New proposal seeks to regularise false self-employment

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In autumn 1998, a draft bill on "false self-employment" was submitted to the Portuguese social partners for discussion. It would regularise such situations by making it possible to turn them into fixed-term contracts and, from there, establishing the presumption of the existence of a permanent employment contract.

The 1996-9 tripartite Strategic Concertation Pact (Acordo de Concertação Estratégica, ACE) stipulates, among the legislative measures to be adopted, the approval of legislation designed to combat situations of "false self-employment" (falso trabalho autónomo), where the true nature of the work situation is disguised or the existence of an employment contract is denied. The Pact (PT9808190F) was signed by the government, the Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP), Confederation of Portuguese Commerce (Confederação do Comércio e Serviços de Portugal, CCP), Confederation of Portuguese Farmers (Confederação dos Agricultores de Portugal, CAP) and General Workers' Union (União Geral de Trabalhadores, UGT).

The problem of false self-employment

The situations in question are those where workers are, in essence, functioning as employees of an entity in a subordinate capacity, but this is disguised through the use of false contracts for services - commonly called "green-slip contracts" (contratos a recibos verdes). The social partners included several measures to fight this practice in the ACE. The measures include undertaking studies on how the labour market functions,as well as a revision of the system of access to "green slips" - that is, access to the specific fiscal category of self-employed workers. They also include "drafting legislative measures designed to promote regularisation of existing situations, namely by changing them, within 30 days of the entry into force of such measures, and in other special circumstances, into fixed-term contracts". With regard to this last measure, the ACE expressly mentioned the first quarter of 1997 as the time frame for presenting a bill to the social partners.

This provision in the ACE came out of debate over a draft of a decree-law, also relating to the issue of false self-employment, that was published for public discussion in March of 1996. The solution proposed at that time was to apply the designation of "work under an employment contract" to any person who works for another entity, within an organisation under the supervision of the entity, and in its respective installations or workplace. This last requirement referring to the workplace would not have been required in the case of activities that, by their nature or objective, must take place away from the organisation's worksite. The presumption of an employment contract does allow for some exceptions, and could be waived by the worker.

This draft decree-law never went beyond the public discussion phase. Approval was dropped because of the signing of the ACE, which contained the same provisions. It is in this context that a new draft bill on regularisation of situations of false self-employment has now been submitted to the social partners for discussion.

The new proposals

The new draft bill begins by regularising situations where subordinate work has been inappropriately classified as self-employment, through the application of employment contracts either indefinite or for a fixed term, in accordance with the applicable laws. In addition, it makes it possible, in special circumstances, to regularise the situation through the use of fixed-term employment contracts for a period of no longer than one year with no option to renew. In these cases, there is no need for the verification normally required by law for this type of contract. However, the changeover to employment contracts must be made within 30 days of when the law goes into effect. Once the 30-day time limit has passed, "whenever a person is discovered to be working at an organisation's worksite, under the supervision of another, without clearly demonstrating that the work truly constitutes self-employed labour, the labour inspector is to notify both parties in writing that the existing labour relationship falls under the legal framework of an employment contract."

The UGT trade union confederation considers the bill inadequate, protesting that there is still too much latitude for fixed-term contracts to be signed that fall outside the legal framework. It would like to see the bill coordinated with the unemployment benefit system, so as to provide some protection to those workers who will end up with fixed-term contracts and then be dismissed before reaching the time set by law that would guarantee a normal employment contract. UGT also protests against the provision that an employment contract is presumed to exist only after verification by labour inspectors has taken place. It believes that this presumption should be automatic.

The General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) - which did not sign the ACE - is against a regularisation of situations of false self-employment that would create more precarious labour relationships. It believes that the consequences of disguising work that should be covered by an employment contract must be immediate application of the employment contract, as understood by law.

Commentary

Space does not permit an exhaustive analysis of the draft bill here, but some observations can be made.

Approval of measures to combat situations of false self-employment, beyond being a commitment made by the government and the social partners in the ACE, is justified by fact that this practice is so widespread, and because of the precarious employment situation in which the workers involved find themselves. In any event, these measures need to be coordinated with other forms of intervention, namely, flexibilisation of the legal models for the employment relationship. Portuguese labour legislation is still centred around the full-time permanent employment contract, and the legislature has not paid much attention to the emergence of new and atypical forms of rendering services that challenge this classic model.

The fact is that case law and doctrine have determined that, when faced with situations of false self-employment, labour laws should be applied whenever elements characteristic of an employment contract are present. If this measure is intended to promote regularisation of the irregular situation on a voluntary basis by those involved (especially on the part of the employer), the mere possibility of being able to opt for a fixed-term contract of less than a year is hardly much incentive. This is not to mention the distortions which the practice could cause in the fixed-term contract system.

In other countries, establishing the presumption of a subordinate relationship has already been shown to be inadequate as a remedy. It does not make much sense to put into practice a solution that did not produce good results in other legal contexts. In addition, coordinating the function of a presumption of subordinate relationship with labour inspection raises some problems from a legal-technical standpoint, with regard to the latitude the inspectors would be given in evaluating situations and to the lack of control parameters. It should also be noted that, in the draft bill in question, the terms by which this presumption is established are considerably broader than those set by the draft decree-law of March 1996 referred to above. (António Nunes de Carvalho)