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The Portuguese Government approved a set of rules to enforce the state of emergency (Portuguese only) which will be in force in for a period of at least 15 days.

The new rules are extraordinary and result in proportional and appropriate restrictions of citizens' rights and freedoms, in particular with regard to the rights of movement and economic freedoms.

Among the approved rules, the following should be highlighted:

• Restriction of citizens' freedom of movement, only being possible to move on public roads for one of the following reasons:

a)      The purchase of products and services;

b)     Performance of professional activities that are not possible to carry out from personal domicile by teleworking;

c)     Acquisition of necessary supplies considered essential to the exercise of the professional activity, the activity being exercised by telework;

d)     Displacements for health reasons, namely to transport people who need health care administration;

e)     Urgent journeys, namely transportation of victims of domestic violence or veterinarian medical doctors;

f)      Travel to care for vulnerable family members, children, seniors, among others, or for fulfilling parental responsibilities;

g)     Short travels for physical activity, excluding the practice of exercise in collective modalities;

h)     Short-term travels for pets; and

i)      Returning home.

• Prohibition of religious celebrations and other worship events involving a crowd of people and establishing that the holding of funerals is subject to the adoption of measures to ensure the absence of crowds and the control of safety distances, including the establishment of a maximum limit of attendance, to be determined by the local authority.

The Government has also opted for not promoting the suspension of the following activities:

a)     Catering activities carried out in canteens or canteens that are in regular operation and in other collective catering units whose catering services are carried out under a continuous performance contract;

b)     E-commerce activities, activities for the provision of services which are provided at a distance, without contact with the public, or which develop their activity through an electronic platform;

c)     Retail trade activities or service activities located along the highways network and within railway, airport, inland waterway and hospital stations, unless such infrastructure has been or is foreseen to be closed.

In establishments of physical retail or service establishments, certain measures must be taken to ensure a minimum distance of two meters between persons, a stay for the time strictly necessary for the purchase of the products and a ban on the consumption of products inside them.

In addition, all citizens under surveillance by health authorities, under penalty of a crime of disobedience, must remain at home.

All the new measures also establish the need for employers, irrespective of their public or private nature, to promote, where possible, the provision of teleworking facilities to enable employees to carry out their work from their personal home.

The rules are applicable from March 22nd throughout the national territory.

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As Portugal and the world prepare for difficult times, tourism takes a break, the economy slows down, orders are cancelled, people worry about those close to them, fear takes hold of many and everyone tries to see an end to the crisis. The coronavirus is today’s subject for all of us.

And in the middle of the crisis, legal issues are beginning to arise.

How does my job situation look now that the company for which I work has suspended its activities? What about the mortgage loan instalments due to the bank to pay off the mortgage? Can I suspend payment of rent of the shop or office that is now closed? Can I cancel the order I placed for delivery in April? What can I do if I don't have staff to complete the contract or the service? What if I don't have materials and equipment that should come from China?

In this first article we address some of these issues, with the promise that over the coming weeks Macedo Vitorino will provide more detailed information on the legal impact of the coronavirus crisis on the lives of companies and individuals.

Employment contracts

The Portuguese Government approved a "Simplified Lay Off" scheme that allows the company to suspend employment contracts for up to six months, during which the employee receives 2/3 of his/her gross salary, of which 70% will be paid by the Social Security and 30% by the employer.

Financial support is granted for a period of one month, renewed monthly, up to a maximum of six months, only when the company's employees have enjoyed the maximum annual vacation leave days and when the employer has adopted the working hours flexibility mechanisms provided for by law.

For more information on this topic read our Newsletter: Covid-19 and Employment Support .

Loan contracts for home purchase

As a rule, these contracts will remain unchanged unless the Government approves a bill suspending payment of bank loans or interest on housing mortgages.

We expect that, as in Italy, the Government will introduce specific legislation allowing for a total or partial suspension of loan repayments and possibly interest relief. However, as long as no such measure is approved, contracts will have to be honoured.

House rental contracts

Medium or long-term rental contracts will remain unchanged. Tenants who continue to use the leased properties will be required to continue to pay their rent on time.

