In the current context of the coronavirus disease 2019 (Covid-19), it is likely that several businesses will be unable to pay outgoings due to severe cash-flow shortages in the coming months.

According to official data, the sectors of tourism, non-food retail, automotive and components, textile/clothing, consumer durables and leisure and cultural activities will be the most affected by the crisis caused by Covid-19 in Portugal.

The measures implemented can be generally divided into four categories: (i) financial measures - moratorium on credits and financial incentive measures; (ii) tax and contributory measures; (iii) employment - simplified lay-off regime and extraordinary training plan;  and (iv) real estate – moratorium on rents.

The purpose of this briefing is to provide an overview of insolvency proceedings for Portuguese companies, so that creditors and other stakeholders may understand some of the restructuring and insolvency solutions for facing cash-flow difficulties due to Covid-19 and, particularly, in a scenario beyond Covid-19.

In the current context of the coronavirus disease 2019 (Covid-19), it is likely that several businesses will be unable to pay outgoings due to severe cash-flow shortages.

As stated by International Monetary Fund, this crisis is not simply about liquidity, but primarily about solvency at a time when large segments of the global economy have come to a complete stop.

Sectors of tourism, non-food retail, automotive and components, textile/clothing, consumer durables and leisure and cultural activities will be the most affected by this crisis. Other sectors, such as construction and real estate, which were developing positively in 2020, will also suffer a reversal in the upward trend of their activity.

In seeking to mitigate the economic impact of Covid-19, the Portuguese Government approved crisis containment measures – legal, financial, and regulatory – to protect businesses (and individuals) negatively affected by the Covid-19 pandemic.

The measures implemented can be generally divided into four categories: (i) financial measures - moratorium on credits and financial incentive measures; (ii) tax and contributory measures; (iii) employment - simplified lay-off regime and extraordinary training plan;  and (iv) real estate – moratorium on rents. A summary of these measures is detailed below.

1. Financing

1.1. Moratorium on loans

Measures

• It is prohibited to cancel, in whole or in part, the credit facilities and loans granted on or before 27 March 2020, during the period in which the measure is in force. Banks and other financing entities cannot refuse financing that had already been approved;
• For bullet loans in force on or before 27 March 2020, extension of the maturity as well as of any ancillary obligations, including interest and guarantees, namely provided through insurance or in securities;
• For other loans in force on or before 27 March 2020, suspension of payment of instalments, rents, guarantees and interest and automatic extension of the payments schedule. The contractual payment plan for the instalments of capital, rent, interest, commissions, and other charges will be automatically extended for a period identical to that of the suspension. There are no charges other than those that may arise from the variability of the contracted reference interest rate.

Who can benefit?

SMEs that have their headquarters and carry out their economic activity in Portugal and that, as of 18 March 2020, were not in:

• Default of cash payments towards financial institutions for more than 90 days or, if they were, did not meet the materiality threshold established in the Bank of Portugal’s Notice 2/2019 and Regulation (EU) 2018/1845 of the European Central Bank of 21 November 2018;
• An insolvency, suspension, or cessation of payments situation or subject to an enforcement proceeding;
• Default towards the Tax Authority and the Social Security.

Sole owners of businesses, charities and non-profit organizations may also be eligible.

The financing covered by this measure applies to credit operations granted by credit institutions, financing, leasing, factoring and mutual guarantee companies, as well as branches of credit institution with operating in Portugal

Duration

Until 31 March 2021.

1.2. Financial incentive programs

Measures

• According to IAPMEI, requests for incentive reimbursement submitted by companies will be settled as soon as possible, using, if necessary, a transitional upfront payment up to 80% of the incentive;
• Extension (for 12 months) and without interest, of the repayment term of loans granted under QREN or Portugal 2020, in situations of decrease in turnover or reserves or orders over 20% in the two months prior to the request for modification of the repayment plan, compared to the same period in the previous year;
• Eligibility of the expenses incurred with cancelled or postponed initiatives or events, foreseen in projects approved by Portugal 2020 and other funding programs;
• Consideration of the negative impacts of Covid-19 in case of insufficient implementation of actions or objectives established in the grant agreements of Portugal 2020;
• Extraordinary financial incentive to ensure the normalization phase, to prevent the risk of unemployment and the maintenance of jobs (up to one minimum wage per employee);
• Strengthening of the response capacity of IAPMEI and of Turismo de Portugal for the assistance to the impact caused by Covid-19;
• The “Capitalizar” Financial Facility – Covid-19 was created, worth EUR 200 million, to support companies whose activity is affected by the economic effects resulting from the outbreak. This Financial Facility is aimed at companies whose sales have decreased by at least 20% in the last 60 days (compared to the same period last year) preceding the submission of the application to this Financial Facility;
• Extension of the deadline for the submission of applications to calls under “Portugal 2020” incentive program.

