In the labour market, there are moments employers have to take difficult decisions. One of those difficult moments occur when there is a need to terminate employment contracts. Sometimes employment contracts may be terminated for disciplinary reason.1 But in other cases non-disciplinary reasons may lead to employment contract terminations. According to Law no. 23/2007, of 01 August (“Labour Law”), Article 130.2, structural, technological or market related reasons are the cause behind terminations for non-disciplinary reasons. However, the process becomes more complex if due to one of those non-disciplinary reasons it results in the termination of many employment contracts. According to Labour Law, Article 132, termination of employment that affects more than ten employees at any one time, is defined as collective dismissal.2 In this specific cases there is the need to be more careful due to strict legal formalities the employer must comply with.
Labour Law, Article 133, establishes the procedure for collective dismissal, divided in three main stages, which are: (i) notice stage, (ii) consultation stage, and finally, (iii) decision stage.
1. Notice stage: In this stage the employer must give prior written notice to:
a)The affected employees.
b)The trade union bodies.
c)The Ministry of Labour, more specifically the Labour Inspectorate.
The notice must contain the description of the reasons invoked for the collective dismissal and the number of employees affected by the process.
2. Consultation stage: After the notice referred to in point 1 above, consultations between the employer and the trade union body begin. Consultations must not exceed thirty days. The purpose of these consultations is the exchange of relevant information. The consultations also aim to address the grounds for collective dismissal, and the possibility of avoiding or reducing its effects. Moreover, the consultations aim to ascertain the necessary measures to mitigate the consequences of collective dismissal for the affected employees.
3. Decision stage: At this stage the employer may decide to dismiss (or not to dismiss) the affected employees. The decision is taken thirty days after the notice referred to in point 1 above. The decision to dismiss must be notified in writing to each of the affected employees. The decision must also state the reasons for dismissal and the date of employment termination. In these cases compensation calculated in the strict terms of the law must be paid.3
It bears note that it is the employer’s burden to prove the existence of structural, technological and market related reason for collective dismissal. This is more relevant in case the collective dismissal is challenged at the courts. However, risks of an unfavourable court decision, in case of legal dispute, may be mitigated, if the consultation stage (referred to in point 2, above) is properly conducted.
As it can be noted, the procedures for collective dismissal can be burdensome and time consuming. Thus, the employer must ensure the utmost compliance and strictness in following the legal procedure required for collective dismissal. This approach can make a huge difference between a less problematic collective dismissal contributing for business stability, or, complications with the authorities, several court cases resulting in huge costs in terms of court fees and compensations. Again, as I have pointed out before – safety is in the details!
- In these cases prior disciplinary proceedings, in terms of Law no. 23/2007, of 01 August (“Labour Law”), Article 67, are compulsory in order to ascertain the grounds for dismissal.
- Retrenchment is another term commonly used to refer to collective dismissal.
- Labour Law, Article 130.3, determines the terms for compensation calculation.