Constitutional court rejects latest austerity measures

For the third time since the country’s bail-out by the Troika, Portugal's Constitutional Court has rejected proposed austerity measures. The court rejected a number of articles of the bill enacting austerity measures, saying that it violates a principle prohibiting dismissal ‘without just cause’, and also restricts a worker’s fundamental right to employment security. It said there were also issues about the principles of trust and legal confidence enshrined in the Constitution.

Background

For the third time since Portugal was bailed out by the Troika – the International Monetary Fund (IMF), the European Commission (EC) and the European Central Bank (ECB) – a government austerity bill has been rejected by the country’s Constitutional Court.

Ministers from the centre-right coalition, backed by Portugal's parliament, had put forward a proposal to introduce new rules making it possible for public sector workers to be sacked. This part of the austerity package announced by the coalition in May 2013 was called the ‘regime of requalification of the public sector’ and was drafted in response to the Constitutional Court's rejection in April 2013 of the austerity proposals included in the 2013 state budget (PT1301019I; PT1304019I).

Among other measures affecting public employees, the new austerity package also included a bill increasing their working time from 35 to 40 hours a week. The trade union confederations, the General Confederation of Portuguese Workers (CGTP) and the General Workers’ Union (UGT), and public sector trade unions responded by calling a general strike on 27 June 2013.

The two bills to change the rules for the dismissal of public sector workers and to extend public sector working time were both approved by parliament on 29 July 2013, just before parliament’s holiday period break. The plan was opposed by all of the parties on the left, including the Socialist Party, the Communist Party, the Left Block and the Greens. The parties opposing the new package said they would ask the Constitutional Court to rule on the constitutionality and legality of the proposals.

‘Requalification’ scheme

The government’s plan was to implement the ‘requalification’ scheme as a direct replacement for its special mobility scheme (PT1304019I). The new rules allowed ‘surplus’ public sector workers to wait for placement for a maximum of 12 months. At the end of this period, workers could choose to remain without pay on the waiting list for a possible placement, or opt for termination of employment. If they chose redundancy, they would be entitled to claim unemployment benefits.

It was estimated the measure would save the government €170 million.

The new bill would radically change the employment security of public sector workers. It would end the compromise reached with Law 12-A/2008, which had established two types of contract in the public sector – ‘by appointment’, which was limited for core functions, ‘by contract’. The agreement that led to the enactment of Law 12-A/2008 had established that public employees previously hired 'by appointment' who moved to a 'by contract' form of employment (those not in core functions) would still be able to keep their employment protection rights (PT0705019I; PT0809039I).

On 13 August 2013, Portugal's President, Aníbal Cavaco Silva, asked the Constitutional Court to rule on whether Bill 177/XXII, changing public sector workers' employment security, complied with Portugal’s constitution in four areas – just cause for dismissal, the constitutional regime of rights, freedoms and guarantees and the constitutional principle of protection of trust.

However, the President agreed to allow Bill 153/XII, extending working time, to be enforced. As a result, public sector employees began working 40-hour weeks from 28 September 2013 and Portugal joined the group of EU countries with longer working time (TN1305017S).

Court rules on ‘requalification’ measures

On 29 August 2013, the Constitutional Court announced its decision (Judgment No. 474/2013, in Portugese) and declared certain parts of the new bill unconstitutional.

It ruled against the proposals on ‘requalification’ of public sector workers. According to the court the justification of requalification on the grounds of ‘budget reduction of agencies or services resulting from the decrease of transfers from the State or their own resources’ was unfair. It said there was insufficient detail about the legal criteria that would be used to make a decision about redundancies. This, it said, could lead to unjustified and potentially arbitrary redundancies, which violated the constitutional principle forbidding dismissals without just cause.

It also violated the constitutional principle of proportionality in relation to the restriction of the fundamental right to employment security.

The court noted that in the private sector, employees could not be selected for redundancy on the basis that their dismissal would save more money. Instead employers had to demonstrate ‘the occurrence of market, structural or technological reasons’ for a dismissal.

The court also objected to the proposed rule changes for public sector employees hired ‘by appointment’ before 2008 and subsequently moved to a 'by contract' form of employment. The court ruled that employees who were employed 'by appointment' at the time when Law 12-A/2008 was enacted had been guaranteed that they would retain certain rights to job security. The court ruled the government's proposal to now remove this guarantee was unconstitutional.

Commentary

This is the third time that the Constitutional Court has rejected austerity measures intended to reduce public sector spending since the implementation of the first Troika Memorandum of Understanding (PT1301019I; PT1304019I). It left the centre-right coalition facing the most challenging questioning any government has ever faced in Portugal.

At stake this time is the government's intention to substantially reduce employment in the public sector to meet public deficit reduction targets. Yet between the end of 2011 and the second quarter of 2013, 36,855 public sector jobs have already been lost.

Trade union confederations and public sector unions welcomed the Constitutional Court decision that confirmed the concerns they had raised. The unions’ view is that the proposals threatened employment relations and employment protection at a time when the unemployment rate remains extremely high.

Maria da Paz Campos Lima, Dinâmia

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