Amendments to the Labour Code
Collective labour regulation instruments (ircts);
Unsuitability for a job or job station;
Making working time more flexible;
Individual hour bank;
Group hour bank;
Length of annual holidays;
Abolition of mandatory public holidays.
RULING No. 602/13
20 of September of 2013
In this Ruling the Constitutional Court:
1) Declared a number of norms contained in a Law that amended the Labour Code (CT) unconstitutional with generally binding force. These norms sought to: a) change the requisites for dismissing workers because their jobs are eliminated; b) do away with the requirement that, for an employer to be able to dismiss a worker whose existing job is eliminated, there cannot be another position at the same employer that is available and compatible with the worker’s qualifications; and c) nullify certain provisions of collective labour regulation instruments (IRCTs) and clauses of labour contracts that were entered into before the entry into effect of the Law that made the amendments in question, with regard to rest periods attributed as compensation for working overtime on normal working days, compensatory weekly rest days or public holidays.
2. Declined to declare the unconstitutionality of norms which are contained in a Law that amended the Labour Code and which concern:
a) the individual hour bank format; b) the group hour bank format; c) doing away with some forms of compensatory rest and halving the additional amounts paid for overtime; d) abolishing certain mandatory public holidays; e) eliminating the possibility that the length of annual holiday periods can be increased for workers who are especially assiduous; f) requisites for dismissing workers on the grounds that they are unsuited to their work; g) norms regarding certain aspects of relations between regulatory sources (Labour Code versus collective labour regulation instruments); and h) a two-year suspension of some IRCT norms and labour-contract clauses containing provisions on additional overtime rates above those laid down in the CT, and on payment or compensatory rest periods for normal work done on public holidays, at companies that are not required to suspend operations on such days.
General remarks. A group of Members of the Assembly of the Republic asked the Constitutional Court to conduct an abstract ex post facto review of norms contained in a 2012 Law that made the third set of amendments to the 2009 Labour Code (CT). These norms addressed a number of issues: hour banks (individual and group); doing away with some forms of compensatory rest; overtime payments; abolishing a certain number of public holidays; eliminating a mechanism whereby the number of days of annual holiday could be increased (as a reward for the worker’s assiduity, subject to certain conditions); requisites for dismissing workers because their jobs are eliminated; requisites for dismissing workers on the grounds that they are unsuited to their work; relations between regulatory sources (Labour Code versus collective labour regulation instruments); and payments for working on public holidays.
The norms regarding relations between the CT and IRCTs included those providing for: 1) the nullification of IRCT provisions which say that workers should receive higher amounts in compensation than those which the Labour Code lays down for (a) collective dismissal, and (b) termination of their labour contract; 2) the nullification of IRCT provisions and labour-contract clauses regarding compensating for overtime by attributing additional rest periods; 3) cuts of up to three days in increases in the length of annual holidays provided for in IRCTs and clauses in labour contracts dated after 1 December 2003; 4) a two-year suspension of IRCT provisions and labour-contract clauses on (a) the payment of overtime rates over and above those laid down in the CT, and (b) extra payments for normal work done on public holidays or the award of compensatory rest periods for the same thing, at companies that are not required to suspend operations on such days; and 5) an automatic halving by law of overtime rates if the IRCT provisions governing labour-contract clauses on the matters covered by points 1 to 4 are not revised by the end of the two-year suspension.
The Court began by emphasising that the records of the preparatory work leading up to the Law containing the norms before it for review make it clear that the Law was designed as a response to undertakings in the labour law field made within the framework of the 2011 Memorandum of Understanding on Specific Economic Policy Conditionality (MUSEPC), with a view to promoting the economy. The legislator was also seeking to move towards fulfilment of the obligations undertaken in the Commitment for Growth, Competitiveness and Employment (CCCE) that was signed in 2012 by the government and the majority of the social partners with seats on the Standing Commission for Social Concertation (CPCS).
From the perspective of its author (the government), this reform of the CT is of fundamental interest if workers are to be given a labour market with opportunities that are more numerous and more diverse. The concrete measures approved by the Assembly of the Republic primarily entailed making the labour law more flexible, with a view to restraining salaries, reducing costs linked to work done outside normal hours, making the regimes governing suspending working or reducing staff numbers more suited to the vicissitudes of both the economic cycle and the employer’s production cycles, and modifying the preconditions for dismissing workers on objective grounds (dismissal because the worker’s job is eliminated, and dismissal because the worker is unsuited to the work).
1. Individual and group hour banks
Hour banks are part of a range of measures intended to increase the flexibility of the ways in which working time is organised, by counting that time in average terms with reference to periods of more than a day or a week. They are working-time organisation mechanisms that are different from the weekly scheme based on eight hours a day or forty hours a week, and make it possible to match working hours to companies’ needs. The resulting increases in the hours worked in a given day or week do not count as overtime and are not paid as such. Nor can the worker give what the Labour Code classifies as ‘a reason the employer is required to accept’ in order to justify refusing to work them – something he/she could do if they were overtime. By creating hour banks, the legislator sought to address the additional cost of overtime, the limitations on its use, and the varying and unpredictable nature of production cycles. The format was first introduced in the 2009 Labour Code, and in that original version could only actually be implemented as part of an IRCT.
In almost every case the extra hours worked in one period are compensated for by a correlative reduction in the hours worked at another time, within a fixed reference period that cannot exceed twelve months. As a rule, a worker can work more hours on a given day or in a given week, on condition that he/she works less hours on another day or in another week and the result is that the average for a predefined period is at most eight hours a day and forty hours a week. The employer can use this ‘bank account’, in which it and the worker have a credit or debit balance in hours, under the terms and conditions laid down in a collective or individual instrument to require the worker to work more or less than the standard number of hours in the company’s formal work schedule, without having to change the latter each time.
The only thing the law requires is that the worker be given the amount of advance notice of both the periods in which he/she is to work more and those in which he/she is to work less – dates that it is up to the employer to decide – set out in the applicable hour-bank or collective labour agreement.
