New TUPE legal framework in Portugal

The following changes should be highlighted: 

1. Concept of transfer of economic entity

The concept of “economic entity” is developed, now expressly including collectively organized means which assemble a productive unit with technical and organizational autonomy that maintains its identity, with the purpose of pursuing an economic activity, whether that activity is central or ancillary.

2. Extension for two years of the joint liability of the transferee 

The transferee shall be jointly liable for all credits related to employment contracts, their violation and termination, as well as for the inherent social charges, for two years after the date of the transfer, cession or reversion of the undertaking.

3. Procedure to be observed by the transferor and the transferee 

3.1. From the transferor’s side

With reasonable notice prior to the transfer and at least 10 working days before the consultation of the employees, the transferor must inform the employees to be transferred, and their representatives, in writing, of the following elements:

a) Date of transfer and reasons for it;

b) Legal, economic and social implications of the transfer for the employees; 

c) Projected measures for the employees; 

d) Content of the contract between the transferor and the transferee.

The above-mentioned elements should be disclosed to one of the following employees’ representatives (rule of precedence):

• Employee committees;

• Union associations;

• Inter-union committees;

• Union committees;

• Union deputies.

In the absence of any sort of employee representative, the employees involved in the transfer may elect, among themselves and within 5 working days counted from the reception of the above-mentioned elements, a representative committee with:

• Up to 3 members, if the transfer affects up to 5 employees;

• Up to 5 members, if the transfer affects over 5 employees.

Afterwards, the transferor should proceed with the consultation of the employee representatives, or their elected representative committee, in order to obtain an agreement regarding the measures to be applied to the employees after the transfer.

In the absence of a representative committee elected by the employees, the transferor shall directly inform the employees affected by the transfer of the agreement reached with their representatives, or that the consultation was terminated with no agreement reached.

If the transferor constitutes a medium or a large undertaking, Portuguese Labor Authorities shall be informed by the transferor about:

a) The content of the contract between transferor and transferee;

b) If the transfer constitutes a transfer of an economic entity, all the elements that constitute such economic entity.

If the transferor constitutes a micro or small undertaking, there is no need to inform Portuguese Labor Authorities, except if such is requested by this entity.

3.2. From the transferee’s side

With reasonable notice prior to the transfer and at least 10 working days before the consultation of the employees, the transferee shall inform their representatives, in writing, of the following elements:

a) Date of transfer and reasons for it;

b) Legal, economic and social implications of the transfer for the employees; 

c) Projected measures for the employees; 

d) Content of the contract between the transferor and the transferee.

The above-mentioned elements should be disclosed to one of the following employees’ representatives (rule of precedence):

• Employee committees;

• Union associations;

• Inter-union committees;

• Union committees;

• Union deputies.

In the absence of employees’ representatives, the transferee shall send the above-mentioned elements, directly, to the relevant employees.

3.3. Participation of representatives of the Portuguese Employment Ministry in employee consultation 

Any party involved in the transfer may request the participation of representatives of the Portuguese Employment Ministry in the employees’ consultation.

The intervention of representatives of the Portuguese Employment Ministry aims to promote:

a) The consultation’s material and procedural regularity and validity;

b) The appeasement of both parties’ interests;

c) The insurance of respect and compliance with the employees’ rights.

3.4. Conclusion of the transfer

The transfer of undertaking, or economic entity, will only be concluded 7 working days after:

a) The period for the employees to elect their representative committee is terminated with no election of such committee;

b) An agreement is reached in the consultation of the employee representatives;

c) The consultation is terminated with no agreement reached.

4. Administrative liability and recognition of existence or inexistence of transfer of economic entity by the Portuguese Labor Authority

The following conduct qualifies as very serious administrative infractions:

a) Employer who acts as if a transfer has occurred when, in fact, no transfer has occurred; 

b) Transferor or transferee who refuses to recognize the transfer of the employer’s position in the employment contracts when such transfer has occurred.

Portuguese Labor Authorities shall declare, in the administrative procedure’s final decision, whether or not the employer’s position in the employment contracts has been transferred.

5. Rights of the employees affected by the transfer 

5.1. Right to oppose to the transfer of employment contract

The employee’s right to oppose to the transfer of his employment contract to the transferee is now expressly included in Portuguese employment law.

The employee is entitled to oppose the transfer of his employment contract whenever such transfer may cause him serious loss, namely by the transferee’s evident insolvency or difficult financial situation or, also, if the employee does not trust transferee’s policies regarding work organization.

In order to exercise his right of opposition, the employee should inform the employer, in writing, within 5 working days after:

a) The period for the employees to elect their representative committee is terminated with no election of such committee;

b) An agreement is reached in the consultation of the employee representatives;

c) The consultation is terminated with no agreement reached.

The above-mentioned information shall include:

• Employee’s identification;

• Employee’s contracted activity; and

• The grounds for the employee’s opposition. 

The employee’s opposition to the transfer blocks the transfer of the employer’s position in the employment contract, maintaining the transferor as the employer of the employee.

5.2. Termination of the employment contract by the employee

The employee is entitled to terminate his employment contract with just cause, attributed to the employer, whenever a transfer of the employer’s position in the employment contract exists due to a transfer of an economic entity and the employee considers that such transfer may cause him serious loss, namely by the transferee’s evident insolvency or difficult financial situation or, also, if the employee does not trust transferee’s policies regarding work organization.

The termination of the employment contract entitles the employee to a monetary compensation equivalent to 12 days of base salary and seniority allowances multiplied by the employee’s seniority, capped by 12 base salaries and seniority allowances, or 240 times the national minimum wage.

6. Applicable Collective Bargaining Agreement (CBA)

If the employees affected by the transfer are subject to any CBA, they will remain subject to such CBA until its termination date and ate least for a minimum period of 12 months.

After this period, and in the absence of a CBA applicable to the transferee, the following matters of the former CBA applicable to the employees will remain in force in the transferee:

a) Salary;

b) Professional category and the respective notion;

c) Work Schedule; 

d) Social protection regimes that substitute benefits granted by the general social welfare regime or the national health services.

7. Entry into force

This Law will enter into force on March 20, 2018.