The reform of Portuguese law is a perpetual process. Abel Mesquita and Nuno Guedes Vaz outline some of the more innovative improvements in the latest round of changes

The reform of Portuguese labour law has been a constant on the political agenda since the final quarter of the last century. Limited in certain essential aspects – dismissal and collective bargaining – by a constitution which is unlikely to be amended, there appears to be no end in sight.

Initial expectations about each reform have invariably been followed by disappointment and successive labour law reforms have turned into predictable and unvarying rituals.

The Portuguese parliament recently enacted a new labour law reform which came into force on 17 February, 2009. Will this be the one to have a positive impact on the economy? Or will it, like others before it, simply not go far enough?

The Government is extremely pleased with the reform and the social partners, with the exception of one of the two largest trade unions' confederation, also appear to have great expectations as to its results.

For our part, we believe this reform will bring no substantial change to the nature of labour legislation in Portugal; it will continue to be complex, hard to apply, very often unrealistic and marked by an exaggerated state intervention in the economy in which it seems like the Ministry of Labour wants to be the Portuguese economy's human resources director.

But what, if anything, has this reform actually changed? Let us look at four different aspects that the Government and the social partners viewed as paramount: dismissals, precarious employment, working time organisation and collective bargaining.

As far as dismissals are concerned, little or nothing has changed. Dismissal without just cause is still prohibited, while just cause itself continues to be plagued by difficulties. Some procedural aspects have been simplified, yet the fundamental characteristics of dismissal inflexibility remain. There is no need for employees to worry just yet.

As regards precarious employment, new restrictions have been placed on fixed and non fixed-term employment contracts. The maximum term of the fixed-term contract has been reduced from six to three years, while the non fixed-term contract, which previously had no duration limit, will now be limited to a maximum term of six years.

These new restrictions stem from the conviction that such a move will lead to a rise in permanent employment – a conviction we believe to be completely erroneous. The stability or instability of employment turns essentially on the performance of the economy and very little on legal measures. In the current climate, it is likely that the only consequences of these limits will be more companies resorting to outsourcing, higher employee turnover and even greater employment precariousness.

With regard to the organisation of working time, the new legislation undoubtedly attempts to introduce greater flexibility – examples of which include new features such as the 'group adaptability', the 'hours bank' and 'concentrated work schedules'.

Group adaptability allows the employer to operate a flexible work schedule for all the employees of a team, section or economic unit once it has been approved by a qualified majority of the affected employees. The legal regime varies according to whether or not it is envisaged in a collective agreement.

The hours bank is a new measure whereby the working day can be increased by up to four hours subject to a yearly limit of 200 hours. The extra work may be compensated by time off, remuneration or a mixture of both. However, the introduction of the hours bank depends on it being firstly provided for in a collective agreement.

The concentrated work schedule envisages the working day being increased to 12 hours so as to condense the entire working week into fewer weekdays. This regime, too, varies according to whether or not it is envisaged in a collective agreement.

These are undeniably positive aspects but we know from experience how difficult it is to introduce adaptable working time schemes into companies. The collective and individual bargaining negotiations of these innovative measures will not be easy, particularly since Portuguese trade unions – similarly to those in other European Union countries – continue to adopt a very conservative approach and are mostly unaware of the challenges of competitiveness which are facing companies on the European continent as a result of the global economy.

We are not, therefore, overly optimistic about the effects of these new measures, nor should we forget that one of the two largest trade unions' confederation is not committed to them, which will make their practical application all the more difficult.

One final note on collective bargaining – several years ago, the collective bargaining process in Portugal slipped into a phase of stagnation which the country has been unable to shake off, despite the successive labour law reforms.

Collective agreements have remained unchanged for more than 30 years with only salaries and other directly related economic conditions being brought up to date. The reason for this is because the law provides that for as long as the parties involved are unable to reach agreement on their amendment, the collective agreements will be perpetual.

The new measures set out in the February 2009 reform are an improvement on the 2003 and 2006 reforms. The expiration of collective agreements will continue to be a lengthy and complex process and it will be some years yet before the new measures will begin to show any effects.

Ultimately, there appears to be little cause for optimism. All the actors have played their usual roles and results are few and far between. Roll on the next labour reform.

Abel Mesquita is head of and Nuno Guedes Vaz a partner in the labour practice at PLMJ Sociedade de Advogados.