Who can benefit?

• Companies that have their headquarters and carry out their economic activity in Portugal. They cannot also have debts to the Tax Authority and the Social Security;
• These credit lines are also available for sectors strongly affected by the Covid-19 pandemic, such as tourism, restauration, and the industrial sector, for instance, textiles and footwear.

Duration

Depending on the incentive program.

Where can you read more about these measures?

Covid-19: Moratorium on credits

Covid-19: Extension of the moratorium on bank credits

2. Tax

2.1. Deferral of the deadlines of the special payment on account, corporate income tax (CIT) and payment on account

Measures

Deferral of the deadline regarding the first instalment of the special payment on account – which should be made in March – to 30 June 2020, with no penalty.

Who can benefit?

Companies subject to special payment on account.

Duration

Until 30 June 2020.

Measures

Deferral of the deadline for submission of the CIT return (“Modelo 22”) for the 2019 tax period from 31 May 2020 to 31 July 2020, with no penalty.

Who can benefit?

Companies subject to Corporate Income Tax.

Duration

Until 31 July 2020.

Measures

Deferral of the deadline regarding the 1st instalment of the payment on account and the 1st instalment of the additional payment on account – which should be made in July – to 31 August 2020, with no penalty.

Who can benefit?

Companies subject to payment on account and additional payment on account.

Duration

Until 31 August 2020.

2.2. Deferral of delivery of VAT and withholding taxes

Measures

Payment of VAT and CIT and personal income tax (PIT) withholdings in three- or six-monthly instalments, interest free.

Who can benefit?

• Companies with a turnover up to EUR 10 million in 2019;
• Companies that have started their activity as of 1 January 2019 or that operate in closed sectors;
• Companies that have been closed under the emergency state decree;
• Companies with a drop above 20% of turnover compared to the average of the 3 months prior to the month of the obligation, compared to the same period of the previous year;
• Self-employed individuals.

2.3. Deferral of the social security contributions

Measures

Companies may only pay a third of the total amount of the Social Security contributions in March, April, and May 2020. The remaining two thirds will be deferred to the 2nd semester of 2020, paid through a three or six-monthly instalments plan, without interest. The remaining two thirds will be paid in equal and successive instalments in July, August, and September 2020 or from July to December 2020.

Who can benefit?

• Companies with a turnover up to EUR 10 million in 2018;
• Companies that have started their activity as of 1 January 2019 or that operate in closed sectors;
• Companies that have been closed under the emergency state decree;
• Companies with a drop above 20% of turnover compared to the average of the three months prior to the month of the obligation, compared to the same period of the previous year.

Duration

July, August, and September 2020 or from July to December 2020.

Where can you read more about these measures?

Covid-19: Fiscal support measures

3. Employment-related matters

3.1. Simplified lay-off (employment contracts may be suspended, or the normal working period can be reduced)

Measures

• Financial support granted by the social security to companies adhering to simplified lay-off, equivalent to 70% of 2/3 of the employee’s gross salary up to EUR 1,905; the remaining 30% being borne by the employer;
• This financial support can be added by a training scholarship, with a maximum amount of EUR 131,64 (half of which to be granted to the employee and the remaining part to the employer);
• If the normal working period is reduced to more than 66% of the normal period (for example, the employee works 80% of the normal working period), the employee receives the number of hours worked (80%), but the Social Security only contributes up to 2/3 (66%) of the salary;

During the lay-off period and in the following 60 days, the employer may not terminate employment contracts by way of collective dismissal nor redundancy of the job position.

Who can benefit?

Employers, which fulfil one of the following conditions:

• Total or partial closure of the company or the establishment resulting from statutory close of facilities and establishments;
• Total shutdown of the company or the establishment activity resulting from the interruption of global supply chains, suspension, or cancellation of orders or reservations;
• Abrupt and steep drop of at least 40% of the turnover in the period of 30 days prior to the filing of the company’s application with the social security services, with reference to the monthly average turnover of the two months prior to this period or comparing to the equivalent last year’s  month.

The employer may not be in default towards the Tax Authority and the Social Security.

Duration

One-month, monthly renewable up to six months.

