Portugal: Supreme Court Standardizes Jurisprudence on Compensation Return in Dismissal Challenges

The Supreme Court of Justice recently issued Ruling No. 7/2024, providing an important interpretation of articles 366(4) and (5) of the Labour Code. These provisions establish a presumption that an employee accepts dismissal if they receive the compensation without immediately returning it.

In this case, the employees returned the compensation 19 days after receiving it, which the lower courts considered too late, concluding they had accepted the dismissal.

However, the Supreme Court considered otherwise, ruling that to challenge the dismissal, the employee does not need to return the compensation immediately upon receipt as a significant part of scholars and courts had previously interpreted. Instead, the Court clarified that the compensation must be returned by the time the employee initiates a legal challenge (either through precautionary procedures or a lawsuit) and not immediately upon receipt.

This interpretation allows employees reasonable time to assess the dismissal’s legality and seek legal advice without facing undue pressure. The ruling emphasized the principle of fairness, ensuring that employees are not compelled to decide prematurely whether to accept or contest a dismissal.

This decision also standardizes jurisprudence on the issue, resolving discrepancies in lower court rulings and guaranteeing uniform application of the law.