Debate continues over proposed Labour Code

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Over the second half of 2002, the industrial relations agenda in Portugal has been dominated by the government's proposal for a Labour Code, which would replace most current labour legislation by bringing existing provisions together in a single text. At the same time, current provisions would be amended in a variety of areas. This article reviews the initial stage of the debate, which ended in November with the submission of a draft to parliament, and highlights the main proposals relating to individual employment law.

In July 2002, the coalition government of the centre-right Social Democrat Party (Partido Social Democrata PPD/PSD) and the right-wing People's Party (Partido Popular, CDS/PP) issued the preliminary draft of a proposed Labour Code (Código do Trabalho) (PT0208101N). The new Code aims to bring together in one document a large number of aspects of labour law, while amending a number of them - Portugal currently has no such codified set of labour legislation The preliminary draft of the Code comprises 687 articles relating to both individual and collective labour law. The collective aspects were dealt with in a previous EIRO article (PT0210102F).

Individual labour law

In the preliminary draft of the Labour Code, 404 of the 687 articles are dedicated to the individual employment relationship, governing the following areas:

• the geographical location of work;
• working time issues, including duration, organisation, part-time work, shiftwork, overtime, weekly rest periods, annual leave and public holidays;
• pay/remuneration, including the form and manner of payment
• measures relating to transfers of undertakings or establishment s, enterprises in economic difficulties and temporary closure of enterprises;
• the contract of employment, disciplinary power and pay guarantees;
• accidents at work and occupational illnesses; and
• termination of the contract of employment.

Public debate on the preliminary draft began at the start of September 2002, and it was discussed in consultation with the social partners until the middle of November. The government expects the Code to be adopted by the beginning of 2003, and expressed its desire for a full debate. The social partners are hoping that their views will be heard and taken into account when the preliminary draft becomes a white paper. In an interview, the Secretary of State for Labour stated that the key points of the preliminary draft Code relating to the contract of employment include measures to reduce absence from work and promote occupational and geographical mobility. For supporters of the new Code, it has the merit of adding necessary flexibility to the labour market, which is essential for economic and business development. It also has the advantages of: improving employment protection owing to a new joint and several liability for companies in the same group and their managers where a contract of employment is breached; and increased compensation for illegal dismissal.

Key areas of change

The areas where the preliminary draft Labour Code makes the most important changes to individual employment law are set out below. Some of the proposed amendments have been changed as a result of the debate.

Working hours and overtime

• There will be greater working time flexibility, as it will be possible to work a 50-hour working week, equivalent to 10 hours a day, provided that an average 40-hour week and eight-hour day are maintained over a four-month reference period.
• Night work will be considered as work between 23.00 and 07.00, rather than between 20.00 and 07.00, as at present.
• The first and second hour of weekly overtime will be paid at 75% above the normal hourly wage, instead of the current 50%.
• The maximum annual number of overtime hours will be reduced from 200 to 100.

Fixed-term contracts and mobility

• Fixed-term contract s will be permitted in activities with production peaks (such as the automotive industry).
• Fixed-term contracts will be renewable up to three times (rather than the current two), with a limit of three years.
• The geographical and occupational mobility of employees will be increased, as long as the employer respects payment rules, provides justification for the change or move, and provides prior information on the expected date or duration of the change.

Absence from work

• Four unjustified absences from work in a row, or eight interspersed over a period of time, will be fair grounds for dismissal. The same will be true if an employee takes fraudulent sick leave or is over 30 minutes late for work more than 12 times without justification. These provisions are more restrictive than the current rules.
• Employers will be able to appoint a doctor to check up on an absent employee's sickness.
• Absences from work granted by the employer, where not provided for in law, will not include the right to payment.
• Candidates for elections to public posts will be entitled to be absent from work only during the official campaign period.

Reinstatement of dismissed employees

• The right of a dismissed employee claiming unfair dismissal to remain in post until the court hands down its decision will be retained.
• The courts will be able to decide that unfairly dismissed employees need not be reinstated, if their return will cause serious disruption to the company’s business in the case of small and medium-sized enterprises, or if the employee occupies a managerial or directorship position.

Parental leave

• Paternity leave will increased from 14 to 30 days in the event of the mother's death.
• The maximum period during which working parents may switch to part-time work in order to bring up a child is increased from six to 12 months.
• The period of employment protection for employees who have recently given birth will be increased from 98 to 120 days immediately following the birth, and absences from work of four hours or less once per quarter to go to the child’s school will be added to the list of justified absences (some of the provisions in this area will be incorporated into further legislation).

The debate

The government's proposed measures have led to a major national debate, bringing a large number of institutions into the discussions, such as the catholic church and its youth organisations, and groups of employers which do not generally form part of the social partners group. Trade unions and employers’ associations have widely disseminated information on the reforms and embarked upon a thorough regional debate on the provisions of the preliminary draft of the Labour Code.

Employers' positions

Employers broadly agree with the individual employment law provisions of the preliminary draft Code, believing that labour market flexibility does not create 'fragility', although generally speaking the various employers’ groups also say that some aspects of the proposed reform will not increase productivity, will make labour costs higher, and will reduce working time (through increased time off and the recording of working hours).