The 2012 Law permits three hour bank formats: an hour bank created by an IRCT (this was the system that already existed); the individual hour bank (created by ad hoc agreement or prearranged in the individual labour contract between the employer and the employee); and the group hour bank (an extension of one of the other two regimes, but applicable to a group of workers within a company).
The Court recalled that the MUSEPC already called for reforms of the regimes governing working hours in the shape of new, more flexible formats.
The CCCE (2012) said that it was necessary to mould the regimes in ways that permit a better use of resources, but safeguard the existence of both rest periods in general – particularly as regards mandatory daily and weekly rest – and an annual period of paid holiday.
An individual hour bank can be created by agreement between the employer and the worker. The question that was brought before the Court in this respect concerned the legal presumption that if an employer proposes the creation of such a bank, the worker is deemed to accept it unless he/she actually opposes it in writing. This presumption of agreement on the part of the worker is thus based on attaching value to the latter’s silence (or inaction), which is deemed to constitute a declaration of acceptance.
In this respect the Court followed its earlier jurisprudence, which says that while in general silence does not possess declaratory value, this does not mean that the law cannot give it such a value if the legislator takes the view that it is reasonable to impose a duty to respond.
The norm does not provide for a unilateral imposition of the individual hour bank, pure and simple; it does allow the worker to oppose the bank in writing and by a certain deadline.
The Court considered that although there are real obstacles that can make it difficult for the worker in a labour relationship to enjoy a true freedom of decision, a requirement for express consent would not eliminate or significantly lessen the factual constraints on him/her.
The Court also said that the nature of the individual hour bank could in itself ensure an availability of free time which would essentially foster the fundamental rights that protect workers’ personal and family lives.
This legislative option falls within the scope of the legislator’s right to shape legislation.
The question with regard to the group hour bank concerned the fact that an employer can unilaterally decide to impose such a bank on workers who have not consented to it. This can be done by extending an hour bank that is already provided for in an IRCT and already encompasses 60% of the workers in a given team, section or economic unit, even when a particular worker who opposes it is not a union member, or is a union member but his/her union is not a party to that IRCT; and the employer can also impose the bank by extending individual agreements with 75% of the other workers in the unit, even if the worker in question expressly refuses it.
The group hour bank regime is designed to permit the implementation of this working-time organisation format beyond the universe of labour relations covered by an IRCT that allows hour banks, thereby making it possible to overcome obstacles derived from non-union-membership or refusals to accept individual hour banks.
The petitioners to the Court argued that this type of hour bank could be imposed on workers who have expressed their refusal of it; and that a unilateral extension by an employer of an hour bank that is provided for in a collective labour agreement (CCT) to workers who do not belong to a union, or who do belong to one, but that union is not a party to the agreement, constitutes a breach of the principle of the freedom to belong to a trade union or not.
The Court considered that it is justified for the group hour bank regime – which says that if a majority of workers are willing to accept a flexible working-hour system, this prevails over the specific situations of individual workers – to seek to ensure a practical solution to conflicting interests. The possibility of imposing this regime is underlain by an idea of solidarity that justifies subordinating individual interests to the collective interest, in articulation with the interest in ensuring good business management. In this situation the collective principle and the principle of the prevalence of the interests of good management are more important than the individual interests of members of a given working team – a prevalence that is reflected in the advantages to be gained from making working time more malleable in ways that match management needs. The principle of safeguarding the interests of good management provides the grounds for the various rules which, subject to certain limits, ensure that the company’s position prevails over a negotiated agreement. The constitutional bases for this are the freedom of private initiative and the freedom to manage private enterprises.
For it to be permissible for a scheme for modulating working times to be applied to a set of situations in which individuals provide their labour and which are especially linked to one another, it must be possible to make a judgement that there is a need for a functional adaptation that must also be based on management criteria.
The group hour bank (like the other mechanisms for increasing flexibility) is shaped by a rationale that justifies the option which the law makes available to the employer and under which the latter can unilaterally require certain workers to work within the framework of a working-time modulation scheme that they had no part in defining, or may even have expressly opposed.
The Court was of the opinion that this norm does not even interfere with the negative dimension of the freedom to choose whether or not to belong to a trade union.
In the case of the group hour bank, workers are not directly encompassed by the efficacy of collective labour agreements entered into by trade unions to which they do not belong or in relation to which they have not exercised their right to choose. The concrete application of this regime is instead based on the employer’s power to direct, subject to certain preconditions and assumptions that are laid down by law.
The Constitution of the Portuguese Republic (CRP) also admits the possibility that the ordinary law can, when based on reasons with suitable material grounds, expand the scope of the personal application of collective agreements to workers who are not members of the trade unions that signed the agreements in question. There is no doubt in constitutional terms that an individual worker can be bound by a collective labour agreement founded on a collective autonomy, without the need for him/her to specifically accept that instrument.
The presumption that workers are in favour of the implementation of the group hour bank regime is not an absolute one. The law imposes substantiated limits on the right of workers to collective labour agreements. The Labour Code says that workers who are covered by a collective agreement which says that such a regime is not permissible, and workers who are represented by a trade union which opposed the ministerial order extending the collective agreement in question, are excepted from this presumption.
The Court admitted the possibility that a number of other issues might also be at stake: the right to rest (given the existence of biological cycles that affect physical and intellectual tiredness, which mean that concentrating work into a given period of time is not arithmetically compensated for by a correlative reduction in time worked later on); the reconciliation of work and family life; and minimum fulfilment of the right that work be organised under socially dignifying conditions, in such a way as to permit personal self-fulfilment. It considered that these limitations on the rights of workers who have not adhered to, or are opposed to the concrete implementation of, the group hour bank regime are indispensable to the operationalisation of this working-time format, inasmuch as it is only practicable when applied to the whole of a given organisational unit. When this uniformity is not necessary, employers can always resort to less intrusive formats based solely on collective regulations or individual agreement.
