What lessons should companies learn from TAP's conviction?

The Supreme Court of Justice recently ruled that the fixed-term employment contracts between TAP and several of its employees were invalid, consequently condemning the Portuguese airline and bringing an end to years of legal disputes.

The Court found that the reason invoked by TAP to justify the fixed-term contracts was insufficiently specific and did not establish a clear link between the duration of the contracts and the temporary needs that justified those hirings.

The Court's legal solution was to consider that the fixed-term contracts entered into by TAP were, in fact, open-ended or indefinite employment contracts.

Given that these contracts should be classified as open-ended contracts, any possibility of notifying the termination of these contracts, i.e., ending the contracts upon the expiry of the term, is prohibited.

Otherwise, if the termination of a contract that should have been classified as an open-ended contract from the outset has been communicated, the employer is committing an unlawful dismissal.

The unlawfulness of the dismissal entitles employees to compensation for material and non-material damages suffered, the right to payment of wages from the date of dismissal, and the right to reinstatement or, alternatively to reinstatement, the right to payment of severance pay.

Therefore, in order to mitigate the risks associated with this type of contract, employers must assess in advance what type of company need (temporary or permanent) the hiring of workers is intended to meet.

As a general rule, fixed-term contracts (when the end date can be foreseen) or contracts of uncertain duration (when the end date is not yet certain) may only be entered into in exceptional situations involving a temporary need of the company.

However, it is not sufficient to merely invoke a temporary need in abstract terms, nor is it sufficient to simply reproduce verbatim the examples of temporary needs provided for in the law. It is necessary to specify the reasons underlying the temporary need that justifies the fixed-term hiring.

For example, if it is necessary to hire an additional worker to replace a worker who is temporarily absent from work (due to vacation, temporary incapacity for work, for example), the employer must identify in the fixed-term contract to be entered into the worker to be replaced, the reason for his/her absence from work, from when such absence occurs, and when the return of the replaced worker is foreseen.

Furthermore, in fixed-term employment contracts, the relationship between the duration of the fixed-term contract and the duration of the temporary need must be explicit. That is, returning to the previous example, if a worker is hired on a fixed-term basis to replace another worker who is temporarily absent, then that worker's contract should only last for the period in which the replaced worker is absent.

The maximum duration limits of fixed-term employment contracts must also be considered. Fixed-term contracts may be renewed up to 3 (three) times, but may not have a duration exceeding 2 (two) years, without prejudice to the total duration of the renewals not being able to exceed the duration of the initial period of the contract. As for contracts of uncertain duration, they may only last, at most, up to 4 (four) years.

The Supreme Court's decision has highlighted the importance of clear and precise management in the hiring of fixed-term workers. It is therefore essential that employers are rigorous in assessing their hiring needs and in drafting employment contracts. This care not only guarantees the protection of workers but also allows employers to comply with the legal obligations to which they are bound in this matter, avoiding administrative offenses and unfavorable court outcomes.