The subject which we propose to discuss concerns the legality of the deductions that can be made by the employer upon termination of an employment contract in situations where the employer has amounts receivable from the employee, regardless of the nature of the credit.

As a general rule, the Labor Law confers special protection to the remuneration earned by the employee, expressly and unequivocally stating that "the remuneration shall not, pending the employment contract, suffer any discount or withholding that is not expressly authorized in writing by the employee " and that "in no case should the total value of the discounts exceed one third of the monthly remuneration of the employee ", in paragraphs 1 and 5, respectively, of article 114 of Law no. 23/2007, of August 1, hereinafter the Labor Law or LL.

From the foregoing, it is clear that the employer may, with the authorization of the employee, deduct any credits owed to it from the employee's salary, provided that the employer complies with the legally established limit (one third of the employee's remuneration).

It is worth mentioning, however, that an employee may, upon termination of his employment contract, have one or more values to be received from his employer, by way of: (i) remuneration; (ii) advance notice; iii) severance pay or compensation; (iv) annual leave days accrued and not taken (converted into monetary value); (v) performance bonuses, seniority bonuses or 13th salary, among others.

However, the employer may have several receivables owed by the employee, arising from, among others, any: (i) salary advance; (ii) expenses incurred with unjustified travel, training, medical care; (iii) operational failures; depending on the benefits granted to the employee, which must naturally be paid upon termination of the employment contract.

Depending on the amounts involved, often, the amount owed by the employee significantly surpasses the salary/remuneration earned, placing the employer in the face of a dilemma upon termination of the employment contract.

The substantive issue is, in these cases, the applicability of the limit of the salary discount of up to one third, considering that the withholding of the last payment due to the employee (all or part of it) may be the employer's last resort to recover any sums owed to it in due time, which in principle is the only means of protection which the employer may use when terminating the employment contract.

The dilemma gains more importance when considering that the tax legislation establishes, in accordance with paragraph d) of Article 6 of the Personal Income Tax Code, approved by Law No. 33/2007, of 31 December, with its subsequent amendments, the exemption from taxation of amounts received as severance pay, representing an express statement that the State itself "is sensitive" and intends to protect, to a large extent, the precarious situation in which the employee is in case he/she is entitled to receive severance pay for the termination of his/her employment contract.

Our Labor Law does not adequately respond to this question, to the extent that, as mentioned above, it only protects the remuneration and not the other payments to be made to the employee. However, there is still doubt concerning the possibility of proceeding with the discount/withholding of the remuneration to be earned, considering the limitations and interpretations listed above.

It is our understanding that, if we strictly apply the Labor Law, it only gives special protection to the salary/remuneration earned by the employee, including the last salary, and not to any other amounts that are payable to the employee, as for example, any severance pay or compensation, upon termination of his/her employment contract.

However, even if the risk of the former employee/debtor not honoring the commitments assumed after the termination of the employment relationship with the employer is high, and the Labor Law does not foresee the criteria for the deduction of the final amounts receivable by employees, considering the principle of "favor laboratoris", we do not recommend the employer to proceed with the discount above of one third of the amount that should be paid to the employee, even in situations where there is an express authorization of the employee.

According to our experience, it is not forbidden that the former employee/debtor, having income for this purpose, and intending to avoid any default, after receiving the amount that he/she was entitled to, decides to repay the full amount due to the his/her employer freeing him/herself from the debt, or that the employer makes use of other legal mechanisms to obtain payment in a timely manner.

Being the Labor Law under a revision process, and being this a recurring issue for employers, we recommend that this matter be included in the range of innovative aspects of the Law to be approved, including the formalities and procedures that can be followed by the employer to safeguard its legitimate interests.


The article was also published in the Sal & Caldeira Newsletter No 41 and you can click here to access the article. It is reproduced with permission of SAL & Caldeira Advogados LDA.

SAL & Caldeira Advogados LDA is a member of DLA Piper Africa, a Swiss Verein whose members are comprised of independent law firms in Africa working with DLA Piper.

 

DLA Piper is a global law firm operating through various separate and distinct legal entities.

 

Further information on DLA Piper Africa can be found at www.dlapiper.com/africa.

 

This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. SAL & Caldeira Advogados LDA accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

Select a local version of the site

We currently have tailored information available for the following countries and continents:

No WIN in your country currently?

There are plans to expand WIN more broadly, so please register your details to be kept up to date on dedicated WIN events in your region. Alternatively, please contact the relevant marketing contact in your region with your ideas about WIN or the support you need as an in-house lawyer.

Sample Video