Legal alert no. 59

Changes on the legal regime applicable to the transfer of a business or establishment and reinforcement of employees’ rights

On March 19th, Law no. 14/2018, which amends the legal regime applicable to the transfer of a business or establishment (TUPE) and reinforces the rights of the employees was published in the Portuguese Official Gazette.

Rights of the employees

Two of the major changes to the regime are (i) the right of the employee to oppose to the transmission of the employment contract, when it can cause serious harm to the employee, namely, by a significant lack of solvency, difficult financial situation of the acquirer or if the work organization policy does not deserveconfidence, as well as (ii) the possibility of termination of the employment contract with just cause and the right to compensation equal to the foreseen for a collective dismissal.     

The employees transmitted shall retain all contractual and acquired rights, including remuneration, seniority, professional category and functional content and social benefits.

Transferor and acquirer’s obligations and responsibilities

a)           Another innovation of the regime is, (i) in case of medium or large companies, the duty of the transferor to inform the service with the inspecting competence of the Ministry responsible for the labour area of the content of the contract between transferor and acquirer and, (ii) if there is a transfer of an economic unit, such duty covers all the elements that constitute the economic unit in question.

b)           The transferor and the acquirer will be jointly and severally liable for the employees’ credits arising from the employment contract, for its breach or termination and for the corresponding social contributions, due up to the date of the transfer, assignment or reversal, during the following two years.

c)           The transferor and the acquirer must inform the employees’ representatives, or if they do not exist, the employees themselves, of the content of the transfer contract, in order to reach an agreement.

Administrative offenses’ foreseen

(i) The conduct of the employer on the basis of alleged transfer of its position in employment contracts on grounds of transfer of ownership of an undertaking, establishment or part of an undertaking or establishment which constitutes an economic unit or assignment or reversal of its exploitation, when it has not occurred and (ii) the conduct of the transferor or the acquirer not acknowledging the transmission of the transferor’s position in the employment contracts are considered very serious administrative offenses.

The decision that condemns the employer and the acquirer for these conducts must declare whether the contractual position of the employer in the employment contracts has been transferred or not.  

This Law entered into force on 20th, March 2018.

Access here the full version of Law no. 14/2018.


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