3.2. Extraordinary professional training measures

Measures

The financial support is granted depending on the training hours for each employee and is limited to 50% of the employee’s gross salary with a maximum limit of EUR 635.

Who can benefit?

Companies facing a business crisis, but which have not benefited from the simplified lay-off.

Duration

One-month.

3.3. Temporary exemption from contributions payment to the Social Security

Measures

Exemption from Social Security contributions by employers (only employers’ contributions).

Who can benefit?

Employers benefiting from the simplified lay-off, extraordinary professional training measures, or extraordinary financial support. Employers must prove that their contributions and tax payments are up to date with Social Security and the Tax Authority.

Duration

During the simplified lay-off period and/or the extraordinary professional training measures.

3.4. Extraordinary financial support to facilitate the payment of salaries in the activity normalization phase

Measures

• Maximum of EUR 635, per employee, to be paid by IEFP – Instituto do Emprego e Formação Profissional;
• A complementary aid may be granted up to EUR 351, per employee, to be paid by IEFP;
• An extraordinary financial support of up to EUR 635, per employee, may be granted and paid by IEFP.

Who can benefit?

Employers benefiting from the simplified lay-off or the extraordinary professional training measures.

Duration

Until 30 September 2020.

3.5. Extraordinary incentives for the normalization phase

Measures

-         Support in the amount of a minimum monthly guaranteed payment (EUR 635.00), paid in one lump sum per worker who has benefited from the simplified lay-off;

-         Support in the amount of two guaranteed monthly minimum wages (1,270 euros), paid in two instalments over six months per worker who has benefited from the simplified lay-off;

Who can benefit?

Companies that are in a position to resume their activity, provided that they have benefited from the simplified lay-off scheme or the extraordinary training plan.

Duration

No deadline is imposed.

Where can you read more about these measures?

Covid-19: Absence from work

Covid-19: New extraordinary measures

Covid-19: Fast track lay-off

Covid-19: Privacy in time of pandemic – taking employees’ temperatures?

Covid-19: New social protection policies

Covid-19: teleworking can persist, but it is no longer mandatory

Covid-19: New measures to support resuming work

Covid-19: Simplified Lay-off and incentives to normalize the activity

4. Real Estate

4.1. Deferral of rents payment

Measures

• Tenants with businesses under lockdown or activity restrictions due to mitigation and containment measures may defer payment of the rents falling into this period to the subsequent 12-month period counting from 1 September 2020, where the deferred amount should be paid in monthly instalments of not less than 1/12 of the total amount together with the relevant rents. No penalty for delay may be claimed to tenants;
• Suspension of early termination of lease agreements by landlords;
• Suspension of expiry of lease agreements at the end of the relevant term (unless accepted by tenants);
• Prohibition of termination of commercial lease agreements on the grounds of business lockdown or activity restrictions.

Who can benefit?

Tenants of commercial lease agreements or other means of commercial exploitation of property.

Duration

Until 30 June 2021, at most.

Where can you read more about these measures?

Covid-19: payment of rents may be postponed

Covid-19: lease agreements regulatory update

The first 2020 solar auction in Portugal was announced on March 27th and has now begun on 15 June 2020, to be completed by the end of the summer. 

The outcome of the 2019 solar auction has shown how competitive the Portuguese solar market can be. There was some uncertainty for a while as the Covid-19 forced the Portuguese Government to postpone new solar energy auctions, but now it's happening! 

This paper provides a guide through its stages and rules, learn about them in the PDF. 

2020 is expected to be a critical year – if not “the” year – of 5G in Portugal. The spectrum auction takes place in April this year and new entrants will be given a chance to dispute the telecommunications market. Find out more on auction prices, spectrum and novel opportunities by clicking on the pdf!

In a near future, most competitive e-businesses will be able to gauge consumers’ needs and understanding what they want even before consumers do. Anticipating consumers’ behavior is crucial for the e-business success.

Click on the pdf to know everything about e-commerce topics. 

After mini-hydro and wind, photovoltaic solar energy could become the third wave of the renewable energy revolution in Portugal. By 2030, the power output promises to grow up to 6.6 GW using this technology. 

Portugal has been one of the most enthusiastic countries regarding renewable energies. In 2016, 28,1% of the energy produced was by renewable sources, compared to 19.2% in 2004. This is the eighth highest percentage among European countries and the fifth highest in the Eurozone. Portugal’s target for 2020 is set at 31%. Portugal has a strong solar energy potential, boosting an annual average of 2,200 to 3,000 hours of sun in the mainland, making it the European country with the highest average of hours of sun exposure. Today, the solar power output in Portugal is of 1.006 GWh. The Amareleja solar plant with its 46MW and annual production of 93 GW is the largest in Portugal. 