The importance of the preconditions for the exercise of the above option on the employer’s part is linked to the dimension ‘representativeness of workers’ interests’, which means that this working-time modulation regime cannot be unfavourable to the workers it covers when they are taken as a whole. One must conclude that if a collective agreement which encompasses 60% of the workers in question opts for the possibility of a solution of this kind, it recognises that that solution is in the workers’ overall interest; and the legislator took the stance that, in cases in which no such agreement is applicable to at least 60% of the workers, the fact that 75% of them accept their employer’s hour bank proposal is sufficient evidence that the proposed agreement is not unfavourable to the workers’ interests in overall terms. In both cases the law requires the employer’s proposal to receive very substantial support from either the workers it is going to cover, or the qualified representatives of that same universe of workers.
What is at stake here is the fulfilment of interests which, at a given moment in time, are deemed to prevail over rest and family life – interests which can, for example, be those represented by the need to ensure the company’s economic viability and thus the continued existence of the workers’ jobs and working conditions.
From a perspective of a fair balance in the sacrifices imposed on workers, the Labour Code itself provides for maximum daily, weekly and annual limits in the increases in working hours, and dispenses workers in the most vulnerable situations (women who are pregnant, have recently given birth or are breastfeeding; minors; and, in certain cases, workers who are disabled or suffer from a chronic illness, and student-workers).
Parenthood (the existence of dependent minors) also implies dispensation from working under flexible working-time regimes.
The Court held that these limitations on the individual rights of workers who do not directly or indirectly consent to the implementation of the group hour bank regime are merely those needed in order to ensure the exercise of the employer’s power to direct in the common interest of the workers in question, and that, in their own right and because they do not represent a more damaging sacrifice than that which might result if one where not to consider the interests which the regime protects in this way, the limitations are not excessive.
2. The elimination of compensatory rest periods; overtime payments
The petitioners questioned the constitutionality of the CT norms that did away with certain forms of compensatory rest and halved the extra payment for overtime and for work done on public holidays.
They also questioned the norm that abolished the compensatory rest due for work done on normal working days. The 2012 Law only maintained the right to paid compensatory rest for work done on mandatory weekly rest days and during the daily rest period, and for normal work done on public holidays at companies that are not required to close on such days (albeit in the latter case, the employer may choose to give extra pay as an alternative).
The increases in hourly pay for overtime work were halved, and the possibility of IRCTs waiving increased rates for overtime was extended. The petitioners calculated that this reduction in overtime payments means that workers are no longer paid for an annual equivalent of 93.75 hours, which is a significant drop in salary and the value of their labour.
These measures were designed to reduce the cost of overtime, and in introducing them the legislator stuck closely to the terms of the MUSEPC and the CCCE.
Overtime means work “done outside working hours”, and the notion excludes other situations related to the setting of work schedules (e.g. time a worker uses to go on vocational training). Overtime represents an increase in the time in which a worker is available to his/her employer, to the prejudice of his/her right to daily rest. The conditions under which an employer can require people to work overtime are linked to abnormal management needs and situations of force majeure. Resorting to overtime is conditioned by a range of legal requirements. If a certain set of those conditions is in place, workers must obligatorily do overtime unless they give a reason which the law says the employer is required to accept for dispensing them; certain categories of worker are prohibited (minors) or dispensed (workers who are pregnant, have a child below the age of one, or are disabled) from doing overtime; and the amount of overtime is subject to both daily and annual limits.
In certain cases and subject to certain limits, overtime entitles the worker to compensatory rest and increased pay. The Court considered that the legislative amendments in question reduce both salary and the value attributed to work, but that halving the increases in pay due for overtime is not something that in its own right is capable of harming the constitutional right to be paid for work in accordance with the latter’s quantity, nature and quality. This is because, despite the major reduction, work done as overtime is still treated differently, and the definition of remuneratory differentiation is a matter that the Constitution necessarily leaves to the ordinary legislator.
The Court was also of the view that there is no place here for a finding of unconstitutionality on the grounds that the norms breach workers’ rights to rest, the reconciliation of work and family life, and/or the protection of the family. Paid compensatory rest still exists in the situations that most deeply undermine the right to rest. The legislative amendments that were questioned by the petitioners do not expand the legal grounds on which employers can require people to work overtime (although the number of situations that are deemed to fall within the concept of overtime has been cut); nor have the exceptions to the obligation to work overtime been restricted, and the daily and annual time limits on the amount of overtime worked have not been raised.
The Court accepted that doing away with compensatory rest is clearly one more measure designed to reduce labour costs, inasmuch as the time spent taking compensatory rest is paid. However, in the cases in which overtime pay has been reduced, it is still the object of quantitative differentiation in the form of a higher rate, albeit the amount of the increase is now less. The Court also pointed out that the new legal regime governing compensatory rest is not imperative – both IRCTs and individual labour contracts can establish terms that are more favourable to workers.
The Court therefore considered that the first line of defence of workers’ rights to rest, the reconciliation of work and family life and the protection of the latter – a line based on the exceptional nature of the requirement to work overtime, the time limits on working it, and the possibility for workers to be dispensed from it for reasons linked to their condition and personal or family life – has been preserved and that the new rules still ensure workers are not in situations in which they must be unrestrictedly available to provide their employer with work outside the stipulated time schedule.
3. The abolition of mandatory public holidays and of the increase in the annual holiday period as a reward for the worker’s assiduity
The question here was the abolition of four mandatory public holidays and of a mechanism whereby the number of days of annual holiday could be increased (by up to three days, as a reward for the worker’s assiduity).
Mandatory public holidays are significant elements in the labour relations field, inasmuch as any activity that is not permitted on Sundays must also be suspended on such days.
The Court said that the idea behind stopping work in such cases is to make it possible to collectively celebrate dates or events that are considered important. Abolishing mandatory public holidays is not an offence against workers’ rights, because the purpose of creating public holidays is not directly to protect workers’ rights, but rather to pursue public objectives on the social, political, religious or cultural levels. This is not a right which the worker possesses in relation to his/her employer (right to rest), but a duty that employers have to the state – a duty that is in turn articulated with a subjective public right on the part of workers to have free time in which to take part in the commemoration in question.
