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The discreet tweaks to the fixed-term contract

Sometimes, the extension of legal diplomas, particularly when they include numerous punctual alterations of previous ones, can generate the inconsideration of normative solutions that, if considered separately, would deserve more attention. The draft law aimed at implementing the “Agenda do Trabalho Digno” (Decent Work Agenda), already approved in general terms in the  Portuguese Assembly of the Republic, is a good example of an article that, due to its length and the difficulty of reading, may contribute to some cloudiness in the understanding of certain normative options.

For example, the amendment of art. 344, no. 2 of the Portuguese Labour Code, which deals with the termination of fixed-term work contracts. We find therein two substantive measures of undeniable importance.

One consists of the increase from 18 to 24 days of the multiplier to be used in the calculation of the compensation due (when due…) to workers that see their contracts terminated. The extraordinary importance assumed by fixed-term contracts in the Portuguese labour environment confers to this amendment a significance that deserves to be underlined.

It remains to be seen whether the significant increase in compensation will be an incentive for fixed-term contracts – which today are still, in many cases, an instrument of moderate precariousness (when they extend for the full duration permitted by law, or when they act as an antecedent to contracts of indefinite duration) – to tend, in the future, to be more limited in their effective duration.

The second change concerns the assumptions of the right to compensation. In the current version of the Labour Code, the worker only does not have this right when he/she takes the initiative to terminate the contract. The solution is different when the initiative belongs to the employer, or when there is an “automatic” termination, in the cases of death of the employee or of the employer, without succession, and, above all, in the cases of application of non-renewal clauses – cases that, currently, give the employee the right to that benefit.

However, the above-mentioned draft law only maintains the right of compensation in cases where the fixed-term contract is terminated by a declaration of the employer, excluding it in situations of “automatic” termination – among which the aforementioned hypothesis of non-renewal clause stands out.

The importance and practical scope of these projected changes are still unclear. Moreover, it seems that the law will only come into force at the beginning of 2023, which will allow for a more in-depth reflection on the real effect of the solutions enshrined therein.

António Monteiro Fernandes @ Of Counsel, DCM | Littler

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