In 1993, Portugal had no backbone high pressure natural gas pipeline, storage and other infrastructures. From 1993 onwards, such infrastructures were built, and natural gas became one of the most important sources of energy used in Portugal.

According to 2020’s most recent data, the natural gas market has been witnessing an increase in consumption of 7.2% since last year.

Until 2006 the promotion of natural gas and the development of the system’s main infrastructures were handled by the Galp group companies, Transgás – Sociedade Portuguesa de Gás Natural, S.A. (“Transgás”) and GDP – Gás de Portugal, SGPS, S.A. (“GDP”), under concession agreements entered into with the Portuguese State.

The public service concession for the import, transmission and supply of natural gas through the high-pressure pipeline, was granted to Transgás, and the public service concession for the distribution of natural gas through regional pipeline networks, was granted to six different companies, held by the GDP group.

Most importantly, Decree-Law no. 30/2006 of 15 February 2006 (“Gas System Law”) transposed Directive 2003/55/EC, implementing in Portugal the common rules for the EU internal market.

The Gas System Law established (i) a National Natural Gas Distribution Network (RNDGN), licensed or licensed to several operators, to guarantee non-discriminatory and transparent access to the network infrastructures of Liquid Natural Gas (LNG) and RNDGN terminals, (ii) the legal unbundling between the network and infrastructure operators of the National Natural Gas System (SNGN) and the marketers, and (iii) the natural gas supplier and the last resort supplier.

The Gas System Law principles were specified by Decree-Law 140/2006, of 26 July 2006 (“Gas Regulatory Law”), with new rules regarding transmission, LNG facilities’ storage, and distribution and supply services.

As a result of these changes, the natural gas sector was unbundled, and is currently divided into several activities, each one with different operators. Thus, the sector is structured in (i) reception, (ii) storage and regasification, (iii) underground storage, (iv) transmission, (v) distribution, and (vi) supply.

With this briefing, we intend to present an overview on the functioning and organization of the different activities of the Portuguese Natural Gas Sector, as well as on the main players that operate on the market.

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!

At the end of 2018, we visited many Portuguese Internet websites of some large and not so large businesses to check if they complied with the General Data Protection Regulation (GDPR) and the European regulation on privacy and electronic communications proposal («e-Privacy» regulation proposal).

While the GDPR is the general regulation for processing of personal data, the «e-Privacy» regulation aims to update the «e-Privacy» Directive and addresses data privacy in the electronic communications sector, including email and SMS messages and also services like WhatsApp, Facebook Messenger and Skype, along with Internet of Things (IoT) devices.

In our review, we found several examples of unlawful practices or, at least, non-recommended practices in violation of the GDPR and potentially contravening the «e-Privacy» regulation proposal.

Read our full report here.

Following the end of Portugal’s bailout programme by the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB), which lasted from May 2011 until June 2014, Portugal has lived a period of steady economic growth with heavy investments in the property market. ​

From 2014 to 2017 foreign direct investment increased two times approaching pre-crisis levels, pushed by increased activity in the private sector, mergers & acquisitions and investments in residential and commercial real estate assets. ​

Investment in real estate boomed. The golden visa programme which gives foreign investors the possibility of obtaining a Portuguese visa with a minimum €350,000 investment in real estate, and the non-frequent residence tax regime, allowing for a 20% taxation on income, and the boom in short term residential leases were the main factors for attracting investment in medium-size properties, especially in the residential market. ​

Portugal is also becoming one of the preferred European touristic destinations. The afflux of tourists led to increased investments in new hotels and residential projects for short term leases.​

Still prices and yields in the current market conditions continue interesting to many investors, as local banks and corporations holding large real estate portfolios continue to dispose of their real estate assets.​

The retail and office markets are also attracting the attention of investors. The valuation of street shops in prime areas in Lisbon and Oporto have peaked. The scarcity of new office space is also leading to new investments.​

The ECB’s quantitative easing measures, the liquidity of the financial markets and banks’ openness to finance a growing demand for real estate finance are feeding investors’ appetite for real estate assets in Portugal. ​

As Portugal emerges from its worst crisis in the last thirty years, the Portuguese real estate market continues to offer interesting opportunities, still with good valuation prospects.​

This paper provides an overview of the Portuguese real estate market and main legal and regulatory issues affecting the investment in property in Portugal, including, types of property interests, lease contracts, financing real estate assets, investment structures and tax issues.​

Portugal has made several changes to its employment laws in the last few years and increased the flexibility of the legislation to attract foreign investment.

