Foreign companies may be held liable for labour debts of companies based in Portugal

Pursuant to the labour law in force, a company in a relationship of reciprocal participation, control or group is jointly liable – with the employer – for the labour debts arising from an employment agreement, or from its breach or termination, that have been overdue for more than three months.

A decision of the Constitutional Court, dated 06/07/2021, declared the unconstitutionality, with general binding force, of the joint interpretation of article 334 of the Labour Code (which provides for the above-mentioned joint liability) and of article 481 no. 2 of the Commercial Companies Code, in the extent that it prevents a joint liability of a foreign company, which is in a relation of reciprocal participations, control or group with a company based in Portugal, for the labour debts of this company (arising from the employment agreement or its termination).

As a result of this decision, it will be possible for employees to hold an entity located outside Portugal jointly liable for labour claims, overdue for more than three months, that they have on a company based in Portugal which is in a relationship of reciprocal shareholdings, control or group with that foreign entity.

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[Photo by: Damir Kopezhanov, available at unsplash.com]