In some cases, the present crisis may imply a loss of interest in the lease. For example, in temporary leases of students who leave the apartment or leased residence may invoke a "change of circumstances" to end the lease under Article 437 of the Civil Code.

Article 437.1 of the Civil Code states that "If the circumstances on which the parties based their decision to contract have undergone an abnormal change, the injured party has the right to terminate the contract, or to modify it according to fairness judgments, provided that the requirement of the obligations assumed by him seriously affects the principles of good faith and is not covered by the risks inherent in the contract".

It seems clear to us that in the case of student rentals or other short-term rentals, the tenant, who no longer has an interest in or can no longer use the rented property, may put an end to the lease.

There are two conditions for invoking this rule:

(a)         First, the tenant ceases to use the rented accommodation during that period;

(b)        Second, the contract must be of short duration and severely affected by its interruption for a period that is expected to last from three to six months.

For longer contracts the question no longer arises. The loss of interest in the dwelling will be temporary, so the tenant might be interested in not paying rent, but not in terminating the contract. The longer the contract the less reason the tenant will want to stop paying the rent and still keep the contract in place when the crisis is over.

Commercial leases

For commercial leases the situation is similar, but not identical.

In commercial leases there will be some cases where the suspension of the tenant's activity was decided by it as a response to the crisis, such as service companies that started working remotely, and others where it was or will be imposed by the Government, such as restaurants, hotels or street shops.

In both situations, the public health crisis is the same and the material reasons for the suspension of activity are the same: the emergence of the situation, its unavoidable nature and the need to protect its workers and the community in general. Even so, in the second case, the closure of the establishment will result from an administrative order and therefore legally stronger than the first, but in substance they are identical and should receive the same treatment.

In these cases, the duration of the contract is key. In long and medium-term contracts, there is no reason to terminate the contract because of the “change in circumstances”, but there may be a reason to revise the contract in accordance with fairness.

In our opinion, in long-term contracts of three or more years, there does not seem to be any doubt that the risk of business interruption should be entirely at the tenant's expense. After all, the interruption is not caused by an earthquake or any other natural cause preventing the use of the property, so the risk of the business is the tenant's, in the same way that economic crises, long or not so long, more or less severe, do not justify the cessation of payment or the revision of rents.

For contracts with a term of less than three years, a six-month interruption is equivalent to a significant part of the contract duration, which may justify a partial reduction in rents or even suspension of payment during the period of inactivity.

The best solution will be to negotiate with the landlord because failure to comply with the contract carries the risk of the landlord filing an eviction suit, in which case he will most likely be right. To continue to fulfil the contract and ask in court for compensation from the landlord for the time of closure based on changed circumstances seems possible to us. In some cases, it would even be possible to file an injunction to suspend payment of the rent, but the court's decision may be delayed because of the disruption to the functioning of the courts caused by the crisis.

Construction contracts

Despite the closure of trade, we still see many construction works taking place in Lisbon and in other cities of Portugal. For the time being, there does not seem to be much disruption, but as time goes on, contractors may find it difficult to keep the works going at the same pace or be forced to stop work due to a lack of manpower, epidemic outbreaks among their workers or failures in their suppliers of equipment and materials. It is even possible that if the crisis worsens the Government will order all people to stay at home with the exception of certain essential services such as the supply of water, electricity, gas or the transport and sale of food and basic necessities.

The outbreak of an epidemic can thus cause significant delays in the performance of works contracts or even their interruption for a long period.

These situations are called "impossibility of performance" and are regulated in the Civil Code. Paragraph 1 of Article 790 establishes that the obligation is extinguished "when the service becomes impossible for reasons not attributable to the debtor", that is, the debtor is not obliged to perform the contract when performance becomes impossible. In most contracts, however, it will not be a “definitive impossibility”, but temporary because the contractor will still be able to fulfil when the situation is normalised.

Therefore, in the vast majority of situations Article 792 of the Civil Code will apply, which will allow the contractor to delay performance on the assumption that the owner of the work maintains interested in the completion of the works even if with delay. In these cases, there will be a justification for the delay, which will have to be demonstrated in each case for the reasons described above.

