Credits derived from individual labour contracts benefit from a general preference with regard to real-estate assets and thus prevail over mortgages
Principle of trust
Weighing up interests
Right to a salary
Workers’ right to a decent livelihood
RULING Nº 498/03
22 of October of 2003
The inclusion of the right to a salary and the right to redundancy payments within the framework of constitutional protection, which covers the right to remuneration, is the most appropriate interpretation of the reference in the Constitution to the right of workers to a decent livelihood. It expresses the maintenance aspect as well as the pecuniary character of the right to a salary (as opposed to the financial claims of the holders of registered security interests).
The setting of limits on the trust associated with the register is an appropriate and necessary means of safeguarding workers' rights to remuneration; in fact, when an employer goes bankrupt, it is probably the only way of guaranteeing the effective exercise of a fundamental right for workers.
The constitutionality issue concerns the rule under which the financial claims deriving from individual employment contracts are covered by the right to preferential payment out of all the debtor's immovables and, in accordance with Article 751 of the Civil Code, take precedence over a mortgage, even if it was registered before the aforementioned financial claims.
According to the general principle of the certainty of the law included in the principle of the rule of law, all citizens are entitled to know in advance that their actions or dealings will have certain effects. As far as the land register is concerned, this principle is closely linked to the principle of trust, insofar as people must, in general, be able to rely on the information contained in the register.
From the point of view of the mortgagee, the preservation of trust and of the certainty of the law, which are protected by Article 2 of the Constitution and guaranteed in particular by the land register, is called into question. On the one hand, the certainty provided by the register, when it is final, creates the presumption that the right exists and that it belongs to the registered holder (unless there is proof to the contrary). On the other hand, the legal certainty provided by the register protects third parties who have made acquisitions based on the presumption resulting from the previous entry in favour of the assignor. Therefore, the principle of the certainty of the law and the principle of trust, which are derived from the principle of the democratic rule of law enshrined in Article 2 of the Constitution, recognise the predominance of the register, which can work in favour of a person acquiring property from a person who has no title to that property ("a non domino"), insofar as the principle of public notice which establishes that predominance provides for the extinction of incompatible rights.
However, the fundamental rights of workers include the constitutional right to remuneration for their work, so as to "guarantee them a decent livelihood", in accordance with Article 59.1.a of the Constitution. The Constitutional Court has already expressly held this right to be of a similar nature to rights, freedoms and guarantees (see Judgment no. 373/91).
The case in question therefore involves a conflict between a right having a similar nature to rights, freedoms and guarantees (the right of workers to remuneration for their work) and the general principle of the certainty of the law and trust in the law. Although it seems impossible to evaluate directly, in the light of Article 18 of the Constitution, the way in which the impugned rule has resolved this conflict by giving precedence to the right to remuneration, does not mean that it should not be examined in accordance with the criterion of proportionality.
The requirements of the principle of proportionality are derived not only from a specific article - Article 18.2 of the Constitution -, but also from the general principle of the rule of law, enshrined in Article 2 of the Constitution.
Although the bankruptcy of the employer is also the bankruptcy of the debtor, it is precisely remuneration, as a way of ensuring a decent livelihood for workers, which could justify, from a constitutional point of view, the solution offered by the impugned rule, according to the above-mentioned interpretation. However, this argument needs to be seen in relation to other aspects, particularly the scope of constitutional protection of remuneration (Article 59.1.a of the Constitution), in order to judge whether it only covers the right to a salary or whether it also includes, more broadly speaking, redundancy payments.
Nevertheless, since it is undeniable that the right to compensation is clearly meant to replace the right to loss of earnings, the Court ultimately concluded, firstly, that the restriction of the principle of trust is justified and, secondly, that the rule in question is constitutional insofar as it gives precedence to the financial claims resulting from individual employment contracts.
The Constitutional Court has already been asked to determine the constitutionality of rules which confer on certain financial claims the right to preferential payment out of all the debtor's immovables and predominance under the terms of Article 751 of the Civil Code, as well as whether such a right could, in the light of the principle of trust, take precedence over a previously registered mortgage relating to an asset covered by the right. Ruling on these questions, it stated that "the rule [...] according to which the right to preferential payment out of all the debtor's immovables, which it grants to the Treasury, takes precedence over the mortgage under the terms of Article 751 of the Civil Code" (Judgment no. 362/03) and "the rules [...] according to which the right to preferential payment out of all the debtor's immovables, which they grant to the social security authorities, take precedence over the mortgage under the terms of Article 751 of the Civil Code" (Judgment no. 363/02) were unconstitutional because they violated Article 2 of the Constitution.