Employment contract with fixed term - Extraordinary renewal

It was approved 7th November 2013 Law no. 76/2013 (hereinafter referred as the "law"), which creates a regime of extraordinary renewals for employment contracts with fixed term, executed pursuant to the Portuguese labour code, that reach their maximum limit of duration, until two years since the referred Law becomes into force.

It also approves the regime and method of calculation of the applicable compensation to the employment contracts which are subject to the extraordinary renewal pursuant to the Law.

This law entry into force on 8th November.

Scope

Employment contracts with fixed term can be object of 2 extraordinary renewals within the two years after the referred law is approved if the maximum limits of duration are reached as established:

1. In article 148.º of the Labour Code, no. 1, namely: 

• 18 months: For situations of a person seeking a first job; 
• 2 years: in the event of launching of a new activity of uncertain duration, as well as the beginning of activities of the company or establishment belonging to a company, with less than 750 employees and/or the hiring of an employee in a long-term unemployed situation or in other situation established in special legislation of employment policy; 
• 3 years: in other situations.

OR

2. In Law no. 3/2012, January 10th (Law that establishes a regime of extraordinary renewals for employment contracts with fixed term that reach their maximum limit of duration until 30th June 2013 and that are object of extraordinary renewal up to 31st December 2014).

With this new Law, it is allowed the extraordinary renewal(s) of employment contracts with fixed term that until 31st December 2014 may be object of extraordinary renewal.

The total duration of the extraordinary renewals cannot exceed 12 months, otherwise these contracts will be converted into employment contracts without term.

The duration of each extraordinary renewal cannot be less than 1/6 of the maximum duration of the employment contract with fixed term or its effective duration whichever is lower.

The limit of validity of the employment contract with fixed term subject to extraordinary renewal is 31st December 2016.

Compensation

The employment contracts with fixed term that are subject to extraordinary renewal(s) according to Law are subject to different compensation schemes, depending on the situation, due to the approval of the Law no. 69/2013, August 30th, 2013, remaining 3 (three) different calculations pursuant to the date of beginning of the employment relationship, as better described in the table attached.

Thus, the calculations are different weather the employment contract has begun before 01.11.2011, between 01.11.2011 and 30.09.2013 or after 01.10.2013.

Breach of calculation of the compensation under the terms above referred constitutes a serious administrative offense.

Interim Report

Upon 8th November 2014, the social partners shall draw up, within the Permanent Committee of Social Dialogue ("Comissão Permanente de Concertação Social"), an interim report regarding the result of the application of the above referred regime.

Subsidiary Law

Whenever not foreseen in the Law, the provisions established in the Portuguese Labour Code shall be applicable.