In these cases, a "change of circumstances" may require the revision of the contract terms. For instance, if an equipment, which is to be installed on the site, is no longer available and has to be replaced by another, or the equipment price increases significantly, which justifies an increase in the final price of the work.

Service contracts

The regime of "impossibility" of compliance foreseen in articles 790 et seq. of the Civil Code or the change of circumstances foreseen in Article 437 also of the Civil Code may be applied to service contracts.

The application of either scheme depends on the specific circumstances of the case. For example, if a single service is provided by a self-employed person who falls ill, the situation may be one of "subjective impossibility", since the debtor is no longer able to do what he committed to. In such cases, the creditor may no longer have any interest in the service, for example a lawyer’s legal opinion or a medical consultation. The contract will be terminated without the service provider having any obligation to pay compensation.

In others, the service may become objectively impossible because there is no access to the place where it is to be provided, closed because of the epidemic outbreak, as will be the case with equipment maintenance contracts.

In other cases where the change of circumstances will require a price revision or a change of the contract object in favour of the service provider (debtor) or whoever hired it (creditor).

In long-term contracts, such as regular maintenance or cleaning services, the creditor may lose interest in the provision. Compliance may still be possible and the service provider may want to maintain the service, but the creditor may no longer need the service because it is not justified in the current circumstances. For these cases Article 437 of the Civil Code will apply and the creditor may request the termination or the amendment of the contract on equitable terms, i.e. balanced and fair conditions for both parties.

Supply contracts

It is to be expected that the crisis will affect many supply contracts. There will be delays in the supply of goods and materials, disruptions in transport within and from out of Portugal which will cause a domino effect on distribution chains, etc. All these situations may justify the termination or revision of the contract by "objective impossibility" or "change of circumstances" as explained above.

In addition to these situations, there will be many cases where buyers will lose interest in the supply and will want to terminate or suspend the contract while the crisis lasts. For example, closed hotels and restaurants will no longer be interested in receiving the food, hygiene products and all the others that support their day-to-day activities.

In those cases, the 'change of circumstances' rule in favour of the purchaser applies, which may require the revision of the contract, postponing or suspending the supply, or even its termination.

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The Portuguese President has declared today a state of emergency due to public disaster, following countries such as Spain, France, Italy and the United States, that adopted the same measure to fight the current Covid-19 pandemic.

This exceptional measure may imply strong restrictions to some constitutional rights, reason why it is limited to the indispensable in harmony with the principle of proportionality.

The most severe restrictions may occur to the freedom of movement and settlement in any part of the national territory. With the expected exceptions of certain professional activities such as health care or food supply, the Portuguese Government will specify in which terms citizens will no longer be allowed  to use their right to free movement according to the evolution of the Covid-19 pandemic.

Compulsive confinement at home or in a health establishment can be imposed, as well as the setting of sanitary fences (which is already taking place in the municipality of Ovar).

International movement is limited, border controls (including sanitary ones) on people and goods can be imposed, and compulsory confinement also applies. Travelling ban from and to Italy and Spain is already in place.

Property rights and private initiative may also suspended or otherwise limited, as well as the provision of any services. The use of any health care units, commercial and industrial establishments may be demanded.

Employees may be required to perform functions under different working conditions, particularly in the health, civil protection, security and defense, distribution and supply of basic goods and services and critical infrastructure sectors.

According to today’s presidential decree, which may be read here, under no circumstances will the rights to life, integrity and personal identity, civil capacity and citizenship, as well as freedom of expression and information be compromised, well as the principles of criminal law.

The state of emergency shall remain in force until April the second and may be renewed if normality has not yet been restored.

