Termination of Employment Contract by Employer's Initiative

Termination of an employment contract is always a sensitive issue as it relates to an essential sector of life, which is one's own livelihood. It can occur either at the employer's initiative or at the employee's initiative.

Whatever the reason that triggers the desire to end the contractual relationship, there are rights and duties to be considered, well defined in Law No. 7/2009 of the Labor Code of the Portuguese Official Gazette. Let's get to know the law and its duties regarding contract termination at the employer's initiative.

Types of Termination of Employment Contract by Employer's Initiative

Regarding termination of contract by employer's initiative, we describe the three main reasons for dismissal that most frequently occur, as well as their legal framework in Portugal. These are dismissal due to unsuitability;
dismissal due to job extinction, and dismissal due to a reason attributable to the employee.

1. Dismissal due to Unsuitability

Dismissal due to unsuitability is an employer's initiative and occurs whenever the employer considers the employee unfit for the role, thus terminating the contract. Dismissal due to unsuitability happens when:

• There is a continuous reduction in productivity and/or work quality
• There are continuous malfunctions/errors in performing the role
• There are health or safety risks for the employee, other employees, or third parties
• Whenever the technical requirement inherent to the position cannot be met by the employee, preventing the achievement of prior objectives

When can a dismissal due to unsuitability occur?

In Article 375 of the Labor Code (CT), we can read that dismissal due to unsuitability only takes place when the following requirements are cumulatively met:

• Modifications have been implemented in the workplace resulting from changes in equipment, manufacturing processes, or technologies in the previous six months
• Professional training adapted to the changes in the workplace has been provided by a certified training entity
• The employee has been given a minimum adaptation period of 30 days due to changes in functions in the position that may cause harm or risk to the safety or health of the employee and others
• There is no other compatible job position in the company with the employee's professional category

Thus, what the law tells us is that only after exhausting all these possibilities can dismissal due to unsuitability be claimed!

Is there prior notice to the employee in case of dismissal due to unsuitability?

Yes, there is a legal prior notice to be communicated by the employer to the employee, as well as to the unions and the General Labor Inspection. This varies according to the employee's seniority in the company and their technical category. Thus, if it is:

• An employee for less than one year must be informed 15 days in advance
• An employee between 1 and 5 years must be informed 30 days in advance
• An employee between 5 and 10 years must be informed 60 days in advance
• An employee for more than 10 years must be informed 75 days in advance

How is the dismissal due to unsuitability communicated?

In case of contract termination at the employer's initiative, a draft of a dismissal letter due to unsuitability must be written in accordance with the CT and Portuguese Law. It will be sent by registered mail and must comply with the mandatory prior notice periods.