According to the ILO survey “Decent Work in Portugal 2008-18: From crisis to recovery”, Portugal stands as a solid example of successful and swift economic and labor market recovery, without compromising on workers’ rights”.

The labour reform approved in 2009 and the changes introduced after Portugal’s international bailout in 2011 have contributed to reduce the level of rigidity of employment rules. Nowadays Portugal is also better ranked in OECD´s Employment Protection Legislation Index.

Several aspects of the legislation have been revised since the adoption of the 2009 Labour Code, which adopted more employer-friendly legislation concerning the organisation of the workforce. For instance, working schedules may now be managed in a more flexible way without increasing the labour costs. The Labour Code also contains flexible rules that allow the employer to unilaterally change the place of employment and the employee’s functions.

According to the WEF Report, the changes in the labour regime has put Portugal 0.3 points behind the EU average, but ahead of larger European countries such as Spain and France.

After Portugal’s international bailout in 2011, Portugal simplified the termination procedures, reduced the severance pay, decreased the holiday leave period and suspended some public holidays.

Of course the elimination of some public holidays, rest days after overtime were not consensual, even though viewed as necessary by the Troika at the time.

After the general election of 2015, the suspension of the public holidays was removed in 2016 but no relevant changes to the labour legislation were made.

Portugal believes that the system now strikes the right balance between securing employees’ acquired rights and benefits and the level of flexibility required by employers.

According to Pordata, a national database of socioeconomic data, the average number of working days lost through industrial action by employee in 2016 was 11.8 days in 1,000, which is significantly lower than in several other European countries such as Spain where 21.2 days were lost in the same year.

 

Hiring employees

Hiring in Portugal is subject to the mandatory rules and statutory limits on several matters, such as remuneration, working hours, holiday rights or duration of contracts.

Employment contracts. In general, employment contracts do not need to be in writing. Only for some types of contracts the law requires a written document, including, but not limited to, fixed-term contracts, part-time contracts, contracts with foreign employees, and secondment contracts.

Regardless of the type of contract, the employer must inform in writing the employee on working conditions, including, workplace, job position, term and relevant grounds, employee’s pay, collective bargaining instrument (if any), employer’s accident insurance policy and employee’s compensation fund, and within 60 days from the effective date of the contract.

Salary. Employees are entitled to a minimum monthly salary set out by the Portuguese Government. In addition, employees are entitled to receive Christmas bonus and holiday bonus.

Working hours. The maximum regular working period is of forty hours per week, eight hours per day.

Employees are entitled to a minimum rest period of eleven consecutive hours between two successive daily work periods, as well as to one day of rest per week. An additional half or full day of rest (in all or in certain weeks of the year) may be also given other than the rest day required by law.

Holidays. Employees are entitled to twenty two working days of paid holiday per year, and to national public holidays.

Under collective bargaining agreements, employers may be obliged to grant two optional public holidays: Carnival/Shrove Tuesday and the local municipal holiday.

Health and safety. The employer must ensure employees health and safety conditions at work and hence comply with a set of general principles and duties aiming at the prevention of work accidents and professional illnesses.

Employers are obliged to ensure: (i) technical work accident preventive measures; (ii) employee training, information and consultation on workplace safety; (iii) internal or external health and safety services. The employer must also contract an insurance to cover work accidents risks for each employee.

Social Security. The Social Security contribution is a tax levied on the labour income, which is charged to employers and employees at the rates of 23.75% and 11% respectively.

 

Types of employment contracts

Fixed-term contracts. Contracts that are in force for a pre-established period set according to employer’s temporary needs, which must be specified in the contract, and expire at the end of the agreed term, unless they are renewed; fixed-term contracts cannot be renewed for more than three times and have a maximum duration of three years.

