Dismissals and Termination of Employment in Portugal

As a general rule, under Portuguese Employment Law dismissals must be based on disciplinary reasons or on objective reasons and must be preceded by a formal procedure.

A. Dismissal with just cause: this may occur whenever an employee commits a disciplinary offence that is serious, and its consequences make it immediately and practically impossible for the employment contract to remain in force.

Disciplinary offences that may be deemed sufficient for the employee´s dismissal with just cause include the following: 

1. illegitimate non-obedience of instructions or orders given by any responsible person in a hierarchically superior position; 
2. breach of the company’s employee’s rights and warranties; 
3. instigation of repeated conflicts with company employees;
4. repeated indifference to fulfilling the obligations of his/her position, with the required degree of diligence; 
5. serious damage to the patrimonial interests of the company; 
6. false declarations regarding justification for any absences from work; 
7. non-justified absences from work that directly constitute serious damage or risk to the company, or if the employee is absent from work, without justification for five days in a row or ten individual days in each civil year, regardless of the damage or risk caused; 
8. non-observance of work safety and health rules; 
9. physical violence, verbal abuse or any other offences punishable by law towards an employee of the company, a member of the company’s corporate bodies or an individual employer that is not a corporate body, its delegates or representatives; 
10. kidnapping in general or any crime performed against the liberty of any of the people identified in the previous paragraph; 
11. non-compliance with the fulfilment of any court or administrative entity decision/ruling; and 
12. abnormal reduction of performance levels.

The applicable Collective Bargaining Agreement may establish additional lawful reasons for disciplinary dismissal.

The company’s management framework, the degree of damage of the employer’s interests, the nature of the relations between the parties or between the employee and his/her colleagues and other relevant circumstances must be attended in order to assess the just cause for dismissal.

B. Dismissal for objective reasons – collective dismissal or job position termination procedure

The dismissal of employees for objective reasons may occur for the following market-related, structural or technological reasons:

• market-related reasons – reduction of the company’s activity due to the predictable decrease of demand for goods or services or the subsequent impossibility of placing such goods or services on the market;
• structural reasons – economic or financial imbalances, change of activity, restructuring of the productive structure or substitution of dominant products; or 
• technological reasons – changes to techniques or production processes, automation of production, construction or cargo movement tools, as well as computerisation and automation of services and communication methods.

C. Dismissal for objective reasons – dismissal due to maladjustment 

The employer may dismiss an employee due to maladjustment to his/her work post for reasons that occur after being hired. Maladjustment to the work post will be considered to have occurred when any of the following conditions are verified that make it practically impossible for the employment contract to continue:

• sustained reduction of the productivity and/or quality levels of the employee´s performance;
• the employee causes repeated malfunctions to the work instruments made available to them; or
• the security or health of the employee or any other employees or third parties are at risk.

Maladjustment will also be considered to exist for employees who have been allocated to positions of high technical complexity, and/or management positions, when they do not fulfil goals previously set down in writing between the employee and the employer, making it practically impossible for the employment contract to continue.

Dismissal due to maladjustment may only occur if the following requirements are fulfilled cumulatively:

1. The job position was modified due to changes in the manufacturing or trading process, or the introduction of new technologies or equipment based on different or more complex technology in the six months before the dismissal;
2. Professional training related to the modifications of the job position was given by a competent authority or by a duly certified training entity;
3. After the training, the employee was given an adaptation period of at least 30 days in the job position, or outside when the performance of the duties may have caused damage to the employee’s safety and health or other employees or third parties.
4. There is no other job available in the company compatible with the employee's professional category.

Both disciplinary and objective dismissals require certain formalities.

A. Dismissal with just cause

The dismissal of the employee with just cause involves a disciplinary proceeding in which the employee is given a detailed description of the facts that constitute the disciplinary infraction (‘Nota de Culpa’).

In general, this notification must take place within the 60 days after the employer becomes aware of the facts.

