Prohibition on dismissal of employees for outsourcing is not unconstitutional

Portuguese Constitutional Court

On July 2, 2025, the Portuguese Constitutional Court ruled, with three dissenting votes, that articles 10.3, 338-A.1 and 338-A.2 of the Portuguese Labor Code are not unconstitutional. The court held that restrictions on private economic enterprise—protected under article 61.1 of the Constitution of the Portuguese Republic (“CPR”)—are proportional to safeguarding other fundamental constitutional rights. Consequently, these restrictions comply with the limits imposed by article 18.2 of the CPR.

 This ruling stemmed from a request for successive abstract review and a petition for a declaration of unconstitutionality submitted by the Ombudsperson. Specifically, the Ombudsperson argued that articles 10.3 and 338-A of the Portuguese Labor Code excessively restrict the “general frameworks and guarantees” of private economic enterprise, functioning as true rights-restricting laws and departing from “their nature as conforming law[s].”

Consequently, the Constitutional Court analyzed these articles to determine whether the rules they establish impose a restriction on the freedom of private economic enterprise and, if so, whether they breach the limit imposed by article 18.2 of the CPR.

Article 10.3

The court examined article 10.3 of the Portuguese Labor Code, which concerns the possibility of independent workers  who are economically dependent but not legally subordinate being replaced by with a third party during parenthood, leave or other absences provided in the Portuguese Labor Code. It concluded that this provision does not infringe upon the essential content of freedom of enterprise.

The court clarified that the rule does not constitute a legal restriction on the employer’s ability to select the original service provider but merely permits substitution under specific circumstances for limited periods.

The Constitutional Court considered the rule suitable for guaranteeing the right to organize work in socially decent working conditions, as provided in article 59.1.b) of the CPR. It also concluded that the rule aligns with the state’s constitutional obligations to protect health (article 64), family (article 67), and maternity and paternity (article 68).

The court determined that the measure is necessary because no less restrictive alternatives would adequately fulfill “the constitutional value at stake.” It further found the measure proportional in the strict sense, as it preserves the original contract while allowing temporary replacement  by a third party.

Articles 338-A.1 and 338-A.2

The Constitutional Court also assessed articles 338-A.1 and 338-A.2 of the Portuguese Labor Code, highlighting the legislator  negative perception of outsourcing within twelve months after collective or individual redundancies due to job elimination. Specifically, the legislator considers such outsourcing as indicative of an unlawful or ill-considered use of these forms of dismissal. Therefore, the purpose of these provisions is to prevent so-called “dismissals-for-outsourcing” practices, thereby safeguarding the constitutionally protected right to job security under article 53 of the CPR.

While acknowledging that these provisions do limit employers’ freedom of economic enterprise, the Constitutional Court rejected the Ombudsperson’s view that the measures fail the tests of suitability, necessity and strict proportionality. It ruled that the prohibition and related penalties are appropriate, necessary and proportional in the strict sense for deterring contract termination through false objective dismissals (“dismissals-for-outsourcing”). The court characterized these measures as “rules regulating general behavior (...) in a logic similar to that existing in anti-abuse rules.”

Conclusion

Ultimately, the Constitutional Court ruled that the provisions of articles 10.3, 338-A.1 and 338-A.2 of the Portuguese Labor Code are not unconstitutional. However, this does not preclude the court from ruling differently in the future, whether through abstract or specific reviews.