Term employment contracts must contain a detailed description of the relevant grounds and there must be a clear connection between the relevant grounds and the term. Otherwise, the employer may be subject to fines and the term contract could be legally converted into an open-ended employment contract.

Unfixed-term contracts. Contracts that are not subject to a pre-established period, but expire after the completion of the employer’s project or when the reason for which the employee was hired ceases to exist; unfixed-term contracts have a maximum duration of six years.

Open-ended contracts. In case the parties do not agree a term (fixed or unfixed), the employment contract is deemed to be entered into for a permanent period of time, which means that the contract can only cease upon termination by one of or both parties under the law, namely in case of just cause for dismissal.

Probation period. The probation period is the period during which either party may unilaterally terminate the contract without prior notice and without cause, during which no compensation required.

The maximum probationary period is:

For open-ended contracts:

• 240 days for employees with management or senior positions;
• 180 days for employees with job positions of technical complexity, high degree of responsibility or which require special qualifications, and for employees who perform duties of confidence; and
• 90 days for other employees;

For fixed and unfixed-term contracts:

• 30 days for contracts with a duration equal or higher than six months; and
• 15 days for contracts with a duration of less than six months.

 

Salary

Employees are entitled to a minimum salary, which is set by the Portuguese Government and updated annually based on the cost of living, national productivity and the government’s prices and incomes policy.

Portugal's minimum salary is calculated based on a flat monthly rate. The national minimum salary in Portugal in 2018 is €580 per month (based on 14 payments a year). For certain jobs and professions, the minimum salary may be agreed by collective bargaining agreements, which could not however provide for an amount fewer than the minimum salary legally set out by the Government.

The salary must be paid on a regular and permanent basis and may be fixed, variable or mixed (comprising fixed and variable components).

In addition to the salary, employees are entitled to:

• Christmas bonus: equal to one month salary payable until 15 December of each year; and
• Holiday bonus: equal to one month salary payable before the holiday leave period.

Employers may not offset credits held over employees against any salary or make any discounts or deductions from employees’ salary during the period the employment contract is in force.

There are however exceptions (and up to certain limits), including:

• Deductions in favor of the State, Social Security or other entities ordered by law, court decision or mediation settlement, provided that such decision or settlement has been notified to the employer;
• Compensation determined by a court decision or a mediation settlement;
• Monetary penalties resulting from a disciplinary procedure;
• Repayment of capital and payment of interest on loans granted by the employer to the employee;
• Prices of meals at the work place, use of telephones, supply of assets, petrol or materials, when requested by the employee, as well as other costs incurred by and with the employer’s consent on behalf of the employee; and
• Subsidies or payments made in advance and on account of the employee’s salary.

 

Holiday rights

Employees are entitled to 22 working days of paid holiday per year. The holiday right is mandatory, which means that holiday entitlement may not be replaced by any compensation, financial or otherwise, even if upon employee’s approval. Employees may however waive the part of their holiday rights exceeding 20 working days.

In the same working year, the holiday leave period cannot exceed 30 working days, save as otherwise established by collective bargaining agreement or other instrument.

The holiday right becomes due on January 1 of the following year, except:

• In the hiring year and after six months of work, the employee is entitled to two working days of holiday per each complete month of work up to the maximum of 20 working days. If the end of the year is reached before this period or before the employee takes his/her holiday, the employee may enjoy the holiday leave period until June 30 of the following year;
• In case of employment contracts up to six months, the employee is entitled to two working days of holiday per each complete month of work;
• In case of employment contracts up to 12 months or ending in the year subsequent to the hiring year, employee is entitled to a holiday leave period pro rata to the duration of the employment contract.

As a rule, the holiday leave period should be taken in the year it becomes due. In exceptional cases, employees may take the holiday leave period afterwards insofar this takes place until April 30 of the subsequent year and upon employer’s agreement.

The schedule of the holiday leave period should be agreed between the employer and the employee. In case this agreement fails, the employer must schedule the holiday leave period and give the employee the right to take the holiday between May 1 and October 31.