In 2017, renewable sources represented 41% of the electricity generated in Portugal. Still, more than 30% of the renewable quota was achieved by the electricity generated by large-scale hydro power plants. Solar energy remains very far from what it could potentially be. The Portuguese Government has, early in 2017, suspended the licensing of any new feed-in tariff photovoltaic plants. The political motive was not increasing the electricity invoice paid by consumers, but the argument passed to the market players was that the market already offered adequate conditions for the deployment of new projects without a feed-in tariff due to the continuing solar panels’ cost reduction. 

The lack of stability on promoters’ remuneration led to the tightening of the financing conditions and to several licensed projects never being built or operated. The lack of grid capacity has been another challenge to the growth of the Portuguese photovoltaics. 

Aiming at solving these challenges, in 2019 the Portuguese government made several modifications on the licensing photovoltaics power plants and changed significantly the solar production ecosystem.

To learn more about this subject, click on the pdf.

#whyportugal

Quick and simple registration systems can save your IP from falling into the wrong hands and ensure your business and your brand are protected in Portugal.

In today's world a business’s brand is as important as its product or services. And the intellectual creations behind it are what gives a business its unique competitive edge. The importance of protecting your Intellectual Property (IP) assets cannot be undervalued. Neglecting to do so can put your business at risk, affecting essential core services and your long-term viability.

Are my IP rights covered in Portugal?

Yes, it has never been quicker or easier to ensure your IP rights are protected on par with other EU Member States and in line with EU directives. Portugal is also member of the World Intellectual Property Organization (WIPO) and party to numerous international agreements, including the Berne Convention, the Universal Copyright Convention, the European Patent Convention and the Patent Cooperation Treaty.

The law covers your industrial property rights – trademarks, patents and designs – and your copyright, which protects literary, artistic and musical works, multimedia creations, videograms and phonograms, computer programs and databases.

To note, while IP rights are territorial, many can be registered at the Portuguese Institute of Industrial Property (INPI) for both national and EU protection, while other EU rights must be arranged direct with the relevant EU European Patent or IP Office. International rights must be handled with the WIPO.

What falls within the category of ‘trademarks’?

From non-generic words, logos, slogans, sounds, etc., your trademarks are your brand – think McDonald’s golden arches or Nike’s “Just do it”. These important business assets distinguish a business, its products and services within the relevant market. We cannot emphasis enough the importance of securing your right to trademark your products, etc., as yours and yours alone.

Registration protects your rights for 10-year periods, without limits on renewal, but to be eligible, signs have to be unique or distinctive, such that they could be easily identified by a third party. ‘Signs’ can be represented graphically, by words, people’s names, drawings, letters, numbers and sounds, for example, as well as the form of the product or respective packaging and even your advertising slogans. What ‘signs’ cannot be is descriptive or just the name of your product or service.

To note, well-known or prestigious trademarks are given a special degree of protection, even if they have not been registered.

How are trademarks registered and where will they be protected?

Any person or legal entity from any country in the world can apply for the registration in Portugal, and you can do it online at https://inpi.justica.gov.pt/, but for entities, all stakeholders must take part. Trademarks registered at the INPI are only protected within Portugal, so if you are looking for EU-wide protection you must register at the EU IP Office.

For international protection in over 100 countries, you have to register with the WIPO. You must have a business, be a national or domiciled in a member country of the Madrid System (International Trademark Registration Treaty), but be aware that each country’s national law governs the registration so your application could be accepted in some and rejected in others.

Trademark applications in Portugal will be denied if they are a reproduction or imitation of a well-known Portuguese trademark, or if they apply to identical or similar products or services that could cause confusion with that well-known trademark. Applications will also be refused if the trademark is identical or similar to a prestigious Portuguese or EU trademark, even if related to different products or services, in a way that takes unfair advantage of the prestigious trademark or causes it injury.

To watch out for at both national and EU levels is the fact that trademarks need to be actively used for five consecutive years, otherwise the registration expires, and once your trademark products are in the EU market, your rights are considered exhausted and you cannot disallow the use of the trademark on the product.

What rights are protected by a ‘patent’?