The Court agreed that to eliminate public holidays is to restore working on days when work used to be suspended, and that this means that more days are worked without any corresponding increase in pay. However, on the legal level this effect cannot be attributed to the legislative measure that abolished the holidays. Pay is not indexed to a fixed or minimum number of annual public holidays. To be precise, calendar days (except for weekly rest days and annual holidays) are ab initio working days, unless the law suspends work because it says that the day is a public holiday. It is up to the legislator, in pursuit of the public interest, to determine which days are public holidays.
Nor was there any violation of the principle of trust, because there is no expectation deserving of legal protection – let alone a right – that the legal list of mandatory public holidays will never change.
Turning to the abolition of the norm that used to increase the length of an assiduous worker’s annual holiday, the Court recalled that this legal mechanism was not directly intended to increase the duration of the holiday period, but rather to fight absenteeism by linking a lack of absences from work to the benefit of longer holidays.
The 2012 legislator decided to do away with this incentive, probably in favour of the economic goals that have led to other amendments to the CT and are designed to increase productivity levels in Portugal.
These are choices that imply making considered judgements that fall within the scope of the legislator’s power to act and whose correctness it is not the Court’s place to assess. Besides which, there is nothing to stop collective agreements or individual contracts from establishing holidays that are longer than the legal minimum.
Given that the issue here is not a change in the minimum duration of the annual holiday period, but rather the elimination of a regime under which that duration was increased in the light of a worker’s assiduity, the 2012 amendment does not fall within the scope of the protection afforded to the right to holidays or the right to rest. It is therefore not unconstitutional.
4. Dismissal on the grounds that the worker’s job is being eliminated
The format under which a worker can be dismissed because his/her job is eliminated is invoked at the employer’s initiative and is justifiable when it is due to market, structural and/or technological reasons that are affecting the company. The norm before the Court addressed the requisites for this form of dismissal. The possible reasons were: a) market-related: the company is reducing its activities due to a predicted fall in the demand for goods or services or to a supervening practical or legal change that is making it impossible to place those goods or services in the marketplace; b) structural: an economic/financial imbalance, a change of business, a restructuring of the company’s production organisation, or the replacement of dominant products; and/or c) technological: changes in manufacturing techniques or processes, the automation of production, control or loading equipment, or the computerisation of services or the automation of means of communication.
The questioned norm said that when faced with multiple jobs with exactly the same functional content, it was up to the employer to define relevant, non-discriminatory criteria for deciding which individual employee’s position should be eliminated. The modifications made by the 2012 Law were already set out in the 2011 MUSEPC.
The Court emphasised that the regime governing dismissal because a worker’s job has been eliminated rests on two fundamental decisions that must be taken by the employer: the decision to abolish a position, which must necessarily be based on the abovementioned market, structural and/or technological reasons; and the decision to dismiss a particular worker. In order for the employer’s final decision to terminate a specific employment contract to be lawful, the grounds and requisites which the law imposes for each of these two decisions must be in place.
This regime must remain within the bounds laid down by the principle of job security, whose negative aspect precludes dismissal without just cause or for political or ideological reasons.
As part of the process of making the constitutional concept of just cause legally operable, the Constitutional Court has taken the stance that this concept can encompass a range of objective facts, situations or circumstances and is not limited to the notion of disciplinary just cause.
The existence of fault on the part of the worker – i.e. linked to some situation in which he/she is the object of ethical/legal censure – is not a precondition for dismissal for objective reasons. The termination of the labour bond is not derived from a fact that the worker ought to have avoided or prevented; nor can it be laid at the employer’s door. It must instead be objectively impossible for the job to continue to exist, and in order for this impossibility to exist, the substantive and procedural regulations governing this type of dismissal for just cause must be different from those applicable to disciplinary just cause, in a way that safeguards the requirements derived from the principle of proportionality. The regulations applicable to this format must prevent dismissals for which there are no justifiable reasons or which are ad nutum, including those based merely on the enterprise’s convenience.
The constitutional concept of just cause includes both subjective just cause (disciplinary situations in which fault exists), and objective just cause, in which the situation is one in which the employer cannot be required to continue the labour relationship.
In addition to prohibiting reasons for dismissal which the Constitution does not consider just, the fundamental right to job security also requires the state to act by issuing suitable procedural rules for the protection of the right itself. The constitutional prohibition on dismissal without just cause can be breached by both legal provisions that allow inappropriate grounds for dismissal, and provisions that establish rules which do not do enough to safeguard the workers’ positions.
In the present case, the challenged norms regulated aspects of the regime that were directly related to the employer’s decision to dismiss a specific employee.
With regard to the criterion for selecting which job to eliminate – which is the same thing as choosing which worker to dismiss – the new text of the norm replaced a seniority-based criterion with sub-criteria that were defined by the employer and had to be relevant and non-discriminatory in the light of the objectives that underlay the elimination of the position.
When the legislator takes the trouble to set preferential criteria for choosing which job to eliminate in situations involving multiple jobs with the same functional content, the goal is to ensure that the dismissal is objective. The idea is to prevent employers from being able to use the excuse of objective reasons linked to the enterprise in order to get rid of an employee whose contract it wants to terminate, but in relation to whom it does not have subjective just cause.
The Court said that whereas in the pre-2012 version of the Law, this individualisation of the job that is to be eliminated is subject to a clearly defined legal provision based on a purely objective type of criterion (seniority and the person’s level within the same professional category), the new norm delegated the task of defining the criterion(a) that must govern the selection of which worker to dismiss to the employer, who was only given a number of directives to follow.
This means that it was now the entity with the interest in dismissing someone that formulated the criteria for justifying that dismissal. However, it is only if the law rigorously lays down parameters which in turn impose conditions and limits, that one can make a subjective choice impossible and also ensure that a court can effectively control the dismissal’s validity by objectively verifying the reason for it and that the decision is a fit one, and consequently determine whether the dismissal is legal or illegal.
The new norm only required the criteria for choosing which job is to be eliminated to be relevant and non-discriminatory, and that these characteristics be weighed up against the objectives underlying the abolition of the position in question.
