The formalities of temporary employment contracts in Portugal

The Supreme Court of Justice, in its ruling on case no. 406/24.0T8VPV.L1-4, reaffirmed that fixed-term employment contracts cannot be used to disguise permanent employment relationships. The decision highlights three key points:

• The justification for the term must be real, specific and verifiable;
• The burden of proof lies with the employer;
• The lack of proper justification or distortion of reality results in the automatic conversion to a permanent contract.

The Supreme Court of Justice concluded that fixed-term and unfixed term employment contracts cannot be entered into freely, openly and independently, without regard to the specific circumstances of the company’s organization, operations and economic activity, or the external conditions of the market sector in which it operates. Such employment contracts are only legally allowed when:

1. they are based on the grounds listed in article 140 of the Portuguese Labour Code;
2. they are executed in writing;
3. they comply with the formal and material requirements set out in article 141 of the Portuguese Labour Code; and
4. the contractual description of the reasons for the entering into such employment contracts must be real, true and specific, and cannot merely reproduce legal formulas or vague, abstract concepts that fail to sufficiently explain and justify the grounds on which they are based.

Key considerations for companies when hiring temporary employees:

• Fixed-term employment contracts are generally allowed only to meet the temporary business needs, and for the period strictly necessary to meet those needs.
• The indication of the justification for entering into a fixed-term employment contract is a formal requirement ‘ad substantiam’ and must be included in the contract. Insufficient justification cannot be remedied by other means of proof.
• The reasons listed in the subparagraphs of article 140(2) of the Portuguese Labour Code must be substantiated by specific facts that establish a clear link between the justification invoked and the stipulated term.

The Labour Law Department at Belzuz Abogados, S.L.P. – Sucursal em Portugal has qualified professionals who can provide legal advice on the most appropriate contractual solutions and compliance with the respective formalities.