At a glance
- Employees who are dismissed for objective reasons are entitled to receive statutory compensation.
- By receiving such compensation, the law presumes that the employee has accepted the dismissal.
- If the employee returns the compensation, this presumption is overturned.
- Article 366(5) of the Labour Code does not specify the timeframe for this reimbursement, ie up to what point in time the presumption can be overturned.
- Recent case law from the Supreme Court of Justice* has clarified the time limit for reimbursing compensation in cases of redundancy in order to overturn the presumption of acceptance of the dismissal.
Background
After their employment contracts were terminated within a collective dismissal, the employees filed a lawsuit challenging the dismissal claiming it was unlawful.
The company objected and the lawsuit was judged to be unfounded by the Court of First Instance. The employees appealed against this decision.
The Oporto Court of Appeal considered the appeal to be unfounded, confirming the decision of the lower court. The Court of Appeal concluded that the employees had received their compensation and did not immediately return it; instead, they returned it only 19 days later without any justification. This conduct contradicted their intention to reject the dismissal, thus failing to overturn the presumption of acceptance of the dismissal as provided in Article 366(5) of the Labour Code.
Unsatisfied with this outcome, the employees filed an Exceptional Review Appeal.
Supreme Court’s decision
The employees appealed based on Article 672(1)(a), (b), and (c) of the Civil Procedure Code, arguing that this issue should be assessed due to its legal relevance for the proper application of the law. They contended that Article 366(5) of the Labour Code does not establish a deadline for the reimbursement of amounts paid to overturn the presumption of acceptance of dismissal, which has resulted in contradictory court rulings from the Court of First Instance to the Supreme Court.
On 21 June 2024, the Supreme Court of Justice ruled that the deadline for the reimbursement of compensation to overturn the presumption of acceptance of dismissal does not expire until either a protective order is filed (preventive suspension of dismissal) or a lawsuit is brought aimed at challenging the dismissal. This allows the employee sufficient time to seek advice and decide whether or not to challenge the dismissal and is aligned with the wording of the legal provision which requires reimbursement of the full compensation to occur simultaneously with opposing the dismissal.
In this regard, the Supreme Court of Justice has established case law to the following effect: 'In order to overturn the presumption of acceptance of the dismissal contained in Article 366(4) of the Labour Code, the compensation received by the employee must be returned by them by the time of the respective protective order (preventive suspension of dismissal) or by the time a lawsuit challenging the dismissal is filed.'
Takeaway for employers
Previously, there were various court decisions that considered that employees should reimburse the full compensation amount in a very short timeframe from its payment date. Determining the number of days that needed to pass before the presumption of acceptance of dismissal would definitely apply was the controversial issue.
After this recent ruling, employers should be aware that not reimbursing the compensation right away or within a short time frame after its payment will not mean that the employee does not intend to challenge the dismissal, since the employee will be able to make the reimbursement at the same time as they make their effective opposition to the dismissal. Therefore, the maximum legal deadlines to be taken into account will be five working days after receiving a dismissal communication for filing a protective order, six months after the termination date for filing a lawsuit aimed at challenging termination in cases of collective dismissal, or 60 days for filing lawsuit aimed at challenging termination in cases of individual redundancy.
* Ruling of the Supreme Court of Justice no. 7/2024 - Case no. 474/21.6T8MTS.P1.S1
For further information, please contact any of DLA Piper’s Portuguese Employment Team. We will be pleased to provide any further assistance as may be necessary.
