Portugal: Wide-ranging changes to the Portuguese Labour Code and related legislation – Decent Work Agenda

Law no. 13/2023 was published on April, 3, amending the Portuguese Labour Code and related legislation in implementation of the, so called, Decent Work Agenda. The Law will enter into force on 1 May. The new rules will apply not only to employment contracts entered into after May 1st, but also to existing contracts (with some exceptions and special rules). The amendments are wide-ranging, although, it is possible to summarize them in 19 main changes to the Portuguese labour legislation.

The most impactful changes are on the following matters: non-waivability of labour credits, prohibition of outsourcing, probation period and employer information duties. From 1 May, the employees’ labour credits arising from the employment contract, its breach or termination cannot be extinguished by waiver or remission, unless the corresponding declaration is issued in a court settlement. The outsourcing of services is now prohibited in Portugal, if hired to satisfy needs previously assured by an employee whose employment contract was terminated within the previous 12 months period, as a result of collective dismissal or of extinction of the job position.

Regarding the probationary period, whenever the employer fails to provide written information to the employee on its duration and conditions, there is a legal presumption that it is excluded. First-job seekers or long-term unemployed probation periods will be reduced or excluded, when the candidate was previously engaged under a fixed-term contract, by a different employer, which duration was, respectively, equal to or greater than 90 days duration. The probationary period is also reduced if the employee has completed and been approved under professional traineeship, lasting 90 days or more, for the same role, by a different employer within the previous 12 months.  The notice period applicable to the employer whenever the probationary period has exceeded 120 days duration was also extended.

The duty of information incumbent upon the employer, that must be provided on hiring of the employee, is extended to cover the following new issues: (i) the use of algorithms and artificial intelligence systems for certain HR purposes, (ii) the duration and conditions of the probationary period, if applicable, (iii) the employee individual rights to professional training, (iv) the identification of the temporary work user, (v) the rules applicable to the provision of overtime work and shift work, (vi) the method of payment of the remuneration and a breakdown of its constituent elements (vii) formal requirements applicable in case of termination of contract, (viii) the parties of the applicable collective bargaining agreement (if any), (ix) social protection systems, including benefits complementary to or substituting those assured by the general social security system and (x) the identification of the Security Work Compensation Fund (“Fundo de Garantia de Compensação do Trabalho”).

The regime of the following matters was changed, with a significant impact: term contracts, temporary work, professional traineeship, self-employed workers in a situation of economic dependence, digital platforms, overtime work, compensation for termination of the employment contract, suspension of dismissal, trade union action in the company, omission of communication of admissions. Term contracts and temporary work admissibility are subjected to a restricted control from the Labour Authority that may promote ex-officio supervision, as well as legal requirements for the execution of legally admissible term contracts and temporary work are substantially restricted.

Professional Traineeships in Portugal will be subject to the same provisions applicable to employment for social security purposes and will be subjected to work accident insurance coverage. In addition, professional trainees are entitled to an allowance, corresponding to at least 80% of the mandatory minimum monthly remuneration (which, in 2023, is fixed at € 760).

A definition of “economic dependence”, instrumental to the application of certain rules of the Labour Code to independent contractors, is inserted. The application of this regime requires the self-employed worker to declare his/her status, before the beneficiary of the activity and to provide proof of fulfilment, in practice, of the legal requirements. In innovative terms, not only the applicability of collective bargaining agreement provisions in force in the relevant professional and geographic sector of activity, as well as certain rights of a collective nature are extended to economically dependent providers.

There will be a rebuttable presumption of the existence of an employment contract for workers for digital platform operators. Moreover, the use of algorithms and artificial intelligence for the hiring of employees or the management of working conditions will generate information duties towards employees and their representatives, which will be protected against discrimination, whenever any decision of the company was based on the use of algorithms or artificial intelligence systems.

Overtime worked over 100 hours or more per year is more onerous and must be paid double for work performed up to that limit.

Compensation due to the employee for the termination of employment contract – severance pay – applicable to the duration of the contract after the entry into force of the new Law, is increased.

On other hand, the Labour Authority’s powers were reinforced to allow the Authority to notify the employer to correct the situation whenever it verifies the existence of signs of unlawful dismissal. In the absence of correction, the Authority shall forward the facts to the Public Prosecutor’s Office for the latter to initiate an injunction to suspend the dismissal.

Failing to inform the Social Security Service of the admission of employees will become a criminal offence, punishable with a prison sentence of up to three years or a fine of up to 360 days.

On the conciliation between family and professional life, parental protection and care workers were given reinforced rights and protection and new absences from work were established. The teleworking regime was altered, among other aspects, to be extended to employees with disabled children or children suffering from chronic disease or oncological illness.

On employees representative’s rights, trade unions without affiliated employees in the company and union delegates are recognized new rights, namely to have an appropriate place in the employer’s premises for the exercise of their functions, as well as to post and distribute information, and to convene the meeting of the employees in the workplace, respectively.

Key Action Points for Human Resources and In-house Counsel

• These changes require reviewing contract provisions as well as practices regarding the admission of employees and the termination of contracts.
• In the case of employers whose decisions are based on the use of algorithms artificial intelligence systems and digital platforms, there must be assessed the compatibility of company practices with the new regime to avoid discriminatory practices.