DELAYED PAYMENT OF WAGES
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DELAYED PAYMENT OF WAGES
Expression designating a somewhat unusual phenomenon, without any immediately apparent parallel in other European countries, which emerged in Portugal as a result of the effects of the economic crisis on enterprises combined with the rigidity of the legal mechanisms governing the termination of employment contracts and even the closure of enterprises. It concerns situations where employers fail to pay the wages due to some or all of their employees promptly, delaying payment for a period which may vary in duration but cannot be described as an occasional brief episode. The spread of this phenomenon prompted the introduction of special mechanisms to protect employees, and the current provisions on the matter are laid down in the Delayed Payment of Wages Act (Law No. 17 of June 14, 1986), covering situations where: a) the delay in payment exceeds 30 days and the amount overdue is equal to one month's pay/remuneration , or b) where the delay exceeds 90 days, whatever the amount overdue. When such a situation is found to exist, the Ministry of Employment and Social Security initiates an administrative procedure whereby the enterprise is officially declared to be in default of prompt payment of wages and its economic and financial circumstances are examined in order to ascertain the reasons.
The employees affected may then choose either to suspend their contract of employment or to terminate it. Suspension does not prejudice them in respect of any of the rights deriving from the contract, i.e . entitlement to the wages owing up to the start of the suspension plus accumulated interest. During the period of suspension they are entitled to receive unemployment benefit and all social security benefits, or may work for another employer without prejudice to enforcement of the legal obligations arising from the original contract and without the other employment producing any effects on the contract. Such suspension ends when an employee so wishes, or when the outstanding wages plus accumulated interest have been paid, or, provided this is with the consent of two thirds of the enterprise's workforce, when an agreement is reached on the regularization of the outstanding wages plus interest. If they prefer, employees may terminate their contract. They are then entitled to: a) a payment equal to that provided for in instances of dismissal without just cause (see compensation for termination of the employment contract ), which may be increased by collective agreement; b) unemployment benefit; and c) priority for a place on government-subsidized training and re-training courses.
Employees thus affected enjoy a general right of preference for payment out of the employer's assets in respect of not only movables but also non-movables, i.e . more favourable than the provisions laid down by law for more generalized situations (see preferential claims for entitlements accrued under a contract of employment ), and all tax enforcement proceedings against them are suspended, as are also any eviction orders for non-payment of rent, provided they can prove that delayed payment of wages is the cause. Also, provided two thirds of the workforce agree, they may apply to the Public Prosecutor's Office to have the employer declared bankrupt or insolvent.
Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.