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The Covid-19 pandemic will affect drastically the solar promoters in Portugal as it will make harder for them to comply with their permitting obligations in due time.  These are some examples of how Portuguese promoters are subject to a tight schedule:

1. promoters with production license obtained prior to the approval of the Decree-law 76/2019 have two years after its issuing to obtain the operation license (extendable to 3 years);
2. promoters awarded on the first Portuguese solar actions in June 2019, have 6 months to obtain the land rights required for the plant construction; and, depending if the project requires environmental impact assessment or not, 12 or 18 months to obtain the production license, 18 or 24 months to obtain the construction license and 30 or 36 months to obtain the operation license;
3. promoters seeking an agreement with the Grid Operator to increase the grid capacity have 20 business days, counting from 11 March 2020, to provide documental support in order to be attended before other promoters, which have 120 business days to gather such documents;

The Covid-19 pandemic driven emergency measures contained in Decree law 10-A/2010, enacted on 13 March by the Portuguese Government, do not contemplate yet cases such as these. It suspends all tacit approval deadlines but the above deadlines do not benefit of tacit approval, and therefore are not suspended. Suspension will only occur in case the competent authorities close due to the Covid-19 pandemic, but this did not happen so far with DGEG (the Portuguese energy authority), with APA (the Portuguese environmental authority) or with the Municipalities, which are expected to continue working online.  Arguably, a general force majeure principle may apply if, for instance, an operation license’s requirements are delayed  because a construction permit issuance is delayed due to a Municipality’s service restrictions imposed during the Covid-19 pandemic.

Needless is to say that If promoters fail to comply with their licensing schedules, financial penalties, including performance bonds, may be enforced and, in some cases, licenses could be terminated. So, these are times to stay at home, yes, but working harder than ever. That’s the only  way everyone’s projects can reach COD successfully.

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Recently published, the new collective bargaining agreement  signed between the Portuguese Association of Facility Services, and the Portuguese Union of Concierge Workers, Surveillance, Cleaning, Housekeeping and Various Activities ("STAD") and the Federation of Trade Unions of Industry and Services ("FETESE"), establishes new rules for the employment relationships between employers engaged in hygiene and cleaning activities in buildings, industrial equipment,  pest control  and hygiene, disinfection, and employees at their service, represented by the signatory associations.

On March 16, an Extension Order for the said collective agreement was also published, widening the scope of the collective agreement to all companies dedicated to the provision of facility  services, even if subsidiary or complementary to their main activity and to the workers at their service.

Among the new rights foreseen in the collective agreement we highlight the following:

• Allocation of a minimum wage of €638.00 for early-career employees with the category of cleaning worker and of €1,100 for employees at the top of the supervisor-general career;
• Increase in meal allowance from €1.85 to €3.00 in 2020 and to €3.50 in 2021;
• Payment of a 100% increase for the work performed on public holidays;
• Possibility of an increase in the employee’s vacation days, between 1 and 3 days, according to the absences in the related year;
• Provision for an arbitration mechanism for situations in which the parties, in future negotiations, do not reach an agreement.

The new instrument further establishes that in cases of loss of a workplace, the new entity has to ensure the activity of the employer and it is responsible for the maintenance of the employment contracts. The employees will maintain all their rights, privileges and seniority, transmitting the obligations arising from the employment agreement to the new company.

The new rules that are now coming into force have not been revised as a whole since 2004.

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The Government has approved a set of extraordinary measures to face the COVID-19 virus pandemic, which include Law Decree No. 10-A/2020  and the Council of Ministers Resolution No. 10-A/2020.

The following rules apply to employees:

• The disease situation is equivalent to prophylactic isolation for 14 days, both for subordinate workers and self-employed ones, provided that it is motivated by situations of serious risk to the public health and decreed by the entities recognized as health authorities. Recognition of sickness benefits is not subject to guarantee terms or waiting periods;
• The situation resulting from the assistance of a child or other dependent on the employee's responsibility in prophylactic isolation for 14 days is considered justified;
• With the exception of periods of school interruptions (e.g. Easter holidays), absences are considered justified, only with loss of rights in relation to retribution, any absences from work motivated by unavoidable assistance to a child or other dependent under 12 years of age, or, with disability or chronic illness, of any age, resulting from suspension of school and extracurricular activities in a school or social support equipment.