The Court found these concepts to be vague and indeterminate and lacking the efficacy which would make it possible to adequately set goalposts within which the employer must make its choice, and which would thus prevent the employer from being able to arbitrarily decide which worker to dismiss.
The 2012 Law maintained an existing norm which says that it is a general requisite for a person to be dismissed on the grounds that his/her job is being eliminated that it must be impossible to maintain the labour relationship between him/her and the employer by giving him/her another position. However, whereas the old version thus requires the employer to show that it does not have another position which is compatible with the dismissed worker’s professional category and which is open for the worker to occupy, the new text said that this requisite was automatically fulfilled when the employer showed that it had adopted criteria that were relevant and non-discriminatory in the light of the objectives underlying the abolition of the position.
In other words, in order to determine that it was impossible for the labour relationship to continue to exist, in cases where there are multiple jobs with the same functional content the 2012 Law used the same criterion as that to which it subjected the choice of the position that was to be abolished. In practice the new text revoked the rule that imposes a duty on the employer to offer the worker an alternative job at the company, if one exists. The regime which the 2012 Law sought to replace ensures that satisfaction of the employer’s interest in doing away with a position is compatible with the principle of job security, in that the elimination of the job does not automatically entail termination of the labour bond, because the employer is obliged to propose a change of position if there is one at the company which the worker in question can occupy. The Court said that this was the balance that would be lost as a result of the new text of the norm.
The regime that was challenged by the petitioners made it possible to dismiss workers within a framework of circumstances in which the company has another vacant position which the worker who would otherwise be dismissed might want to take up – circumstances in which doing away with one job would not in itself preclude the preservation of the worker’s employment. The Court held that by freeing the employer from the obligation to propose a different position, the new regime caused unnecessary and excessive harm to the right to job security and was therefore unconstitutional.
Moreover, this unconstitutional flaw was worsened by the inappropriate nature of the criterion which the legislator adopted to replace the employer’s duty. This new criterion invoked concepts that were so indeterminate and vague that they were effectively equivalent to the absence of any legal criterion at all, with the employer free to choose them at will.
5. Dismissal on the grounds of unsuitability
The Court was asked to review the constitutionality of a norm that sets out the requisites for the format under which employees can be dismissed because they are not, or are no longer, suited to their work. This format consists of termination of the labour contract by the employer on the grounds that the worker has become unsuited to his/her job. Existence of this kind of supervening unsuitability is demonstrated by the way in which the worker performs his/her functions, and must be such that it makes it impossible for the labour relationship to continue. Manifestations include: (a) an ongoing drop in productivity or quality; (b) repeated malfunctions in the resources allocated to the worker’s position; and/or (c) risks to the health and safety of the worker, his/her colleagues and/or third parties. Such situations can come about when changes have been made to the worker’s job or job station or, if this is not the case, if there has been a substantial change in the worker’s performance and it is reasonably foreseeable that this change will be permanent.
The 2012 Law provides for two types of dismissal due to unsuitability: one represents the traditional situation, in which a worker becomes unsuitable after changes have been made to his/her job or job station; the other type is new (the petitioners and some authors call it “ineptitude” rather than unsuitability) and entails a substantial change in the worker’s performance that is reflected in a lasting fall in productivity or quality, regardless of whether his/her job or job station has changed. The new norm did away with two requisites for dismissal due to unsuitability following changes to the employee’s job or job station: that the employer not have another vacant position that is compatible with his/her professional qualifications; and that the unsuitability not be derived from a lack of health and safety conditions at work for which the employer was responsible. The petitioners also questioned the constitutionality of the revocation of these preconditions for dismissal on the grounds of unsuitability.
The petitioners argued that the grounds for this dismissal format based on unsuitability and without reference to changes in the employee’s job or job station were subjective (the worker is personally responsible for them) and therefore outside the parameters which the Constitution admits in relation to dismissals for objective reasons. They said that this was because in such situations it is not possible to adequately determine the concrete causes of the dismissal, or for a court to control whether it is objectively impossible for the labour relationship to continue to exist, and that this meant that the new norm permitted unjustified and arbitrary dismissals.
On the question of the constitutional conformity of the format under which a worker can be dismissed because he/she is unsuited to his/her job and this is revealed by a substantial and permanent change in the way in which he/she performs his/her functions, the Court recalled that although the legal concept of unsuitability concerns an objective, definitive fact in relation to the worker, it is not the kind of subjective impossibility which would mean that the labour contract would have to end under the general provisions of contract law.
The fact that this substantial change in the worker’s performance is not a consequence of alterations in the context in which he/she works means that it is deemed to be linked to the way in which he/she does his/her job, as reflected in a range of objective elements that reveal a professional performance which possesses less quality or produces less output, but in which there is no fault on the worker’s part.
The cause that underlies this dismissal format is objective, in that the decision to dismiss is based on facts linked to the worker’s behaviour. The requisites imposed by the norm are fulfilled if the worker behaves in ways that lead to an ongoing reduction in the quality or productivity of his/her work. The reason for dismissal is related solely to the worker and the way in which he/she performs his/her functions, and the only requisites are that the unsuitability demonstrated by the poor results of his/her performance at work cannot be attributed to fault on his/her part (when another format would be applicable) and that it is reasonably foreseeable that this unsuitability will be permanent.
This combination of poor results and a lack of fault is an objective one. What is at stake here is a situation in which it is deemed that the employer cannot be required to maintain the labour relationship. From this perspective it is useful to weigh up the fundamental rights that are in conflict here – the right to job security on the one hand, and the right to free economic initiative on the other.
In the light of this conflict, an employer cannot be required to maintain the labour bond with a worker who is unable to work with the equipment provided to him/her, who endangers his/her safety or that of others by the way in which he/she works, or whose productivity falls drastically and permanently.
From all this, the Court concluded that dismissal on the grounds of unsuitability demonstrated solely by a reduction in the quality of the work done as reflected in either of the above situations and in cases in which it is reasonable to predict that that reduction will be permanent is not unconstitutional. There is no violation of the prohibition on dismissal without just cause, because these grounds for dismissal fall within the possible scope of the criterion ‘just cause’, whose definition the constitutional legislator has left to the ordinary legislator.