If you have got a new invention, way of solving a technical issue or even a new way of doing something, protecting it with a patent is paramount. This ensures your right to exclusive use and that others cannot use your ‘invention’ without your express permission for 20 years from the date of application in Portugal. You can also apply for a supplementary protection certificate that extends protection for a further if you are dealing in pharmaceutical and plant protection products.

Portuguese patents protect others from manufacturing, offering or storing an invention with an industrial use without your consent. This includes anything biological in nature or process that produces, treats or uses biological material but does not extend to: discoveries; scientific theories and mathematical methods; materials or substances already in existence; nuclear materials; aesthetic creations; schemes, rules and methods for performing mental acts, playing games or doing business, computer programs and informative presentations. If the commercial exploitation of an invention would be contrary to Portuguese law, public policy, public health and good practice then it is also excluded.

To be covered, your invention has to be novel, capable of industrial application, and it cannot be something that would be obvious to someone with average knowledge in the relevant technical field. Once you have the patent you must exploit the invention within four years from the application date or three years from the date it was granted, whichever is longer, and you have to commercialise the results.

To note, a patent can be used by a third party if you enter into a license agreement or through its sale to a third party.

How and where are patents registered?

As with trademarks, registration is territorial. For protection valid in Portugal you must register at INPI, in person or online at https://inpi.justica.gov.pt/ and for an EU-wide patent (not including Spain and Croatia) you can either do so at INPI or direct with the EU Patent Office but the application must be in either English, French or German. The patent will be automatically validated in all EU Member States and only subject to maintenance fees in one country, but be aware that national laws govern registration in each country. Relevant fees apply and the protection period for both is 20 years.

Once the patented products are placed on the EU market, your rights as the patent-holder are considered exhausted and you cannot disallow acts related with the patented products.

International patents are dealt with by the WIPO, ensuring your patent is protected in over 150 countries with a single application and set of fees. The applicant must be a national or resident of a member country of the Patent Cooperation Treaty. However, it is the national laws that govern the registration in each country.

When does a ‘utility model’ apply?

If you don’t meet the patent criteria, you can always try for a utility model with the INPI with applications in person or online at https://inpi.justica.gov.pt/. With less stringent requirements, a simplified approval process and lower fees, this applies to minor inventions – products or procedures with industrial application – that still require a level of protection.

Utility models, however, don’t cover anything biological in nature and last only six years from the date of application. This can be extended, but only up to a maximum of 10 years.

What protection can secure ‘design’ rights?

Your business’s designs need to be safeguarded, granting you exclusive rights and ensuring third parties can’t copy or commercialise them. Design rights protect visual appearance, shape or configuration for unique two- or three-dimensional forms, and while they don’t have to be 100% ‘new’ they have to include novel combinations or layouts of known elements with a distinctive character.

Once registered in Portugal, designs are protected for five years periods from the application date, renewable for up to a maximum of 25 years. Registered designs also benefit from automatic copyright protection applicable from the date of creation.

You can register for national protection at INPI and EU-wide at the EU IP Office with just a single set of fees to cover all Member States. WIPO registration grants protection in 65 countries, and to qualified you must be a business or be a national or domiciled in a country that is part of the Madrid System. Once again, it is national laws that govern registration in each country and your rights are considered exhausted once the products where the design was incorporated or applied are placed on the EU market.

To note, unregistered Community designs have an automatic three-year protection as from the date of their public disclosure within the EU. This prevents commercial use from any copy of the design by third parties.

How can works be copyrighted?

Once an idea has been physically expressed, then copyright comes into play, protecting literary and artistic works, music, software, architectural works and even databases and computer programs, among others.

Copyright does not have to be officially registered to be protected – its automatic upon the creation of the work. It is highly advisable, however, to register with the relevant authorities worldwide to ensure that you control whether, or under what circumstances, the work can be used by third parties, and gain recourse if used without permission

In Portugal, you may register with the General Inspection of Cultural Activities (IGAC), part of the Ministry of Culture, and you can even delegate the administration of your copyright to a collecting society, like the Portuguese Society of Authors (SPA) or ASSOFT - Portuguese Association of Software. Portugal also is party to international treaties and conventions (such as the Berne Convention) that allows for protection in numerous countries.

Authors or copyright owners of any works covered by copyright have the right to assign or licence their economic exploitation. Protection generally runs for 70 years following the death of the author or from posthumous publication, after which the works enter the public domain and can be used freely. This does not, however, apply to what is known as the ‘moral’ rights to the work. As an author this means you have the right to be recognised as the author of the work and to protect it. ‘Moral’ rights are not assignable, cannot be sold, allocated or waived – even if the author authorises its exploitation – and they continue indefinitely.

