New rules for fixed-term contracts

Download article in original language : Pt0108160fPT.DOC

In August 2001, a change to the legislation on fixed-term contracts came into effect in Portugal. One of the aims of the law, which establishes new rules governing the conclusion and termination of such contracts, is to ensure that employees who, de facto, have permanent jobs can benefit from a standard open-ended employment contract.

A new law on fixed-term contracts was published in July 2001 and came into force at the beginning of August. The law aims to build on and complement certain provisions of existing legislation.

The Portuguese legislation covering fixed-term contract s (PT9810106N) has gone through a number of changes, the most notable being those made in 1999. With this new law, fixed-term contracts are now covered by a set of rules governing:

• the legal framework for terminating an individual fixed-term employment contract;

• how fixed-term contracts are concluded and the conditions under which they may be terminated;

• termination of a contract by mutual agreement;

• voluntary termination on the part of the employee; and

• the grounds on which fixed-term contracts may be concluded.

Main points

The more innovative features of the new law include the following:

• fixed-term contracts may be used only where another worker is being temporarily replaced, when additional temporary tasks are to be performed, when seasonal activities are being carried out, at the start of a new activity of uncertain or seasonal duration, and when hiring first-time job-seekers or long-term unemployed people;

• fixed-term contracts cannot be used fraudulently as a means of evading the rules on standard open-ended employment contracts. Under the terms of the new law, if this is found to have occurred, the worker has the right to a standard contract;

• the burden of proof is on the employer to substantiate why a fixed-term contract was signed instead of a standard contract;

• a series of consecutive fixed-term contracts with the same signatories, or fixed-term contracts where the employee is asked to take breaks between contracts, will lead to an automatic change in the legal status of the fixed-term contract to a standard contract, if the employee is performing the same functions or meeting the same company needs as before;

• at the end of the term of the contract, the employee will have the right to compensation in the form of three day's wages for each full month worked under the contract. Termination of a fixed-term contract for reasons beyond the control of the employee, in cases where the contract has been in force for over 12 months, will imply that the same job position cannot be filled by an employee with either a standard or fixed-term contract for six months after the position has been vacated;

• employees with a fixed-term contract have the right to compensation in the form of six months' basic pay if they are replaced by a new recruit who is given a standard contract to perform the same functions; and

• the content of a fixed-term contract as well as information on its extension and/or termination must be submitted to the company's workers' commission and trade union committee within five days.

One of the most important features of the new law is that it requires the employer clearly to state the facts and circumstances, so that there is no doubt about why a fixed-term contract has been concluded.

The debate

Draft laws to change the existing fixed-term contract legislation had been put forward by the Socialist Party (Partido Socialista, PS), the Communist Party (Partido Comunista Português, PCP)and the Left Bloc (Bloco de Esquerda, BE) (PT0102133N). The drafts were open to public debate and trade unions and workers' commissions submitted their comments to the parliamentary Labour Solidarity and Social Security Commission. According to those involved in formulating the various draft laws, one of the main aims was to put a halt to the alarming amount of precarious work in Portugal. Another principal aim was to set limits and bring greater fairness to workers whose jobs are truly temporary, by improving the system of monitoring and by creating a system that will offer fixed-term employees rights and job stability.

The Commission drew up a report that was published in the Diário da Assembleia da República (Parliamentary Record) on 3 May 2001. The report detailed the discussion and voting on the draft law, as follows:

• the final text was essentially based on the draft drawn up by the Socialist Party and was approved with the Socialist Party and the Social Democrats (Partido Social Democrata, PSD) voting in favor. The Communist Party and the Left Bloc abstained; and

• members of parliament from the Communist Party and the Left Bloc believed that the draft could have gone further in assuring greater quality of work for fixed-term employees. The Communist Party in particular believed that, at the least, the law should not have continued to enshrine fixed-term contracts as the means of hiring first-job seekers and long-term unemployed people. In this party's opinion, the objective behind this article in the previous law was to enable companies to hire these types of worker more easily. However, in reality such workers end up being employed for long periods of time without ever being asked to sign a standard contract.

Positions of the social partners

The discussion over, and publication of, the law sparked comments from the Portuguese Business Association (Associação Empresarial Portuguesa, AEP) and some regional employers' associations such as the Viseu Regional Business Association (Associação Empresarial da Região de Viseu, AIRV). These organisations believe that employment contracts should be more flexible and that the award of standard contracts should be based on the employee's competence and not be subject to legislation that is becoming ever more restrictive.

The trade unions acknowledge that there are certain job positions that are, by nature, temporary. However, they assert that jobs that are truly of a permanent nature should benefit from an employment contract that reflects the nature of the job being done.

Commentary

The new law is a concrete attempt to improve the quality of work in Portugal. The country is in the throes of a situation in which the high level of precarious work shows no discernible signs of abating. Some commentators have observed that the law has caused some surprise because it went farther than was expected in controlling and restricting fixed-term contracts in Portugal. (Maria Luisa Cristovam, UAL)