The substantial and procedural requisites which the Labour Code imposes in terms of the relevance of these grounds for dismissal also make it possible to objectively gauge just cause in controllable terms, and the worker is given the opportunity to both defend him/herself and correct his/her performance.
However, on the absence of an alternative job as a requisite for dismissal to be permissible, the Court said that the finding of unconstitutionality with regard to the norm that revoked the requisite that there be no other available job also applied to the question of dismissal on the grounds of unsuitability.
If one can say that in order not to be required to keep an employee whose unsuitability has been revealed following changes in his/her job or job station, it is essential that the employer not have another position at the company that is compatible with the worker’s professional qualifications, then the same conclusion must be reached with regard to a situation in which the worker’s unsuitability becomes apparent regardless of any alterations in the working environment. The criterion for not requiring the employer to give the employee another job is that it be impossible in practical terms for the labour relationship to continue to exist, and this criterion is the same in both situations. The issue here is the collision between the right to job security and the right to free economic initiative, and the former can only justifiably be sacrificed to the strict extent needed to safeguard the latter. The ‘prohibition on excess’ aspect of the principle of proportionality means that if is there is another job available at the company that is compatible with the worker’s professional qualifications and present ability to work, then he/she must be offered that position.
This requisite is not fulfilled if such another job does exist. The Court thus said that dismissal on the grounds of the worker’s unsuitability can only occur if no alternative position is available.
6. Questions of constitutionality regarding relations between sources of regulation
The petitioners also alleged a violation of the right to enter into collective labour agreements and the ensuing unconstitutionality of the norm regarding relations between sources of regulation (CT and IRCTs) that nullifies, reduces or suspends certain IRCT provisions.
They argued that this precept addresses matters which the Constitution reserves to collective labour agreements and on which the ordinary legislator cannot legislate because they form part of the essential core of the right to enter into such agreements, which is a fundamental right that pertains to workers. They considered that inasmuch as the revocation of clauses in collective agreements by an imperative law constitutes a limitation on collective bargaining and is thus a restriction on that fundamental right, in order for it to be valid it would have to comply with the principles of proportionality, appropriateness and necessity, in conformity with the requirements which the Constitution imposes on any law that restricts fundamental rights, freedoms and guarantees.
The petitioners also argued that by reducing terms and conditions that had been validly agreed in current collective labour agreements or declaring them null and void, the norm in question breached the principle of the protection of trust that in turn results from the principle that legal certainty must be protected, both of which are an inseparable part of the implementation of the principle of a democratic state based on the rule of law.
The Court pointed out that under the Constitution workers are the holders of the right to enter into collective labour agreements, albeit they can only exercise it via trade unions. This exercise is guaranteed “under the terms laid down by law”. Because this guarantee is founded in the Constitution, the fact that the details are left to “the terms laid down by law” cannot mean that the guarantee itself is placed in the hands of the ordinary legislator. The law must at least guarantee that an ability to enter into collective agreements be reserved to workers, because this is a right that is directly derived from the Constitution and not from the ordinary law.
Portuguese constitutional jurisprudence has leant towards the interpretation that the right to collective agreements is a right which it is up to the ordinary law to format, but that in doing so the latter can neither empty the right of its content, nor itself decide every aspect of labour law in ways that cannot be opted out of by collective agreements. The ordinary law can only regulate the right to collective bargaining and agreements in such a way as to delimit it while simultaneously leaving a minimally significant range of matters open to collective negotiation. Now if the ordinary law cannot delimit the untouchable core of the right to enter into collective labour agreements, because otherwise one would be inverting the normative hierarchy and emptying the constitutional precept of its legal force, then one must interpret the elements provided by the Constitution as meaning that the CRP entrusts the defence of workers’ rights and interests to the trade unions and lays down the list of both those rights and the commands it gives the state with regard to the terms and conditions governing labour relations.
In its jurisprudence the Constitutional Court has already addressed various matters linked to the concrete implementation of the area that is reserved to collective agreements. Over the years it has found some proposed norms unconstitutional and others constitutional.
The question of constitutionality under analysis here was whether the 2012 Law norms on relations between regulatory sources (CT and IRCTs) that remove various matters from the ambit of collective labour agreements do or do not respect that minimally significant set of matters, which the ordinary law is required to leave open to collective bargaining. The norms make certain aspects of the labour rules that are laid down in the 2012 Law mandatory, with the new legal provisions taking the place of those contained in IRCTs that were entered into before that Law entered into force. The Court also had to gauge whether the legal certainty and the protection of trust derived from the principle of the state based on the rule of law were safeguarded, inasmuch as in the new precept the legislator sought to change labour terms and conditions that had been validly agreed as part of collective agreements that were currently in effect, before those agreements reached their normal term – i.e. that agreed by the parties or imposed by law.
In these norms, the legislator nullified, suspended or reduced the scope of IRCT provisions (that were more favourable to workers than the equivalent legal provisions) on various matters.
By nullifying or reducing the efficacy of provisions that resulted from collective bargaining, the norm definitively terminated their effect, or in the case of those it suspended, rendered them temporarily ineffective.
The legislator’s objective was to ensure that the legislative amendments it made were effective and uniform by preventing the continued existence of earlier, more favourable regimes included in collective agreements.
All the norms in the 2012 Law that were before the Constitutional Court in this case were intended to prevail over the IRCT provisions on the same matters. However, the Court highlighted the fact that not all of the Labour Code norms whose efficacy the 2012 Law sought to ensure are imperative.
The Court recalled that, as an expression of collective autonomy, the law recognises IRCTs to be a specific source of law governing labour contracts, and that the limits on the content of IRCTs include imperative legal norms contained in the CT. It also noted that legal norms can possess different degrees of imperativeness.