Absence must be determined by a health authority, and the worker must report the absence to the employer under article 253 of the Portuguese Labor Code, otherwise the absence is considered unjustified.

• A guarantee of social protection for trainers and trainees is established in the course of training, as well as beneficiaries employed in active employment policies who are prevented from attending training.

Thefollowing rules apply to companies:

• Deferral of tax obligations (e.g. delivery of periodic revenue income statement for the 2019 tax period until July 31, 2020, without any surcharges or penalties);
• Flexibility of VAT payment by companies and self-employed individuals, in a fractional manner and up to six installments;

• Flexibilization of social security contributions, and reduction to 1/3 of the contribution in March, April and May. The remaining amount for the months of April, May and June is settled as of the third quarter of 2020.
• Payment of incentives related to the Portugal 2020 Programme, within 30 days;
• Eligibility of expenses incurred with cancelled international events;
• Promoting an extraordinary financial incentive to ensure the standardisation phase of activity and aimed at supporting businesses in order to prevent the risk of unemployment;
• Creation of a set of credit lines totaling € 3 billion for the most affected sectors (e.g. restaurants, tourism, textile industry, clothing, footwear).

Under the Council of Ministers Resolution 10-A/2020 of 13 March, four extraordinary measures for immediate support for workers and businesses are established.

For that matter, Ordinance No. 71-A/2020 of March 15 was published, which defines and regulates the terms and conditions for the allocation of immediate support of an extraordinary temporary and transitional nature, aimed at employees and employers, in order to maintain jobs and mitigate situations of business crisis. The Ordinance was amended by  Ordinance No. 71-A/2020 of March 18.

The measures are as follows:

• Promotion of an exceptional and temporary regime for exemption from the payment of social security contributions;
• Extraordinary support for the maintenance of employment contracts in a situation of business crisis with or without training, with the State paying 70% of 2/3 of the remuneration, up to a limit of 3 RMMG;
• Extraordinary training plan; and
• Creation of an extraordinary financial incentive to ensure the normalization phase of the activity (up to one minimum wage per worker).

These measures apply to private sector employers, including employers in the social sector, and employees at their service, who are in a situation of business crisis.

All the measures mentioned are in force and can be taken advantage of by workers and companies.

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The Portuguese Council of Ministers approved a set of extraordinary measures in response to the COVID-19 pandemic, with a view to maintaining jobs.

The extraordinary support measures are:

(i) Extraordinary support for the maintenance of employment contracts in a business crisis situation, with or without training ("Simplified Lay Off");

(ii) The Extraordinary Training Plan;

(iii) Extraordinary financial incentive to support the normalization of the company's activity;

(iv) The temporary exemption form the Employer of the Social Security payroll.

It is considered a situation of corporate crisis:

(i) The total stoppage of the company's or establishment's activity that results from the intermittence or interruption of global supply chains; or

(ii) The abrupt and sharp drop of at least 40% in invoicing, with reference to the same period of 3 months, or, for those who started the activity less than 12 months ago, the average for that period.

The Simplified Lay-off follows the following rules:

(i) The State supports the payment of wages;

(ii) The support translates into the payment of 2/3 of the employee's illiquid remuneration, 70% of which is ensured by Social Security and 30% by the employer.

(iii) The support corresponds to an amount equal to 2/3 of the employee's illiquid remuneration, up to a maximum of three guaranteed minimum monthly salaries;

(iv) The financial support is granted for a period of one month, extendable monthly, up to a maximum limit of six months, only when the company's employees have taken the maximum limit of annual vacation and when the employer has adopted the mechanisms of flexibility of working hours established by law;

(v) the employer benefiting from this measure may entrust the worker with the temporary performance of duties not included in the employment contract, provided that this does not entail a substantial change in the worker's position, and that they are geared to the viability of the undertaking; and

(vi) In order to have access to these measures, the employer must be proven to have the social security and tax situations regularized before the Tax and Customs Authority.

The new measure requires the obligation to inform, in writing, the employees concerned and the foreseeable duration of the interruption of the activity.