The Portuguese Confederation of Industry (Confederação da Indústria Portuguesa, CIP) believes that the Code should be used as an opportunity to introduce 'justice' amongst employees, rewarding those who are productive rather than focusing excessively on equality. The Confederation of Portuguese Services and Commerce (Confederação do Comércio e Serviços de Portugal, CCP) has stated that the Code is a wasted opportunity because it does not go as far as it should. The Confederation of Portuguese Agriculture (Confederação da Agricultura Portuguesa, CAP) says that Portugal should realise that it is part of a highly competitive economic system and needs to adjust to that fact.

Trade union opposition

Some individual employment aspects of the proposed Labour Code are regarded as highly controversial by unions, being seen as ways of deregulating acquired rights, in particular through:

• the increased ease of dismissal and easier use of fixed-term contracts;
• the new provisions on absence, such as the employer’s option to appoint a doctor to check the validity of sickness absence, deeming being over 30 minutes late more than 12 times without due justification as a motive for dismissal, and the provision that absences taken with the employer’s authorisation are no longer to be paid;
• the reduction of the period considered as night work to between 23.00 and 07.00; and
• the increased occupational and geographical mobility.

The General Workers' Union (União Geral de Trabalhadores, UGT) believes that the implicit and explicit links which the debate makes between productivity and flexibility, and between absence from work and dismissal, make no sense, as productivity factors relate to the performance of company management and the public administration, and not just to conditions directly concerned with work. Problems in this area may be the result of difficulties in the surrounding social support system, such as public transport, crèches etc.

The General Confederation of Portuguese Workers (Confederação Geral de Trabalhadores Portugueses, CGTP) regrets that the proposed new legislation, which may increase job insecurity, is not accompanied by provisions to improve employees’ qualifications and training.

Opposition from other quarters

Left of centre opposition political parties and various catholic organisations, such as the Catholic Workers’ League (Liga dos Operários Católicos, LOC), have decided to oppose the Code’s introduction. On humanitarian grounds, the catholic church regards it as insensitive, because it penalises the weakest, including mothers who have to place their children in nurseries or other schools, as well as employees in large cities.

Experts' views

The preliminary draft of the Labour Code has been greeted by some in the academic community as necessary for business competitiveness. Others see it as a model of neo-liberalism, and still others state that the reforms needed in employment relations cannot overlook the specific nature of labour law and the European tradition - in other words, the collective establishment of employment conditions based on self-regulation generated via social dialogue. Some of these positions also seem to be reflected in the view of the social partners.

Acdemic critics of the proposals also state that:

• the new Labour Code will change the essence of labour law as regards its principles of protecting employees, given their inferior legal, economic and psychological position in the employment relationship, which is still, in the main, one of subordination;
• between the two extremes represented by the current scattered labour laws (about 60 current laws are incorporated into the preliminary draft) on the one hand, and systematisation via a Labour Code on the other, there are also other possibilities, such as the 'workers' statutes' used in Spain and Italy, even though these would not be the most suitable option, as they would perpetuate legal rigidity; and
• the proposals do not go far enough to regulate the relationship of workers who are economically dependent and yet legally independent (TN0205101S), though the draft Code does for the first time regulate teleworking.

Latest developments

The Minister of Labour has stated that he is open to suggestions on labour law reform. He also said that, together with the new Code, a basic law on employment and vocational training is to be drawn up. The Prime Minister and President are calling for compromise and for a balance between the interests of trade unions and employers.

The unions believe that the current preliminary draft Code will be considerably amended following the debate. However, CGTP does not feel confident on the subject. At the start of the debate, CGTP and UGT met at the highest level, agreed their position, and stated that if no changes were made to the new Code, they would call a general strike. In mid-October, UGT stated that it was still at the negotiation stage, but CGTP called a general strike for 10 December 2002.

The first stage of the debate on the Code came to an end in November 2002, at the time of writing. The final version of the draft Labour Code was submitted to parliament after being debated by the Standing Committee for Social Concertation (Comissão Permanente de Concertação Social, CPCS). Some amendments were made to the preliminary version of the draft as a result of suggestions from the social partners.

Commentary

The Organisation for Economic Cooperation and Development (OECD) and a number of European Union reports state that Portugal has very rigid labour market legislation. However Portuguese trade unions note the existence of highly flexible labour market practices, which are not accompanied by efficient monitoring of compliance with the law. Portugal has the second highest level of fixed-term contracts in the EU and a large number of insecure and economically dependent jobs, with women often being the most seriously affected. Increased flexibility in the employment relationship and the boosting of collective bargaining through new operating mechanisms and regulation, as are now being planned - in the preliminary draft Code or in an improved version of it - are a major challenge for Portuguese society. Substantial improvements in running the system, and great improvements to the weaknesses of some of its institutional features and of management culture in Portugal, plus a far greater understanding of social innovation, are urgently required. (Célia Quintas and Maria Luisa Cristovam, UAL)