What protection is afforded to databases and computer programs?

Databases are covered by copyright if considered an ‘intellectual creation’ under the Portuguese Protection of Databases Law. This lasts 15 years from the end of the calendar year in which the database was created. And there is even implied protection for unregistered databases where substantial investment is involved in obtaining, verifying or presenting its contents.

Computer programs can get the same level of protection as literary works if they fall within the legal criteria of being ‘creative’, as defined in the Portuguese Computer Program Rights Law and you can register the program on the IGAC or ASSOFT. Any unauthorised economic exploitation is considered a violation of the Portuguese Computer Program Rights Law and deemed a criminal offence under the Portuguese Cybercrime Law.

As the program author, you have ‘personal’ rights, meaning you have the right to be recognised as the author of the work and can mention the program’s name. As owner of a program, you have the right to economic exploitation including permanent or temporary reproduction by any means and in any form, make changes and any other modifications as well as reproducing the results and distribution to the public. In addition, you can put originals or copies into circulation and to rent out those copies. Also, a program created by an employee in the execution of their duties or following instructions given by their employer, is considered a ‘collective work’ owned by the company.

To note, anyone with the right to use a copy of the program can, without the authorisation, make a back-up or observe, study or test its functioning, and a licensee or anyone with the right to use it (or on behalf of someone authorized to do so) can perform a decompilation of the parts necessary for interoperability with other programs. This is only legal if obtaining the information is intrinsic to achieving interoperability and if the information is not easily accessible.

Can ‘trade secrets’ be protected and what circumstances do that cover?

Any confidential business information giving competitive advantage to others can be considered a trade secret, and it is your business’s most valuable asset. This includes information obtained from business plans, customer data, recipes and manufacturing processes through to know-how and technical knowledge (potentially patentable). Trade secrets don’t require registration to be protected, it is automatic, but there are certain conditions that need to be met.

The disclosure, acquisition or use of your trade secrets without your consent is illegal if the information is secret, has commercial value due to being secret and has been subject to considerable diligence by the person responsible for the information in order to keep it in secret. It is also illegal if someone, at the time of obtaining, using or disclosing a trade secret, had or should have known that the secret had been obtained directly or indirectly from another person who was using or disclosing it illegally.

It is not illegal however if someone gets your trade secrets through independent discovery or creation, due to the employee’s (or their representative’s) right to the information, through consultation in accordance with national practice or the law or in other circumstances that are considered to be in line with honest commercial practices.

If there has been a breach or well-founded fear that others could cause serious and irreparable damage to your trade secret, the court may, at your request, order the appropriate precautionary measures. The court can also order the prohibition of the use or disclosure of the trade secret, the production, offering, placing on the market or use of the infringing goods, as well as the import, export or storing of the infringing goods for those purposes.

We also advise that whenever you are dealing with the exchange of confidential and sensitive information to business partners, shareholders, employees, suppliers and customers, you enter into a non-disclosure agreement in case unfair competition, abuse of right and other legal rules protecting business secrets do not apply or offer sufficient protection.

 

For help with this and all your IP rights, as well as how we can help ease the process, read our Guide ‘Why Portugal?’.

#whyportugal 

Employment laws play a particularly important role in decision-making when it comes to setting up business or working in any country. Whether as an employer or employee, Portugal’s employment regime ensures you know where you stand.

The employer-employee relationship has long been a sticking point for potential investors into any country due the rigidity of the laws as well as the obligations, constraints and fine print that come with it. Ten years ago, Portugal addressed this point with a change in the legal regime that it has been revising and adapting to strike the right balance between securing employee rights and giving employers a level of necessary flexibility.

If you look at recent data from the World Economic Forum (WEF), the European Trade Union Institute and PORDATA (the statistical database of socioeconomic subjects) you will see Portugal has a less rigid system and is at the lower end of labour dispute figures and days lost to labour disputes when compared with other EU countries.

Your go-to for everything employment is the 2009 Labour Code, with everything you need in one place including the type of contracts, duration, working hours, holidays, absences and termination. It’s employer-friendly, as it allows certain types of flexible working schedules without increasing costs to the employer, as well as having an overall flexible regime designed by the Government to make the country’s employment legal framework fairer, more balanced and increasingly investor-friendly.

Looking to hiring employees?

