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 force 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.
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).
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 better opportunities.
1. Individual and group hour banks
The 2012 Law permits three hour bank formats: an hour bank created by an IRCT (this system already existed); the individual hour bank (created by ad hoc agreement or prearranged in the individual labour contract); and the group hour bank (an extension of one of the other two regimes, but applicable to a group of workers).
The Commitment for Growth, Competitiveness and Employment (CCCE, 2012) said that it was necessary to mould the regimes in ways that permit a better use of resources.
As for the individual hour bank the question brought before the Court concerned the presumption of the norm 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 attaches value to the silence of the worker, which is deemed to constitute a declaration of acceptance.
The Court followed its earlier jurisprudence, which says that the law can give silence declaratory value if the legislator takes the view that it is reasonable to impose a duty to respond.
The norm in question 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 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, 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 Court considered the possibility of imposing this regime is underlain by an idea of solidarity that justifies subordinating individual interests to the collective interest. The presumption that workers are in favour of the implementation of the group hour bank regime is not an absolute one. 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 held that the limitations under control are not excessive.
2. The elimination of compensatory rest periods; overtime payments
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.
These measures were designed to reduce the cost of overtime, and in introducing them the legislator stuck closely to the terms of the 2011 Memorandum of Understanding on Specific Economic Policy Conditionality (MUSEPC) and the CCCE.
The Court was of the view that there is no place here for a finding of unconstitutionality. The legislative amendments 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.
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.
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).
The Court said that the idea behind stopping work in mandatory public holidays is to make it possible to collectively celebrate dates or events. 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. It also said that 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 to determine which days are public holidays.
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.
These are choices that imply making considered judgements that fall within the scope of the legislator’s power to act.
4. Dismissal on the grounds that the worker’s job is being eliminated
The possible reasons fot this kind of dismissal were: a) market-related: the company is reducing its activities due to a predicted fall in the demand; 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 Court emphasised that the constitutional concept of just cause includes both subjective just cause and objective just cause.
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.
The Court said that whereas in the pre-2012 version of the Law, the 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.
5. Dismissal on the grounds of unsuitability
This format of dismissal consists of termination of the labour contract by the employer on the grounds that the worker has become unsuited to his/her job.
The 2012 Law provides for two types of dismissal due to unsuitability: 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 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. But the Court held 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 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.
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 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.
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.
All the norms in the 2012 Law that were before the Constitutional Court 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.
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.
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.
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 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 the measures were neither a necessary nor a sufficient condition for bringing about the labour-cost reduction results intended by the legislator. 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.
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.
6.4. As for 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 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. 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.
These precepts only affect the future effects of past normative acts; they do not prohibit effects of new collective or individual regulatory acts.
The Court said that 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.
Supplementary information: 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).