The employee may respond to the notification within ten business days, stating his/her defence, submitting documents and requesting the hearing of witnesses.

The employer or an appointed instructor will assure that all requested actions regarding the production of proof are met, and will issue a final decision within 30 days, counted from the last event adduced as proof.

The dismissal decision must be justified and submitted in writing to the employee.

B. Dismissal for objective reasons – collective dismissal or job position termination procedure

The dismissal of an employee for objective reasons requires that the employee is notified in writing of the following:

• the objective reasons that justify the dismissal;
• a list of all company staff detailed by organisational sectors of the company; 
• the selection criteria used to determine which employees are to be dismissed; 
• the number of dismissed employees and their respective professional categories; 
• an indication of the length of time over which the dismissal will take place; 
• the calculation method to determine the severance payment to be granted to the employees to be dismissed, notwithstanding the legal minimum as established under Portuguese law; 
• the place and moment of payment of this compensation and of any labour credits due to the employee; and
• the date of termination of the employment contract.

On the five days following this notification, the employer must initiate an information and negotiation phase with employees in order to agree upon the effects and dimensions of the measures to be applied, as well as any other measures that may reduce the number of employees to be dismissed, such as: 

• Suspension of employment contracts;
• Reduction of normal working periods;
• Professional reconversion or reclassification;
• Early retirement or pre-retirement. 

Such a meeting must involve the participation of a representative from the Portuguese Labour Authorities.

Although the parties are under an obligation to negotiate in good faith, this does not mean that they are obliged to reach an agreement. Once the parties have reached an agreement, or after 15 days counting from the initial notification of the collective dismissal/job position termination procedure, the employer may issue its final dismissal decision.

C. Dismissal for objective reasons – dismissal due to maladjustment

The dismissal due to maladjustment involves the notification of the employee in writing of the following information:

• reasons that justify the dismissal; 
• the modifications introduced to the job position, or in case of non-existence of modifications, the data that support the decrease of his/her activity or quality of work; and
• the professional training or adaptation period results.

In case the employee is not a trade union representative, the employer must, within three working days after the dismissal has been communicated to the employee, communicate it to the trade union indicated by the employee, or in its absence, to the work commission, or to the inter trade union or trade union commission.

On the ten days following this communication, the employee may attach documents or request probative diligences, after which, if realised, the employer will communicate its results to the employee. After this communication, the employee has ten working days to issue his/her opinion, primarily regarding the grounds of the dismissal.

The employer must issue its final dismissal decision within 30 days after receiving the employee’s opinion informing the employee of the following:

• the grounds of the employment contract termination;
• confirmation that the necessary requirements have been fulfilled;
• an indication of when the dismissal will take place; 
• a calculation method to determine the severance payment to be granted to the employees to be dismissed, notwithstanding the legal minimum as established under Portuguese law; 
• the time and place when the aforementioned compensation and of any labour credits due to the employee will be paid; and
• the date of termination of the employment contract.

Disciplinary dismissal: no notice period is required. The employee is considered to be dismissed as soon as he/she is effectively notified of the dismissal decision.

Objective dismissal: the notice period varies according to the employee’s seniority within the company, as follows:

• less than or equal to a year working for the company: 15-day notice period;
• greater than or equal to one year and less than five years: 30-day notice period;
• greater than or equal to five years and less than ten years: 60-day notice period;
• greater than or equal to ten years: 75-day notice period.

In case of the termination of contract with a foreign employee, the employer must notify the Portuguese Authority for Working Conditions.

A. Dismissal with just cause

• a copy of the description of the facts attributed to the employee (‘Nota de Culpa’) must be submitted to the works council;
• once all witnesses have been heard and all documents submitted, a copy of the disciplinary proceeding must be submitted to the works council, and, if the employee is a trade union representative, to the respective trade union association, which may, within five working days, issue a written opinion;
• the works council and the trade union association must be notified of the final decision of the disciplinary proceeding.

