherence to procedural requirements and generally entitle the employee to severance pay.
Procedural Requirements for Lawful Termination
The procedure for termination varies significantly depending on the grounds for dismissal. Failing to follow the correct procedure is a common pitfall and can render the dismissal unlawful.
Disciplinary Termination (With Just Cause)
The process is highly formalized:
- Notification of Intent: The employer must notify the employee in writing of the intention to dismiss, detailing the facts attributed to the employee, the legal grounds, and the potential consequences.
- Employee Defense: The employee has a period (typically 10 business days) to respond in writing and present their defense, potentially requesting to review the process file and present witnesses.
- Investigation/Inquiry: The employer may conduct an inquiry, hearing witnesses presented by both parties.
- Final Decision: Based on the evidence and defense, the employer issues a final written decision, either proceeding with the dismissal, applying a lesser sanction, or archiving the process. The decision must be well-founded and sent to the employee.
Termination Without Cause (Collective Dismissal, Extinction of Position)
These processes involve consultation and notification requirements:
- Communication to Employee and Employee Representatives: The employer must inform the affected employees and, if applicable, employee representatives (e.g., union, workers' committee) of the intention to terminate, providing detailed justification (economic, structural, technological reasons).
- Consultation Period: A period of consultation follows (varying depending on the type of termination and number of employees) where discussions take place with employee representatives to explore alternatives.
- Communication to Government Bodies: The employer must notify the relevant government body (e.g., the Ministry of Labour) of the proposed termination.
- Final Decision and Notification: After the consultation period, the employer makes a final decision and notifies the employees in writing, specifying the grounds, the effective date, and the severance pay calculation.
Employee Protections Against Wrongful Dismissal
Portuguese law provides strong protections against wrongful dismissal. A dismissal is considered wrongful if:
- It is based on grounds not permitted by law.
- The employer fails to follow the correct legal procedure.
- The stated grounds for dismissal are not proven.
If a court finds a dismissal to be wrongful, the employer may be ordered to:
- Reinstate the employee: The employee returns to their position with payment of back wages from the date of dismissal.
- Pay compensation instead of reinstatement: If reinstatement is not feasible or desired by the employee, the employer must pay compensation determined by the court, which is typically higher than the standard severance pay and can range from 15 to 45 days of base salary and seniority allowances per year of service, with a minimum floor.
Employees have the right to challenge their dismissal in court, and the burden is on the employer to prove the lawfulness of the termination and adherence to procedure. This makes meticulous documentation and strict compliance with legal requirements essential for employers in Portugal.
