Portugal, a country with a population of over ten million people, like many European countries, has suffered a serious economic crisis that has resulted in a 15% unemployment rate across the country and a 78 billion-euro bailout in 2011 from the European Union and the International Monetary Fund. Portugal, a European Union member since 1986, and a founding member of the euro zone1, was the third country, following Ireland and Greece to require a financial bailout. As a result of the growing financial crisis and in order to comply with the terms of the financial bailout, over the last year the Portuguese government, lead by Prime Minister Pedro Passos Coelho, has implemented various amendments (“Law No. 23/2012” or “Amendments”) to the Portuguese Labour Code (“Labour Code” or “Law No. 7/2009”) aimed at reducing labor costs, increasing employment and improving Portugal’s overall economic performance.
Portugal’s Labour Code governs mandatory time off for holidays, sets forth requirements applicable to individual and collective redundancies, severance pay requirements, and wage and hour regulations. The Amendments passed by the Portuguese government directly impact each of these areas of employment law in that country. This article will provide a brief summary of the most critical aspects of the Amendments and discuss the current status of the proposed newest austerity measures relevant to severance pay and social security.
First, the number of minimum paid annual holiday entitlement for employees has been reduced by the Amendments from twenty-five (25) days to a total of twenty-two (22) working days. Additionally, time off for four (4) of the mandatory twelve (12) public holidays has been eliminated.
Second, Portuguese employers now have greater flexibility in implementing individual redundancies. Prior to the Amendments, employers were not permitted to terminate an employee if the grounds for the individual redundancy were caused by the employer or if it was possible for the employer to transfer the employee to another open comparable position within the organization. Rather, employers were only permitted to implement an individual redundancy if the employer could demonstrate specific changes in the workplace such as the introduction of technological innovations that required the employee’s lay-off. However, as the result of the Amendments, employers are permitted to decide the criteria for an individual...