The mandatory rules set forth in the Labour Code, as well those part of any collective bargaining agreements with Trade Unions, set out the legal framework that you must follow when hiring an employee in Portugal. Under certain circumstances, however, you and your employees may be allowed to agree different rules, if more favourable to the latter.

You need to be aware of employees’ obligations and entitlements, working hours and holidays.

These are figures to take note of. You have a maximum 40-hour work-week and a 8-hour work-day, along with a minimum rest of 11 consecutive hours between workings days and a mandatory weekly rest day.

Employees’ are entitled to 22 working days of paid annual leave. This limit may be increased by collective bargaining agreements.  

Employees are also entitled to public holidays – a total of 13 days in the year 2019.

Working out salaries.

You need to be aware that for 2019 the minimum national wage is set at €600 per month. In addition to this you must pay two extra month’s salary known as the ‘Christmas allowance’, payable up to 15 December each year, and “holidays allowance” payable preferably before the holidays.

And what are the employees’ rights in relation to absences?

Be aware that Portugal has a rigid regime when it comes to absences. The labour code establishes an exhaustive list of justified absences, which as a general rule do not affect any rights of the employee.

As for employment contracts, what do you need to be aware of?

Contracts can be for indefinite term (permanent) or for a fixed or unfixed term, and certain types must be made in writing, i.e. those with a ‘term’, part-time contracts, contract executed with a minor. To note, ‘term’ contracts can only be used to meet temporary work needs of the employer and for specific periods, and have a maximum duration of two years, renewable up to three times and the total duration of renewals may not exceed the contract’s initial duration.

The duration of the unfixed term contract may not exceed four years.

Does the law allow for probation periods?

Yes, and the length of the probation period depends on the type of contract.

Thus, for permanent contracts, the probation period is equal to 240 days for management positions, 180 days for employees performing functions of high responsibility or high complexity, first job seekers and long-term unemployed, and 90 days for the rest of the employees.

For fixed or unfixed contracts, the probation period is equal to 30 days for contracts over six months and 15 days for contracts of less than six months.

During this period both parties are free to cut the contract short, without justification or notice period.

 

What are the key rules in relation to terminations and dismissals?

Again, the Labour Code sets out all the circumstances covered as well as the processes to follow. And you must comply with the set criteria otherwise the termination will not be considered effective.

An employee, of course, has the right to quit, terminating the contract with or without a just cause, being that in this last case notice must be given, equal to 30 days for contracts up to two years, of length, or 60 days for contracts over two years. And contracts can of course be terminated without consequence by agreement between the parties.

Can employers terminate ‘permanent’ contracts?

Permanent contracts can only be terminated with just cause, i.e., when the employee breaches his/her duties or when it becomes impossible for them to continue to perform the hired functions. Termination of permanent employees is also possible in cases of redundancy (individual redundancy or collective dismissal), when the company needs to reduce its work force due to market, structural or technological reasons.

And what about ‘term’ contracts?

‘Term’ contracts expire at the end of their ‘term’. However, the employer must give a prior notice. For fixed-term contracts, the employer must give a 15 days’ notice before the term, while the employee must give an eight days’ notice. For unfixed-term contracts, the prior notice is equal to seven days for contracts up to six months, 30 days for contracts with a duration between six-month and two years and 60 days for contracts with a duration over two years.

What is key when it comes to dismissals?

Employers may terminate a permanent employment contract only for just cause. Generally, this would be on account of the employee’s gross misconduct that leads to a fundamental breach of contract, or for objective reasons such as redundancy.

However, it is not enough for the employer to have a fair reason for dismissal: a strict pre-dismissal procedure must be followed. Otherwise, the termination will be deemed as an unfair by the Labour Court.

What are the rules for collective dismissals or redundancy?

Collective dismissal refers to the termination of several contracts either simultaneously or separately over a period of three months. A company will be before a collective dismissal if the termination includes at least two employees, if the company is small, or five employees if it is a medium or large company.

On the other hand, individual redundancy exists whenever the number of employees to be terminated fall below the above-mentioned limits.

Both forms of termination must be based on market, structural or technological reasons and subject to a very strict proceeding.

Is there an obligation to provide severance pay?

Severance does come into play for Collective dismissal and individual redundancy.

The calculation rules regarding the amount of such severance pay have been changed following Troika’s austerity measures, which means that different regimes are applicable depending on the contract’s execution date.

How is this calculated?

