During the Troika years, the Labor Compensation Fund (LCF) and the Labor Compensation Guarantee Fund (LCGF) were created. While the former promoted forced savings by employers in order to pay future amounts of compensation to their workers, the latter aimed to ensure a guarantee fund for cases in which employers defaulted on this payment.
Over the years, it became apparent that the previous legislative policy was not having the desired effect. To this end, Decree-Law no. 115/2023, of December 15, was published in the Diário da República, amending the LCF and LCGF legal regimes. As a result of this change, the LCF became a closed fund and all obligations related to (i) new communications, (ii) deliveries or (iii) updates to existing contracts were generally extinguished.
An important question arises: what has become of the money handed over by employers over the years?
The money handed over by the companies is not lost, of course. However, it’s not enough to ask for it back. The legislator decided to take a paternalistic stance and determined the purposes for which employers can use the money they hold in the LCF. As a result, requests for reimbursement are now subject to greater limitations and depend on the funds being used for legally determined purposes. As a result, a period during which employers will be able to move balances will begin on 15.02.2014. However, if the balances are not moved by 31.12.2026, the amounts in question will revert to the LCGT.
These limitations can be divided into mobilization limits and purposes. With regard to mobilizations, employers with balances of less than €400,000.00 can make up to two mobilizations, while those with a higher balance can make four. As for the purposes, employers can use the funds for all workers in the following cases: (i) to support the costs and investments in workers’ housing (ii) to support other investments agreed between employers and workers’ collective representation structures; (iii) to finance the qualification and certified training of workers. Employers may also ensure that employees are entitled to receive half of the amount of compensation due for termination of the employment contract, provided that they have been included in the LCF by April 30, 2023.
The problem is that these requirements are not isolated. There are additional requirements in the formalization process that can lead to absurd situations. While the use of mobilizations for training or housing depends on a mere communication to the workers’ representative structures, investment, for example, in a crèche or canteen, implies an agreement with these same structures. It could be said that it’s easier to use the funds to pay for current company training than to create a crèche for workers.
DCM | Littler team