B. Dismissal for objective reasons

The initial notification of the promotion of the collective dismissal/procedure for terminating a job position must be sent to the works council, or, in the absence thereof, to the inter-union committee or to the trade union committees of the company representing the workers to be covered.

The works council or another employee representative body must participate in the information and negotiation phases of both a collective dismissal and a job position termination procedure.

The works council or any other employee representative body must be notified of the final decision.

In the collective dismissal, in the absence of such entities, the employer must communicate the intention to proceed with a collective dismissal, in writing, to each of the employees who may be affected. On the other hand, the employees affected by the collective dismissal may appoint, from amongst themselves within five working days of receiving the notice, a representative committee with a maximum of three or five members, depending on whether the dismissal covers up to five or more employees.

With regards to the dismissal due to maladjustment, see point C above ‘Dismissal for objective reasons – dismissal due to maladjustment’.

There is now clarification regarding the possibility of individual representation by the employer and the employee’s representative structure by an expert at the information and negotiation phase meetings.

Disciplinary and objective dismissal: the union is not involved unless the employee is a trade union representative.

Disciplinary dismissal: no approval required. 

Objective dismissal: no approval is required, although the Portuguese Labour Authorities will participate in the dismissal procedure in order to verify that all substantive and procedural requirements are fulfilled, and will have the power to issue a warning to the employer if any irregularity is observed.

A collective dismissal procedure must be followed, as established by the Portuguese Labour Code:

1. if the dismissal is for market, structural or technological-related reasons; and
2. the number of employees affected, within a period of 90 days, is at least:
   • two employees for companies with up to 50 employees; or
   • five employees for companies with 50 employees and above.

The employee is considered to be effectively dismissed as soon as the notice period described above has been observed.

Dismissal without notice is not permitted under the Portuguese Labour Code.

General dismissal reasons: dismissal is considered unfair in the following circumstances:

• if the dismissal has been made for political, ideological, ethnic or religious reasons, even where other reasons are invoked;
• if the reason that justified the dismissal is declared unfounded by the labour court;
• if the dismissal is not preceded by the correspondent disciplinary procedure; or
• if a previous legal opinion is not requested by the competent authority in the area of equality of opportunities between men and women, if the dismissed employee is pregnant, has recently given birth, is breastfeeding or on initial parental leave.

Dismissal with just cause: such dismissals shall be considered unfair in the following circumstances:

• if a description of the circumstances of the relevant disciplinary infringement has not been submitted, in writing, to the employee (‘Nota de Culpa’); 
• if the initial description (‘Nota de Culpa’) does not describe the intention of the employer to dismiss the employee with just cause; 
• if the right of the employee to consult the disciplinary procedure and to respond to the initial description (‘Nota de Culpa’) has been refused; or 
• if notification of the dismissal decision has not been made in writing to the employee and with the observance of the requirements established by the Portuguese Labour Code for the issuance of the final dismissal decision.

Dismissals due to objective reasons: such dismissals are considered unfair in the following circumstances:

• if the initial notification of the collective dismissal procedure has not been properly submitted to the representative employee structure or, where such a representative structure does not exist, directly to the employees included in the collective dismissal procedure or if the information and negotiation phase is not properly promoted by the employer;
• the established period to issue the final decision of the collective dismissal has not been observed;
• if the legal requirements are not fulfilled; or
• the severance compensation, as established by the Portuguese Labour Code, as well as any other due or demandable labour credits arising from the termination of the employment contract has not been made available to the employee by the end of the notice period.

Disciplinary dismissal: No severance is due. However, if the dismissal is declared or recognised as being unfair or wrongful, the employer will have to:

1. reinstate the employee; or
2. pay the employee an indemnity.

The employee may choose to receive an indemnity in lieu of reinstatement of between 15 and 45-days’ salary per year of service, to be determined by the court pursuant to the seriousness and degree of wrongfulness of the dismissal.
In any case, the employee will be entitled to receive the non-earned salaries between the dismissal date until the final decision by the labour court and may claim an indemnity for all damages caused (moral and patrimonial).