For “new permanent contracts”, executed as of 1 October 2013, the compensation corresponds to 12 days of base salary and seniority allowance per each year of service

However, for “old contracts” the rules are as follows:

For contracts executed between 1 November 2011 and 30 September 2013, the compensation considers three periods:

• period between 1 November 2011 and 30 September 2013, the compensation is equal to 20 days of base salary and seniority allowance per each year of service;
• period between 1 October 2012 and the date on which the contact completes three years of duration, the compensation is equal to 18 days of base salary and seniority allowance per each year of service;
• period subsequent to the first three years of duration of the contract and the date of the termination, the compensation corresponds to 12 days of base salary and seniority allowance per each year of service.

For contracts executed before 1 November 2011, the compensation considers three periods:

• period until 31 October 2012, the compensation is equal to one month of base salary and seniority allowance per each year of service;
• period between 1 November 2012 and 30 September 2013, the compensation is equal to 20 days of base salary and seniority allowance per each year of service; and
• period of duration of the contract after 1 October 2013, the compensation corresponds to 12 days of base salary and seniority allowance per each year of service.

For fixed-term contracts:

• Until 31 October 2012: contracts with a length up to six months, two days of base salary and seniority allowance per each month of service. For contracts over six months, three days of base salary and seniority allowance per each month of service;
• As of 31 October 2012: 12 days of base salary and seniority allowance per each month of service.
• After 1 October 2013: the New Rules apply: 18 days of base salary and seniority allowance per each year of service.

 

For a more detailed insight into this and other employment issues, do read our Guide Why Portugal 2019 and for further clarifications or a more tailor-made approach, please do get in touch.

The moral harassment (or mobbing) in the workplace has gradually been qualified as a work accident either by scholars and in court.

Mobbing is an issue that became worrisome in the last few decades, even though it exists for quite a while now. Currently, its greater expression lies on ever demanding work hours, high stress levels, competitive workplaces and non-permanent jobs.

Basically, mobbing consists of the exposure of employees to humiliating and embarrassing events, that are uncalled for, lasting and repeating, causing disturbance in the workplace and often forcing employees to quit from their jobs. It is a phenomenon that carries a great deal of consequences to employees’ physical and mental health.

ILO Convention on Violence and Harassment states “that violence and harassment in the world of work can constitute a human rights violation or abuse, and that violence and harassment is a threat to equal opportunities, is unacceptable and incompatible with decent work”.

Accordingly, the question is whether harassment may be considered as a work accident under Portuguese law.

A work accident should not be mistaken with a work injury. An accident is the event causing directly or indirectly a physical or mental occupational injury, in consequence of which it occurs a loss of working capacity. Also, a work accident is limited to the damages it causes. Finally, the work accident does not necessarily have to be caused by a physical external event, as the cause for a work accident may be non-physical.

A few academic opinions consider that for an accident to be considered as such, it must be sudden. In other words, some find that the work accident should be ascertainable in a given period of time or, at least, it should have a determined and limited duration. Those who share this understanding find it a big obstacle to the qualification of moral harassment as a work accident.

The element of suddenness has been questioned, however. Notwithstanding the identification of a work accident with the occurrence of a sudden event, gray areas are those where there is a gradual evolution, just as in the case of developing illnesses in a work context. In 21 November 2001, the Supreme Court of Justice ruled that “the element of suddenness of the event that is characteristic of the work accident should not be taken in absolute terms, constraining it to instantaneous facts and events, but it should rather be construed as a cause of an injury that occurred in a determined period of time, and that its effects may gradually evolve”. Just so, it may be considered that certain behaviors may be grouped, causing a moral harassment phenomenon that has correspondence with the concept of a work accident.

By considering the moral harassment as a single occurrence, one may possibly qualify it as a work accident.

We disagree with this position. We believe that the moral harassment is a continuous, sequential chain of events causing serious injury to the employee, and that it cannot be considered as a single occurrence. The relevant characteristic is not the consequences of it or the seriousness of the phenomenon, but rather the continuity of it.

It is also our understanding that the characterization of moral harassment as a work accident lies in the extension of the concept. In fact, we believe that given the amplitude that the concept already has at the Law this should be an adequate solution.

Often, the situations qualified as work accidents are not intimately linked with the place and time of work strictly speaking.

This means that the qualification of moral harassment as a work accident and subject to the work accident regime is justified on the employer’s risk that is inherent to the provision of work.

In a nutshell, moral harassment constitutes a type of non-physical violence exerted over the employee, that is characteristic for its repeated sequence of harming behavior towards the employee, causing psychological injury and affecting the provision of work, which ultimately may be qualified as a work accident.