It is possible for the legislator to establish new imperative legal norms that are incompatible with the content of earlier IRCTs, thereby undermining the latter’s continued existence. In order to conclude that an IRCT provision is no longer valid, it is necessary for the law to unequivocally determine that because its new content seeks to pursue values that are in the public interest, the new norms it lays down also constitute limits on collective agreements, including those that have already been reached in earlier IRCTs. In such cases the latter’s intrinsic fitness to produce the effects they are designed to have is affected in ways that are commonly known as ‘supervening invalidity’.
6.1. On the subject of the compensation for collective dismissals and the amounts of and criteria for defining the compensation due for the termination of labour contracts, the 2012 Law has nullified IRCT provisions for amounts above those set out in the Labour Code when the IRCT in question took effect before the new Law.
It also says that IRCTs subsequent to that date must comply with the CT in this respect, failing which they are null and void from day one.
The Court was of the view that it is not possible to exclude the compensation due for the termination of labour contracts from the scope of collective bargaining, but that, given the interests in play, nor can one exclude the legislator’s competence to set limits – higher or lower – on the amounts payable under this heading. It said that in the concrete case before it, the issue was the delimitation of the material scope of the exercise of the right concerned, and not an intrusion into the so-called reservation of certain matters to collective labour agreements.
Because what was at stake is only the setting of goalposts and not the total elimination of the exercise of collective autonomy in the field of the termination of labour contracts, the regime governing which tends to be imperative due to the fact that it possesses guarantee-based characteristics, the Court held that the norm does not go beyond the simple regulation of the right to enter into collective labour agreements and does not impinge on the scope of the protection afforded to the latter.
Looking at this question from the viewpoint of a norm which restricts fundamental rights, freedoms and guarantees and which, as such, must comply with the requirements imposed by the Constitution in that respect, with any restrictions limited to those needed to safeguard other constitutionally protected rights or interests, the Court considered the norm to be justified because it only seeks to equalise the financial compensation that employers must pay to workers when the latter’s labour contracts are terminated on certain grounds. This equalisation is warranted from the perspective of both the costs for the enterprises and the benefits for the workers, given that it ensures that the reduction in compensation deemed appropriate in the 2012 Law applies to all identical situations of this kind.
6.2. On the 2012 Law norms that revoked the compensatory rest due for overtime worked on normal working days, complementary weekly rest days or public holidays, and the increases in the length of annual holidays, the Court said that these matters do not come within the scope of an imperative regime. There is nothing in either the 2012 Law or the Labour Code that prevents the terms of IRCTs entered into after the 2012 Law came into effect from being more favourable to workers.
The combination of the fact that the results of past collective bargaining would no longer count in the future and this openness in relation to new IRCTs, above all in domains that fall within the scope of the protection afforded to the right to enter into collective labour agreements as a result of its links to workers’ rights – particularly the rights to rest, the reconciliation of work and family life and the protection of the family – makes it clear that that the legislator acted in such a way as to cut this protective scope. Without prejudice to the fact that it continues to recognise the right to compensatory rest and bonuses in the form of increases in the length of holidays, the 2012 Law effectively waived earlier IRCTs by revoking this part of their provisions. The CT only sets minima for the rest designed to compensate for overtime which prevents the worker from taking daily rest or which is worked on mandatory weekly rest days, and IRCTs are not precluded from establishing rest periods that compensate for overtime done under other circumstances. There is thus nothing imperative that would limit the permissible content of IRCTs and would justify their nullity, be it supervening or from the start.
The Court also took the stance that revoking provisions of earlier IRCTs would condition future collective agreements that address the same matters, because it would eliminate the point of reference that serves as their starting point. The CT says that a mere succession of agreements cannot be used to reduce the overall level of protection available to workers, and that the rights derived from an agreement can only be reduced by a new agreement whose text expressly shows that its overall content is more favourable.
The law models the right to enter into collective agreements in the material domains addressed by the norms whose constitutionality was being reviewed by the Court under this heading. The norms meant that matters concerning compensatory rest for overtime done on normal working days, complementary weekly rest days or public holidays and up to three-day increases in the length of annual holidays that were freely agreed by workers and employers before the entry into effect of the 2012 Law, ceased to be valid, and that the negotiations for and entry into new collective labour agreements on these matters should not consider the threshold those provisions had already reached in earlier agreements.
The Court emphasised that the solution adopted by the Law was not fit for the purpose behind the standardisation of the applicable collective-agreement regimes – that of achieving a reduction in the costs associated with the factor ‘labour’. By entering into new collective agreements, workers and employers could once again agree exactly the same solutions (or even more favourable ones) as the ones that the 2012 precepts sought to do away with. The Court said that this possibility showed that achieving the law’s proposed goal did not depend on the efficacy of the legislative measures in question, but rather on the actions of third parties. The measures were neither a necessary nor a sufficient condition for bringing about the labour-cost reduction results intended by the legislator. The fact that the measures were not fit in turn proved that they were unnecessary, regardless of any assessment as to whether the purposes targeted by the law matched constitutionally protected rights or interests which the legislator is required to safeguard by restricting the right to enter into collective labour agreements.
The Court therefore declared these norms unconstitutional with generally binding force.
6.3. The Court then addressed the 2012 Law norms that imposed a two-year suspension on IRCT provisions on increased overtime rates above those set out in the Labour Code and on the pay or compensatory rest due for normal work done on public holidays at companies that are not obliged to suspend operations on such days.
The 2012 Law has significantly reduced the extra costs associated with work done in the above situations, halving both hourly overtime bonuses and the compensatory rest and the alternative additional pay for normal work on public holidays at such companies.
This suspension affects all IRCTs, whether dated before the entry into effect of the new Law, or after it. Regardless of the provisions of existing IRCTs, from 1 August 2012 to 1 August 2014 both overtime rates and the compensatory rest or pay for normal work on public holidays must be those laid down by the Law which, albeit temporary, is absolutely imperative.
The Court considered that this suspension constitutes an interference by the legislator within the scope of the protection due to the right to enter into collective labour agreements, inasmuch requiring a legal norm that reduces salaries and the value attached to labour to prevail over IRCTs necessarily interferes with the right to be paid for one’s work in accordance with its nature and volume. However, in the light of the desired purpose and of the norm’s temporary nature, the Court took the view that the measure is appropriate, necessary and balanced in terms of the safeguarding of constitutionally important interests, such as the fulfilment of the goals Portugal set and the undertakings it made within the framework of the MUSEPC.