Regardless of agreement between the employee and the employer, employees are entitled to, at least, take 10 consecutive working days of holiday leave period.

Employer’s failure to comply with the holiday’s schedule constitutes a serious administrative offence and may entail which vary according to the employer’s turnover.

In addition, employees are entitled to take the day off in public holidays. Presently, the public holidays in Portugal are: January 1, Easter, Good Friday, April 25, May 1, Corpus Christi, June 10, August 15, October 5, November 1, December 1, 8 and 25.

 

Parental protection rights

Portuguese employment law establishes several statutory rights to puerperal, pregnant and nursing women, as well to parents.

Pregnant employees’ rights. In case employees’ work duties entail clinical risks to a pregnant employee or to her unborn child, the employer will either:

• Provide the pregnant employee with alternative working conditions;
• Replace the employee to a workplace compatible with her pregnant condition; or
• Avoid pregnant employee’s exposure to risks for as long as necessary.

Pregnant employees are exempt from performing night shifts, working overtime or in hour banks or in concentrated working schedules. They are also entitled to a work leave to attend prenatal medical appointments and, after the birth, to breastfeed the baby.

Initial parental leave. Employees (mothers or fathers) are entitled to an initial parental paid leave of 120 or 150 consecutive days and corresponding to 100% or 80% of the salary, respectively.

If both parents share the initial parental leave, the leave period may be increased by 30 days. In this case, and after the mandatory six-week period to be taken by the mother after childbirth, both parents must take 30 consecutive days or two periods of 15 consecutive days.

Mother’s parental leave. All female employees must take a six-week period leave immediately after childbirth and may take 30 days before birth, in which case the employer must be informed within at least 10 days in advance (or as soon as possible, in case of a medical emergency) and receive a doctor's statement with the expected due date.

Father’s parental leave. An employee who becomes a father is entitled to take a paid leave of up to 20 working days, as follows:

• 10 mandatory working days, five of which must be consecutive and taken immediately after childbirth and the remaining five days in the following 25 days; and
• The remaining 10 working days are not mandatory and may be taken successively or alternately after the mandatory period above and along with the mother’s initial parental leave.

The termination of an employment contract of a puerperal, pregnant or nursing woman requires a prior legal opinion of the Commission for Employment Equality (Comissão para a Igualdade no Trabalho e no Emprego).

Failure to comply with parental protection rights is deemed a very serious offense which may lead to fines.

 

Restrictive covenants

As a general rule, restrictive covenants during employment or after its severance are void. However, it is possible to include non-compete and non-termination covenants in certain conditions.

Exclusivity and non-compete covenants. Exclusivity clauses (during employment) and non-compete agreements (after termination) are allowed if the following requirements are met:

• The non-compete covenant is agreed in writing (for instance, under the employment contract);
• The performance of a competing activity by the employee is likely to cause harm to the employer;
• Compensation amount is agreed and payable to the employee; and
• The non-competition covenant may not exceed two years after termination of the contract or, in some exceptional cases, up to three years if the activity performed entails a special relationship of trust or access to sensitive information.

Except for these cases, restrictive covenants agreed in employment contracts or those settled in collective bargaining agreements could be considered null and void insofar they limit employees’ freedom of work.

Non-termination covenant. In order to compensate the employer for high expenses incurred with the employee’s professional training, employees may also agree non-termination covenants, whereby the employee undertakes not to terminate the contract during a period of no more than three years.

The employee may in any case anticipate the end of this period by reimbursing the employer for the relevant expenses incurred.

To enforce restrictive covenants after termination of the employment contract, the agreement must state either the compensation amount payable to the employee or its calculation criteria. This compensation could be paid in instalments during the term of the agreement or all at once. The parties may also agree on contractual penalties applicable in case of breach of restrictive covenants.

Garden leave. In the context of pending disciplinary proceedings, garden leaves are permitted under law, particularly after the accusation note has been served to the employee. In turn, when resigning or when having been served a prior notice for dismissal (e.g. collective dismissal), employers could not impose the employee to cease performing his/her work role until the prior notice period is completed. In this scenario, the best option is the employer to instruct employees to use any unused holiday leave period.

