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TERMINATION OF THE CONTRACT OF EMPLOYMENT

PORTUGAL
CESSAçÃO DO CONTRATO DE TRABALHO
TERMINATION OF THE CONTRACT OF EMPLOYMENT

Like any other contract, the contract of employment may come to an end for various reasons and in a number of different ways. Termination of the contract of employment is, however, subject to special rules which differ in many aspects from general contract law. These special rules are at present laid down in the so-called "Law on Dismissals" (1989 Termination of the Employment Contract and Fixed-Term Contracts Act), which provides for and regulates the following forms of termination: a) lapse (see bankruptcy , expiry of a fixed-term employment contract , lapse (of the employment contract ); b) mutual agreement of the parties (see termination by agreement ); c) dismissal by the employer; d) resignation by the employee, with or without just cause; e) withdrawal from the contract by either party during the probationary period ; and f) the disappearance of jobs for objective reasons (see individual redundancy ).

Portuguese law is founded on the two key principles that inform most national systems of legislation within the European Community: the principle of freedom to terminate the contractual bond which is inherent in long-term legal relationships established for an indefinite period; and the principle of stability, which is common to many long-term relationships but assumes particular importance in the case of the contract of employment. Freedom to terminate the contractual bond is, from the employee's viewpoint, a corollary of personal liberty; from the employer's viewpoint it is an expression of managerial prerogative and a manifestation of the right of free enterprise, specifically as regards adjusting the volume of employment to the enterprise's needs. The principle of stability or job security is essentially reflected in limitations imposed on termination of the contract by the employer, which in Portuguese law are particularly restrictive. The Decree-Laws of 1975-1976 provided increased job security. Furthermore, the 1976 Constitution established the prohibition of dismissal without just cause, a rule whose interpretation and application have had a decisive impact on the development of the right to protection against dismissal (see individual dismissal (just cause) ).

Following various attempts to amend the 1975-76 legislation in the direction of reducing the rigidity of guaranteed job security, the new "Law on Dismissals" was eventually promulgated (Decree-Law No. 64-A/89). Its most significant innovation was provision for a form of individual dismissal based on objective causes (individual redundancy) rather than, as previously, solely for reasons relating to the employee's conduct. However, the two main features of the earlier legislation have been maintained: the principle of uniformity, whereby the same rules apply to all contracts of employment, irrespective of the nature of the work or the nature and size of the enterprise (exceptions are made for just a few special types of contract, such as those covering domestic work, dock work and agricultural work); and the principle of "inderogability" (jus cogens ), prohibiting as a general principle the establishment of different rules (whether more or less favourable to employees) by collective agreement or under an individual contract of employment (Articles 2 and 59).

As far as the practical importance of the various forms of termination is concerned, government statistics for late 1990 show that cases of voluntary termination (including terminations by mutual agreement and resignations) accounted for almost half (48.8 per cent.) of all departures, while dismissals (both individual and collective) represented only 2.2 per cent. It is, nevertheless, judged that the vast majority of voluntary departures are in fact job cuts initiated by the employer as a result of economic difficulties, where employees resign in return for an agreed amount of severance pay (which means that these are, in essence, negotiated redundancies). It should also be noted that terminations deriving from the expiry of fixed-term contracts represented more than 25 per cent. of all departures.



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.

Page last updated: 14 August, 2009