6.4. Turning to the automatic reduction by law imposed in the event that the relevant IRCT provisions (overtime rates, and pay or compensatory rest for normal work on public holidays) were not revised by the end of the two-year period, the scope of the norm meant that if they were not changed, the IRCT figures would be halved (on condition that they did not fall below the rates provided for in the CT).
The Court said that in this case the Law was modelling the contents of contracts by replacing solutions that were created by means of collective autonomy and interfering with matters that are reserved to collective bargaining. This represents a direct interference with the balance decided by the parties, and applying the norm would have produced a variable result (and not a standardisation), depending on the exact terms of each provision agreed by collective negotiation.
Nothing in the 2012 Law or the CT prevented IRCTs dated after 1 August 2014 (the end of the imperative suspension period) from re-establishing the same solutions as those that applied before the suspension, or indeed more favourable ones. The general CT principle that legal norms which regulate labour contracts can be waived by IRCTs is applicable in this case.
With regard to the provisions of IRCTs dated before 1 August 2014, the Court was unable to see any constitutionally protected right or interest that might have justified the halving ope legis of the value of the additional rates paid for overtime and normal work on public holidays, when greater than the amounts laid down in the Labour Code. This solution by the Law was not fit for the purpose behind the standardisation of the applicable collective-agreement regimes once the suspension ended, and the goal of stimulating collective bargaining does not correspond to any constitutionally important interest and therefore cannot justify interfering in a field that is reserved to collective bargaining.
The Court therefore declared the norm to be unconstitutional.
6.5. The Court also looked at the 2012 Law norms on relations between sources of regulation, from the perspective of whether they are constitutionally compatible with the principles of legal certainty and the protection of trust.
These precepts only affect the future effects of past normative acts; they do not prohibit effects of new collective or individual regulatory acts. While their own effect is not retroactive, because they do not affect effects that have already occurred, they do have retrospective efficacy, inasmuch as they affect the present effects of situations that were constituted in the past.
Determining whether a retrospective law is in conformity with the Constitution requires one to comparatively weigh up assets or interests – particularly in the light of the weight that should be attached to the public interest pursued by the legislator on the one hand and the importance that should be given to the expectations of private persons on the other. The practical scope of the principle of the protection of trust can only be delimited by an ad hoc assessment that takes the circumstances of the concrete case in question into account. The expectations must be legitimate, and importance should not be attached to positions based on illegalities or undue omissions on the part of the state.
The effects of a collective labour agreement are limited in time – normally to a time limit set either by the will of the parties, or by applying a suppletive legal rule that sets a one-year limit that can be successively renewed for another year at a time. There is no minimum limit, so an agreement can last for less than a year.
The legislator has prevented collective agreements from being perpetual by laying down that even when the parties agree a clause that says that such an agreement only ends when it is replaced by another instrument, that clause lapses five years after certain facts come to pass.
While the question of the duration of collective labour agreements was not directly at stake here, the Court said that, within the current legal framework, the regime governing that duration does help form the view that there is a certain diminution in the grounds for a firm trust that the effects of agreement-based instruments for regulating labour relations will be maintained.
The collective interest of the enterprise, seen as the common interest of both employers and workers in the survival and flourishing of both their jobs, is founded on the need to ensure the effectiveness and uniformity of the amendments with which the 2012 Law sought to achieve an increase in the productivity and competitiveness of the Portuguese economy.
The limitations on the efficacy of IRCTs imposed by the above precepts must be said to be included within the broad margin within which the legislator is free to shape legislation. Even if they can be criticised to some extent, the precepts are not ostensibly inappropriate to the pursuit of the public interests which the authors of the Law invoked as the reasons for amending the regime governing labour relations.
When there is a change in the framework applicable to a legal regime that is characterised by the imperative nature of the preconditions and terms governing its application and in which the dominant values are public and social, it is justifiable to seek to ensure uniformity and equality in that application. This fundamental guarantee-related interest must prevail over the trust that earlier agreement-based regimes will be maintained. It is this same interest that justifies the regime’s imperativeness and the consequent fact that it cannot be changed by collective bargaining. The Court said that it was therefore clear that in the present case there were public-interest reasons which, when weighed up against the alternatives, warranted the regime’s prevalence over the interests of both workers and employers.
With regard to the two-year suspensions of some IRCT provisions, the constitutional design of the right to enter into collective labour agreements is regulated by law, with some room in which the legislator can limit and restrict it. If one looks at the norm in question on the level of the resolution of the conflict between legal norms and agreement-based norms, one sees that all it does is temporarily make current IRCT provisions ineffective, and that once the suspension period is over, it does not preclude the efficacy of collective agreements that are entered into ex novo. There are thus insufficient grounds for any expectation that this constitutional right will apply in this two-year period with enough weight to overcome the reasons underlying the legislator’s choice – the desire to reduce the costs of overtime in order to increase the competitiveness of the country’s enterprises. This option is based on reasons that are valid at the present time, given the particularly difficult situation which the Portuguese economy as a whole is currently going through. The Court therefore considered that here too, when weighed up against the alternative, the public-interest reasons in question were important enough to justify the prevalence of the legislator’s choice over any opposing arguments.
The Constitutional Court thus concluded that these norms are not unconstitutional, because they do not breach the principles of legal certainty and the protection of trust.
The exceptional number of dissenting opinions, all except one of which were accompanied by explanatory texts, reflects the extremely complex nature of the matters before the Court. The majority in relation to each of the questions varied in both size and individual composition.
Rulings nos.: 64/91 (04-04-1991); 229/94 (08-03-1994); 581/95 (31-10-1995); 966/96 (11-07-1996); 517/98 (15-07-1998); 634/98 (04-11-1998); 550/01 (07-12-2001); 391/04 (02-06-2004); and 338/10 (22-09-2010).