The employer also has the duty to hear the union delegates and workers' commissions when they exist, by immediately sending an application to the Social Security Institute, accompanied by the list with the names of the covered workers and their Social Security identification number.

The circumstances are attested by a declaration of the employer together with a certificate from the company's certified accountant, and are then confirmed by the competent State bodies.

The new mechanism can also be complemented with the vocational training component, by adding a training grant of 30% of the Social Support Index (IAS). Half of the value is attributed to the employee and half to the employer, with the costs being borne by the Institute for Employment and Professional Training (IEFP, I.P.)

The diploma was published today in Diário da República and comes into force on March 16.

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Following the guidelines of the health authorities and the Portuguese Government regarding the Covid-19 outbreak, Macedo Vitorino will start working remotely from March 16, while maintaining a smaller physical presence in its offices.

The remote desktop systems that we have been using for some time, will allow us to ensure that our work will continue to be done with the quality, effectiveness and proximity that clients expect from us. Our teams will continue working together through remote communication systems.

We will remain in touch with our clients and suppliers through the usual contact emails. We have suspended physical meetings and will be available to meet using remote applications, such as videoconferencing.

We will publish regular newsletters regarding the legal developments resulting from the Covid-19 outbreak and how they will impact on businesses and private individuals and will continue to inform you of other legal developments that may be of interest to your day-to-day basis business.

We will make a status assessment with our lawyers and employees every week to determine the best date of return to our offices.

Together we will be able to contain the spreading of this pandemic.

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The Portuguese Government has issued two orders, Order no. 2836-A/2020 and Order no. 2875-A/2020,with guidelines on how employers and employees should act as we face the Covid-19 outbreak. 

To private sector employees the following rules apply:

• In case of quarantine by decision of the Portuguese health authorities, due to the danger of contamination, the employee is guaranteed payment at 100% of the salary, from the first day, for 14 days.
• After this period, if the employee remains unfit for work for health reasons, in particular because they have been tested positive for the virus, the rules of sick leave apply: 55% of the reference salary for leave up to 30 days, 60% for leave between 31 and 90 days, 70% for leave between 91 and 365 days and 75% of the reference salary for any leave the lasts more than one year.  The sickness benefit is paid from the first day of leave since it is a hospital stay.
• The provisions of the preceding paragraph do not apply to employees for whom it is possible to ensure the use of alternative work arrangements, in particular teleworking, where they will continue to receive their regular salary.
• In the event of a situation in which employees have to leave to provide assistance to children, grandchildren or other household members in prophylactic isolation, the scheme laid down by Portuguese law for these purposes applies.

To civil servants the following rules apply:

• In the event of isolation, which must necessarily be determined by a Portuguese health authority, the civil servant’s absence is considered justified without loss of pay.
• When alternative performance methods and work mechanisms (e.g. telework) are possible, the worker retains his rights as if they were working normally.
• In the event of a situation in which civil servants have to leave to provide assistance to children, grandchildren or other household members in prophylactic isolation, the scheme laid down by Portuguese law for these purposes applies.

There are other differences to note between the two orders: the order regarding the public sector is the most extensive and warns civil servants that they have five working days, from the date of publication, to prepare contingency plans based on the guidelines of the Portuguese General Directorate for Health, in particular with alternative procedures that allow ensuring the normal functioning  of each service or establishment. Public services should also consider other measures, such as: (i) reduction or suspension of the public opening hours, (ii) suspension of public events or initiatives, carried out either indoors or in places open to the public and (iii) suspension of face-to-face training activities, giving preference to distance training.

The regime of leave due to prophylactic isolation entered into force, for Portuguese state services and establishments, on March 2 and in the private sector on March 3.

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The Government approved at the Council of Ministers the amount of the wage increases for the public administration to be applied in 2020.

Under the Law Decree approved yesterday, civil servants will have a wage increase of 0.3% in 2020.

Workers with salaries up to €683.13 will have a salary increase of €10.

The new increases also apply to workers working in public sector companies, as long as they’re not covered by existing collective labor regulatory instruments.

The new updates are retroactive to 1 January 2020.