 

Termination of employment contracts

Expiration of term employment contracts. Term employment contracts expire at the end of their initial or renewal term, provided that serves a termination notice to the employee as follows:

• In fixed-term contracts, 15 days prior to the term of the contract; and
• In unfixed-term contracts, seven, 30 or 60 days prior to the relevant date if the employment contract has lasted for less than six months, from six months to two years, or more than two years, respectively.

Collective dismissal. A collective dismissal is possible if the employer intends to dismiss a minimum of two employees (in companies with less than 50 employees) or five (in companies with 50 or more employees) within a three month period. Collective dismissal must have one of the following grounds:

• Market structure reasons;
• Organization-related and economic reasons; and/or
• Technological reasons.

Mutual agreement. Employee and employer may freely agree in writing to terminate the employment contract. The termination agreement may be revoked by the employee within seven days from the effective date, except if the agreement is executed towards a public notary.

Redundancy. In case the number of employees involved does not allow a collective dismissal, termination on the ground of redundancy could be an alternative. Redundancy must be justified on the same grounds as collective dismissal and meet the following requirements:

• The reasons for the termination do not relate to an intentional behaviour of the parties; and
• The same tasks are not being executed by employees hired under a term employment contract.

Employee’s ineptitude. The employer may terminate the employment contract when the employee demonstrates ineptitude or inability to perform the assigned tasks, provided that such ineptitude occurs in the course of the performance of the functions.

Breach. The employer may terminate the employment contract under disciplinary grounds following by a disciplinary procedure carried out towards the employee.

In case of failure to comply with specific termination rules and formal procedures required by law, the termination could be deemed as unlawful and the employee entitled to (i) compensation for damages; (ii) the employee’s salary (including holiday and Christmas bonuses) from the dismissal date until the court’s final decision; and (iii) choose between reinstatement or compensation to be ruled by the court.

 

Severance compensation

Employees subject to collective dismissal, redundancy or employee’s ineptitude are entitled to severance compensation, which varies depending on the employee’s seniority period and execution date of the employment contract.

For open-ended contracts entered into before 1 November 2011, the severance compensation will be calculated as follows:

• Until 31 October 2012: one monthly base salary and seniority per each year of employment;
• Between 31 October 2012 and 30 September 2013: 20 days of monthly base salary and seniority per each year of employment; the amount of the monthly base salary and seniority may not be higher than 20 times the minimum monthly salary;
• After 1 October 2013: 18 days of monthly base salary and seniority per each year of employment in the first three years of the contract, and 12 days of monthly base salary and seniority per each year of employment in the following years (the New Rules).

If the compensation calculated for the period until 31 October 2012 is equal or higher than 12 monthly base salaries and seniority or 240 of minimum monthly wage (Relevant Threshold), the period after 31 October 2012 will not be taken into account; if that compensation is less than the Relevant Threshold, the total compensation may not exceed the Relevant Threshold. The minimum compensation is three monthly base salaries and seniority.

For term contracts entered into before 1 November 2011, the severance compensation will be as follows:

• Until 31 October 2012: three or two days of base salary and seniority per each month of employment, if the term of the employment is lesser or higher than six months, respectively, with a minimum of three monthly base salaries;
• After 31 October 2012 and until 30 September 2013: 20 days of monthly base salary and seniority per each year of employment; the amount of the monthly base salary and seniority may not be higher than 20 times the minimum monthly salary;
• After 1 October 2013: it is applicable the New Rules; and
• Minimum compensation is three monthly base salaries and seniority.

For employment contracts entered into on or after 1 November 2011, the severance compensation will be calculated in accordance with the New Rules and the severance compensation may not exceed the Relevant Threshold. No minimum severance compensation amount is imposed by law.

In addition to the severance compensation, employees are entitled to all other existing labour credits, including outstanding amounts owed prior to the termination date (e.g. overtime work) and the proportional amounts of Christmas bonus and of the holiday leave period.