Employment Termination in Portugal: Hard But Not Impossible

Portugal's legal framework around employment termination is comprehensive and designed to protect employee rights and benefits – while ensuring employers adhere to fair practices.

Though the process can be complex, there are still viable options for companies and employees to navigate terminations effectively. Understanding the specific laws and procedures is crucial for employers and employees, whether due to voluntary resignation or dismissal. 

Stay with us to discover the critical aspects of employment termination in Portugal – including types of termination, legal grounds, procedures, employee rights, and recent legislative changes.

What You’ll Learn:

• Employment Termination in Portugal: An Overview of the Local Employment Law

Types of Employment Termination
Voluntary Termination: Resignation Process
Voluntary Termination: Mutual Agreement
Involuntary Termination: Dismissal for Cause
Involuntary Termination: Individual Redundancy

• The Termination Terms: Notice Periods, Employee Rights, and Benefits

  Notice Periods for Involuntary Termination
  Employee Rights Upon Termination
  Compensation and Severance Pay
  Unemployment Benefits
  Employment Termination in Portugal: Special Considerations
  Termination During Probation
  Protections for Vulnerable Employees
  Legal Recourse for Wrongful Termination

• Recent Changes in Employment Termination Laws in Portugal

  Best Practices for Employers Terminating Contracts in Portugal

• Employment Termination in Portugal: The Top 6 FAQs

  What are the notice periods for resignation?
  Can an employer terminate employment without notice?
  What compensation is due in a collective dismissal?
  How is redundancy defined under Portuguese law?
  Are fixed-term contracts treated differently?
  What are the rights of pregnant employees?

Employment Termination in Portugal: An Overview of the Local Employment Law

There’s a high level of employee protection covering the Portuguese labor law. 

The primary legislation governing employment relationships is the Portuguese Labor Code (Law No. 7/2009, February 12), which covers many aspects of employment, including contracts, working conditions, and termination rules. 

The Constitution of Portugal (and Article 338 of the Portuguese Labor Code) further enshrines employment protection, prohibiting dismissal without just cause. While terminations are closely regulated, understanding and following the legal framework can help employers navigate the process smoothly and minimize potential disputes.

Types of Employment Termination

There’s not a one-size-fits-all termination. Each situation is different.

Understanding the many types of employment termination in Portugal is essential for both employers and employees to navigate the legal landscape effectively. Both can end professional relationships through voluntary and involuntary terminations. 

Keep reading to better understand both.

Voluntary Termination: Resignation Process

Employees in Portugal have the right to terminate their employment voluntarily by resigning. Resignation is typically formalized through a written notice to the employer, specifying the intended termination date. This process allows the employee to leave the job at their discretion, provided they adhere to the stipulated notice period requirements.

The notice period for resignation depends on the length of service. Generally, employees are required to provide a minimum notice period, which varies based on how much time they worked with the company:

• Up to 2 years of contract: 30 days' notice

• Over 2 years of contract: 60 days' notice

However, when the contracts have terms (fixed or uncertain), the notice periods vary:

• Less than 6 months of contract: 15 days’ notice

• Over 6 months of contract: 30 days’ notice

Voluntary Termination: Mutual Agreement

Both employee and employer can end a contract by mutual agreement. Either can freely agree to terminate the employment relationship. The termination agreement may be revoked by the employee within 7 days from the effective date, except if the agreement is executed in a public notary.

Involuntary Termination: Dismissal for Cause

Dismissal for cause occurs when the employer terminates the employment contract due to misconduct or failure to fulfill their contractual obligations. 

Under the Portuguese Labor Code, just cause includes serious breaches such as dishonesty, habitual neglect of duties, or repeated violations of workplace rules. Employers must provide evidence of the misconduct and follow proper procedures – including a disciplinary process, to justify the dismissal.

Involuntary Termination: Collective Dismissal

Collective dismissal involves terminating a group of employees due to economic, market, or technological reasons. This type of termination is regulated by law and typically applies when an employer needs to restructure or reduce the workforce significantly. The process requires consultation with employee representatives and notification to the relevant labor authorities.

Involuntary Termination: Individual Redundancy

Individual redundancy occurs when a single employee's role becomes redundant, often due to organizational changes or restructuring. Employers must demonstrate that the redundancy is justified and unavoidable. The process involves consultations, notice periods, and compensation arrangements.

The complex part begins now.

The legal grounds for dismissal in Portugal are defined to ensure fairness and protect employees from arbitrary termination.

Just Cause Dismissals

Just cause dismissals are legally permitted when an employee's actions make it impossible to continue the employment relationship. Examples of just cause include:

• Serious misconduct or insubordination

• Repeated violation of company policies

• Criminal activities affecting the workplace

Employers must follow a formal disciplinary procedure, providing the employee with the opportunity to defend themselves before the dismissal is finalized.

Unjustified Dismissals

Unjustified dismissals occur when an employer ends a contract with an employee without valid legal grounds. Such dismissals are prohibited under Portuguese law, and employees have the right to challenge them in court. If a dismissal is deemed unjustified, the employee may be entitled to reinstatement or compensation.

Termination Procedures

The procedures for employment termination in Portugal vary based on the type of termination, but all must comply with the legal requirements set forth in the Portuguese Labor Code.

Consultation Process

For collective dismissals and individual redundancies, employers are required to engage in a consultation process with employee representatives or unions. This process aims to discuss the reasons for the termination, explore alternatives, and negotiate terms such as compensation and notice periods.

