A Porto Labour Court Rules on Employer of Record Hiring for the First Time, and Refuses to Let the Tech Company That Received the Work Out of the Case

If you work in Portugal for a foreign company that has no office here, there is a reasonable chance your contract is signed by a third company you have never dealt with. That arrangement now has its first serious test in a Portuguese court, and the ruling went against the model.

The Juízo do Trabalho do Porto (Porto Labour Court) has declared a dismissal unlawful in a case brought by a Portuguese worker hired through an Employer of Record platform. The detail that matters is what the court refused to do: it declined to release the international technology company that actually received the work from the case, keeping it in the proceedings alongside the firm whose name was on the contract.

What an Employer of Record is

Eduardo Castro Marques, a labour lawyer at Dower Law Firm, set out the mechanics in written answers to Notícias ao Minuto. An Employer of Record, or EOR, is a company that presents itself as the formal employer of a worker but does so on behalf of another business, typically a foreign one that wants somebody working in Portugal without opening a branch or subsidiary here.

"In practice, it is the EOR company that signs the employment contract, pays the salary and handles taxes and Social Security," he said. "But whoever gives the orders, sets the hours, approves the holidays and actually benefits from the work is, in many cases, the other company."

The appeal is speed. Setting up a Portuguese company or branch takes time, money and legal formalities; an EOR can have someone working from Portugal within days. It has become common in technology and digital sectors where the work is remote and, as the lawyer put it, the worker's nationality is often irrelevant to the job. The model is relatively new here and has no specific regulation of its own in Portuguese law.

Why the ruling matters

The problem is what Castro Marques calls the dilution of responsibility. With two companies involved, one signing and one commanding, it becomes unclear who answers for what: who pays compensation on dismissal, who guarantees the worker's rights, who can be taken to court.

Portuguese law has an answer, and it is not a formalistic one. The law and the courts require you to look at the day-to-day reality, at who gives orders, who controls hours and who benefits from the work, rather than only at what the contract says.

Here the court found the dismissal unlawful because the reasons given were vague and generic, with no concrete facts to support them. That abstraction, the lawyer argued, was tied directly to the EOR structure itself: the entity doing the sacking was not the entity that knew what the employee did.

"It is a clear sign that the Portuguese courts are looking rigorously at this model, and that it cannot serve to dilute the requirements the law imposes on whoever dismisses a worker," he said. It is among the first times Portuguese courts have ruled specifically on the figure, which may mark a path for similar cases.

What it means if you are on one of these contracts

The practical advice for workers is evidentiary. Keep proof of who actually exercises authority over your work day to day: who approves holidays, who sets objectives, who communicates decisions such as a dismissal. That is the reality a court will eventually examine. For companies on both sides, the message is that the model does not displace the guarantees of Portuguese labour law. When the company that genuinely benefits from the work wants to dismiss someone, it has to meet the same requirements as any other employer.

The backdrop is a workforce that has moved decisively this way. Remote work now spans 1.15 million Portuguese workers, and Portugal recruits foreign remote staff through the D8 digital nomad visa. The government's attempt to rewrite the rules on dismissals, the Trabalho XXI package, died in parliament in June, leaving the Código do Trabalho (Labour Code) protections intact and the courts as the place where new working models get tested. Our guide covers what your Portuguese contract and payslip should contain.