Newsletter

General Regime of Lay-Off

 

The general regime of “lay-off” is foreseen in the Labor Code, being available to employers who intend to use it, if they fulfill the requirements that the law determines, having a wide reach among economic agents operating in the market.

 

Legal Regime

The “lay-off” is legally provided between articles 298 and 316 of the Labor Code, approved by Law 7/2009 of 12 February.

This institute allows the company to determine the suspension of workers' employment contracts or, in cases of lesser severity and subsistence of labor activity, the reduction of normal periods of work.

The measure is necessarily limited and temporary.

It is triggered by an initiative of companies, when they do not have the possibility to ensure the payment of wages to their workers, which, according to paragraph 1 of article 298 of the Labor Code, should happen due to at least one of four circumstances:

  • Market reasons, such as, for example, limitation of the company's activity caused by the foreseeable reduction in the acquisition of goods and services or supervening impossibility, practical or legal, to place these goods or services on the market;

  • Structural reasons, that is, in situations of economic-financial imbalance, change in the company's activity, restructuring of the productive organization or replacement of dominant products;

  • Technological reasons, such as changes in manufacturing techniques or processes, automation of production, control or cargo handling instruments, as well as computerization of services or automation of means of communication;

  • Disasters or other events that have affected the normal functioning of the company, for example storms that damaged the material or fires.

The employer can only claim the need to adhere to the "lay-off" when it is necessary and indispensable to safeguard the economic and financial viability of the company, as well as the maintenance of the jobs of the workers involved in this procedure.

 

These companies are considered to be in a situation of business crisis.

 

The “lay-off” is thus:

A time course in which the employer suspends or decreases the number of hours in the contract of the respective workers, in order to ensure that, at that moment, the company is not forced to close due to objective and typified economic difficulties.

 

During the period in which the “lay-off” takes place, as well as in the 30 or 60 days following the application of the measures, depending on the duration of the respective application does not exceed or exceeds six months, the employer cannot terminate the employment contracts with the workers covered by those measures, except in the cases provided for in article 303, paragraph 2 of the Labor Code, namely:

  • Termination of service commission;

  • Termination of fixed-term employment contract;

  • Dismissal for reasons attributable to the worker.

 

It should also be noted that both directors and managers who exercise functions in the employer's structure cannot be covered by the “lay-off” regime.

 

A. What are the Employer's duties during the “lay-off” period?

The employer assumes a diverse set of obligations, under the terms of article 303, paragraph 1 of the Labor Code, during the period of reduction or suspension of activity, namely:

  • Carry out the payment of the remuneration compensation, as well as the increase to be paid in the case of professional training;

  • Pay social security contributions on workers' wages;

  • Do not distribute profits;

  • Do not increase the remuneration or other patrimonial benefit attributed to members of the corporate bodies, while social security participates in the compensation granted to workers;

  • Do not admit or renew the employment contract to fill a job that could be secured by a worker in a situation of reduction or suspension.

 

B. What are the Workers' rights during the “lay-off”?

The workers covered by the measure are entitled, under paragraph 1 of article 305 of the Labor Code, to:

  • Receive a monthly remuneration compensation of at least two thirds of the gross monthly salary, 70% of which is reimbursed by Social Security, receiving at least the national minimum wage or all of your remuneration if the same is less than this amount, and the compensation cannot be more than three times the national minimum wage;

  • Maintain, unaltered, the right to social benefits and social security benefits;

  • Perform another paid activity outside the company, if they so choose;

  • Take full advantage of Christmas and Holiday allowances, and Social Security partially participates in the payment of Christmas allowance, under the terms of Article 306 of the Labor Code.

 

C. How long is the “lay-off” period?

The employer is responsible for determining the duration of the suspension of the contract or reduction of the working hours of the workers covered by this regime.

This cannot have a time lag that exceeds six months, with the exception of catastrophe situations or circumstances that have seriously impaired the company's operational activity. In these cases, the “lay-off” can extend for a maximum of one year (paragraph 1 of article 301 of the Labor Code).

The periods of interruption / suspension of activity may be extended up to six months, if the company communicates this intention to workers and proves the need to maintain the “lay-off” regime.

 

D. What obligations do workers assume?

During the “lay-off” period, the worker has the duty to:

  • Discount for social security based on the remuneration earned;

  • Communicate to the employer the beginning of the paid activity outside the company up to five days after the same, this situation may imply a reduction of the remuneration contribution to be paid by the company;

  • Attend any vocational training courses, if given that possibility by the employer.

 

E. What reasons can cease the “lay-off” period?

In the event that the employer does not have the capacity to terminate the “lay-off” due to the normalization of employment contracts, the termination may occur in the following situations:

  • End of the stipulated “lay-off” period;

  • Non-existence or termination of the reason for “lay-off” initially invoked;

  • Lack of information or negotiations on the part of the employer;

  • Failure to pay retributive compensation;

  • Failure to pay social security contributions;

  • Profit sharing;

  • Existence of salary increases for members of corporate bodies;

  • Admission of new workers to vacancies likely to be occupied by workers in a “lay-off” regime.

 

In conclusion, a company will be able to access the common “lay-off” model, foreseen and defined in the Labor Code, thus guaranteeing its financial viability with useful measures and for a long period of time.

Author: Lourenço de Almeida e Silva

Date: 31-03-2020

Contacts: elisabetebasto@bsa-advogados.com, lourencodealmeidaesilva@bsa-advogados.com and joanamateus@bsa-advogados.com