The Termination Terms: Notice Periods, Employee Rights, and Benefits

On top of legal grounds, you mustn’t forget about termination terms. Usually, employers and employees define those in the initial contract – so that, if the time comes, all the details are previously agreed upon (or most of them).

Let’s analyze the most common, one by one.

Notice Periods for Involuntary Termination

All employment contracts include mandatory notice periods, as it’s one of the guidelines to hire and employ compliantly in Portugal. Both employees and employers should respect them – except for just cause termination.

When it comes to involuntary termination, it’s the employee's length of service that determines the notice period:

• Less than 1 year: 15 days' notice

• 1 to 5 years: 30 days' notice

• More than 5 years: 60 days' notice

If we’re speaking of termination by role extinction or inadaptation (redundancy or unsuitability), the law adds an extra layer of protection – 75 days if the worker has seniority equal to or greater than 10 years.

These notice periods ensure that employees have adequate time to prepare for the termination and seek alternative employment.

Employee Rights Upon Termination

Employees in Portugal are entitled to specific rights upon termination, which aim to provide financial security and fair treatment. If for some reason they’re fired with no plausible cause, they’re entitled to monetary compensation.

Compensation and Severance Pay

Employees who are dismissed due to redundancy or other lawful reasons are entitled to compensation based on their length of service. The compensation typically includes:

• Severance pay calculated as a multiple of the employee's base salary and years of service

• Payment for unused vacation days and other accumulated benefits

Unemployment Benefits

Employees who lose their job through no fault of their own may be eligible for unemployment benefits provided by the Portuguese Social Security system. Eligibility criteria and benefit amounts vary, but generally, employees must have made sufficient Social Security contributions and be actively seeking employment.

But there’s more.

Employment Termination in Portugal: Special Considerations

Terminating employment contracts in Portugal also foresees special considerations under certain circumstances – to ensure compliance with legal protections.

So it’s time to go through them now.

Termination During Probation

During the probation period, either party can terminate the employment contract without cause – as prior notice is only required when the trial period has lasted for more than 60 days. The notice period is usually shorter during probation, allowing for flexibility in evaluating if the job is a good fit.

Protections for Vulnerable Employees

Portuguese law provides additional protections for vulnerable employees, such as pregnant women, employees on parental leave, and those with disabilities. Employers are prohibited from dismissing these employees without just cause, and any termination involving these individuals requires approval from relevant authorities.

Legal Recourse for Wrongful Termination

Employees who believe they’ve been wrongfully terminated have legal alternatives to seek justice and compensation, such as:

• Filing a Complaint: Wrongfully terminated employees can file a complaint with the Portuguese labor inspectorate or take their case to court. The complaint process involves presenting evidence of the wrongful termination and seeking solutions such as reinstatement or compensation.

• Court Proceedings: These can result in various outcomes, including reinstatement of the employee, compensation for lost wages, and damages for emotional distress. The court's decision is based on the evidence presented and the specific circumstances of the case.

The Portuguese Labor Code protects both employers and employees in these situations, and it evolves over time.

Recent Changes in Employment Termination Laws in Portugal

Recent legislative changes in Portugal introduced new regulations to enhance employee protections and streamline termination procedures. Notable changes include:

• Increased requirements for employer transparency in termination processes

• Expanded rights for employees to challenge dismissals

• Updates to compensation calculations for redundancy

These changes reflect a broader effort to align Portuguese employment law with evolving labor market dynamics and ensure fair treatment for all parties involved.

And there’s more.

Best Practices for Employers Terminating Contracts in Portugal

Employers can minimize the risk of disputes and ensure compliance with legal requirements by following best practices during employment termination, like:

• Clearly communicate reasons for termination and provide evidence when necessary

• Adhere to consultation processes and engage with employee representatives

• Ensure all termination procedures are documented and comply with legal requirements

• Provide fair compensation and adhere to notice periods

If everyone follows some common sense, it’s a win-win.

Employment Termination in Portugal: The Top 6 FAQs

If you still have doubts about terminating contracts in Portugal, check if one of these FAQs helps you.

What are the notice periods for resignation?

Notice periods in Portugal depend on the contract type. If it’s a certain or uncertain term contract, employees must provide a notice period of 30 days if the contract is over 6 months and 15 days if it’s less than that.

In other contract types, employees with up to 2 years of service must submit a notice period of 30 days. Those with over 2 years of service must do it 60 days before.

Can an employer terminate employment without notice?

No, employers must provide notice periods based on the employee's length of service, unless dismissal is for just cause – which requires evidence of serious misconduct.

What compensation is due in a collective dismissal?

Compensation for collective dismissal includes severance pay based on the employee's base salary and years of service, along with payment for unused benefits.

How is redundancy defined under Portuguese law?

Redundancy occurs when an employee's role is no longer necessary due to economic, market, or organizational changes, leading to lawful termination.

Are fixed-term contracts treated differently?

Yes, fixed-term contracts are subject to specific regulations, including limitations on renewals and conditions under which they can be terminated.

What are the rights of pregnant employees?

Pregnant employees are protected from dismissal without just cause. Any termination involving a pregnant employee requires approval from relevant authorities to ensure compliance with legal protections.

Employment termination in Portugal is a complex area governed by comprehensive legal frameworks aimed at protecting both employees and employers. 

Understanding the many types of termination, legal grounds, procedures, and employee rights is essential for ensuring compliance and fair treatment. Employers must navigate these regulations carefully to avoid disputes and potential legal challenges, while employees should be aware of their rights and options in the event of termination.