Objective dismissal: For the termination of the employment relationship the employee will be entitled to severance pay.

In case of collective dismissal, dismissal for objective reasons, or maladjustment, the severance pay corresponds to 14 days of basic salary and seniority per  year of seniority.. There are specific rules that apply to employees who worked for the Company before May 2023, who may receive a severance pay corresponding to 30, 20, 18 or 12 days for each year of seniority, depending on the date they were hired by the company.

If the objective dismissal is declared unfair or wrongful (because the objective grounds are not proven), or the collective dismissal procedure has not been correctly followed, the employer may have to reinstate or pay the employee an indemnity according to the terms established above (refer to Disciplinary dismissal).

Please note that, even though it is not a “dismissal”, the termination of term employment contracts by the employer grants employees the right to severance pay in the amount of 24 days of base salary and seniority for each  year or fraction thereof worked.

Any clause in an employment contract or Collective Bargaining Agreement which in any way prejudices the exercise of freedom of work after the contract has ended shall be null and void.

Nevertheless, it is lawful to limit the employee’s activity for a maximum period of two years (or 3 in special conditions) following the termination of the employment contract, under the following conditions:

1. It is subject to a written agreement, namely an employment contract or its revocation;
2. It is an activity whose exercise may cause harm to the employer;
3. The employee is entitled to a compensation during the period of limitation of activity, which may be equitably reduced when the employer has incurred in significant expenses in professional training.

In the event of unlawful dismissal or termination with just cause by the employee on the grounds of an unlawful act of the employer, the compensation referred to in point c) of the previous paragraph is increased to the value of the base salary on the date of termination of the contract. If this does not occur, the limitation of activity provided for in the non-competition clause cannot be invoked. 

There is now a prohibition on outsourcing services to fulfil the needs previously met by an employee whose employment contract was terminated in the previous 12 months, through a collective dismissal or a job position extinction. It also stipulates that violating this requirement constitutes a very serious administrative offence by the contracting company.

It is no longer possible, after the termination of the employment contracts, for employees to waive the right to claim labour credits, except if it occurs by means of a judicial transaction.

Also, the dismissal of a Caregiver employee requires a prior opinion from the body responsible for equal opportunities between men and women (“CITE”). Dismissal for reasons attributable to a caregiver is presumed to be without just cause.

Under Portuguese law, the managing director and other members of the board of directors have a commercial relationship, and are beyond the scope of employment law. Even though in certain situations as in a limited liability company the managers may have an employment contract. The information below deals with a ‘director’, who has been appointed for the directorship mandate in accordance with the Portuguese Companies Code. It should be noted that senior managers are exclusively those who, on behalf of the legal owners of a company, have independent authority (reporting directly to the board of directors) and full responsibility for the company’s general objectives.

The company may request the dismissal of the director with just cause whenever a serious breach of the director´s duties towards the company has taken place, which affects the director´s liability to fulfil the normal performance of his/her duties.

Just cause: a resolution to dismiss a director with just cause may be passed by shareholders by a simple majority.

Where there is just cause, any of the shareholders may request that the director is suspended and dismissed by means of a legal action to be submitted to the company.

Where there is no just cause, the company´s contract may determine specific majority rules for the director´s dismissal.

Just cause: no notice period. Dismissal takes effect when the director is notified.

No involvement.

No involvement.

Not required.

Not required.

Not required.

The Portuguese Companies Code does not foresee any specific consequences if any requirements are not met. Contractual and legal penalties may be applicable, however.

If a resolution to dismiss a director is passed without just cause (or deemed by a court to be without just cause following a legal challenge by the director), then the director is entitled to compensation for the damages suffered.

When calculating such severance for damages, the law states that it should be considered that the director would not continue his/her mandate for more than four years, or for the time remaining in the mandate currently in force.

Non-competition clauses may also be negotiated and entered into after termination of the mandate, but actually just before termination, so that the mandate is still in force.

Not applicable.