29 March 2008

Better Know A Strange Labor Law: Portugal

This is the second installment of our new series "Better Know A Strange Labor Law".

(Please also read the disclaimer at the bottom of this post)

Portugal: The Country
Situated in Europe on the Iberian peninsula with a population of almost 11 million. All cab drivers are fluent in sign language and some understand English. Great country if you love meat, almost all dishes are served with fries AND rice. According to a former employee, TAP (the national airline) stands for "Take Another Plane". Great weather!

Portugal: The Strange Labor Law
If your company intends to start doing business in Portugal, here's one important thing to know: There's no termination period for the employer.

This doesn't mean that you can tell your employees to go home and the next day their employment contract will have disappeared. This means that you can't fire anybody. An employee can resign with a 1 month resignation period in the 2 first years of employment and 2 months afterwards.

The employer has the following choices:
  • offer money and beg the employee to leave (also known as "mutual consent")
  • fire the employee for gross misconduct (also known as "for cause" or "good luck proving that")
  • fire the employee, pay up to 6 months salary AND risk to be forced to reinstate the employee (also known as "abusive dismissal" or "back to square one")

Impact On Labor Market
The consequence is that most companies only offer fixed-term contracts (can be extended 2x within 2 years) or hire their workforce through temp agencies.

Unfortunately, this is another example of a labor law that was meant to protect employees but is probably doing more harm than good.

I'm no lawyer. This doesn't constitute in any way, shape, form or size legal advice. I'm just babbling. I got most of my information from fortune cookies. If you really need serious advice, contact a real lawyer. But first make sure he is sober.

Disclaimer re: the Disclaimer:
I have nothing against lawyers. But I thought that it would be fun to say something bad about them since everybody seems to hate lawyers. Especially my friends who went through a divorce.


Anonymous said...

I hear Italy has similar labor laws. Ah, Europe. A great place to work.

Happy Employee said...

At least Italy knows resignation / termination periods for both parties.

The tricky thing for an employer is rather finding a good (official) reason for firing somebody, which means additional costs (lawyers and severance payments).

All the more reason IMO to do a proper recruiting process and to treat employees reasonably well.

Anonymous said...

I love this series! Thanks for doing it. Some of my clients must think they live in Portugal - although lately many of them are taking the Italian way out.

Where, if anywhere, in Europe are you just shown the door?

Happy Employee said...

In Switzerland your boss can tell you to go home and not come back, as long as they pay your full resignation period and you're neither sick nor pregnant.

There's also one situation where an employee is not allowed to resign. I'll get to it in a future episode.