Labor Reform Talks Resume This Afternoon Under Presidential Veto Threat

The Portuguese government, employer confederations, and the UGT trade union are back at the negotiating table this Monday afternoon, meeting at 3 p.m. at the Ministry of Labor in Lisbon to resume discussions on the most significant overhaul of the country's labor code in years. The talks had collapsed just one week ago, when business representatives walked out declaring negotiations finished.

"We tried everything, to infinity," Francisco Calheiros, president of the Confederation of Portuguese Tourism, said after last Monday's breakdown. His counterpart at the Confederation of Portuguese Business (CIP), Armindo Monteiro, placed responsibility squarely on the UGT for the impasse.

A Presidential Nudge

What brought the parties back? A decisive intervention from President of the Republic Antonio Jose Seguro, who took office barely 24 hours before issuing a public appeal for all sides to return to the table. Seguro has made his position unambiguous: without a consensus in the Standing Committee for Social Concertation, he will veto the reform. Given the government's minority status, that veto would almost certainly kill the legislation.

"My appeal, which I renew here, is that the representatives of workers, the representatives of employers, and the government sit down again quickly to find a solution that passes through a balanced agreement between the parties," Seguro said.

The Sticking Points

Three issues have proven especially divisive in negotiations that stretch back to July 2025, when the government first presented an ambitious package of more than 100 changes to the Labor Code.

The first is the individual time bank. The government wants to reinstate a mechanism, revoked in 2019, that would allow employers and individual workers to agree on flexible scheduling without collective bargaining. Business groups have long championed its return. The UGT considers it a red line, arguing it opens the door to unpaid overtime by stripping unions of their role in negotiating working time.

The second concerns reinstatement after unlawful dismissal. Under current law, workers fired illegally are generally entitled to be reinstated. Exceptions exist only for senior management roles and workers in micro-enterprises. The government proposes extending the option to refuse reinstatement -- replacing it with compensation -- to all companies and all positions. In its latest proposal, the minimum compensation would rise from 30 to 45 days of base pay per year of service, though the maximum of 60 days remains unchanged.

The third flashpoint is fixed-term contracts. The parameters for when and how companies can hire on temporary terms remain unresolved, with unions pushing for tighter restrictions and employers seeking greater flexibility.

What Changed Since Last Week

In a notable concession, the government has dropped its earlier proposal to simplify dismissals for "just cause" -- terminations triggered by serious employee misconduct. That provision, which would have made it easier to fire workers accused of grave behavioral infractions, drew fierce opposition from both union centrals. Its removal signals the government's willingness to trade ground on some fronts while holding firm on others.

The CGTP, Portugal's other major trade union, is notably absent from today's talks. The confederation, which organized a general strike in December, has refused to participate in what it calls a fundamentally flawed process, leaving the UGT as the sole worker representative at the table.

Why It Matters for Everyone

Portugal's labor laws directly affect the roughly 200,000 foreign workers who have entered the country in recent years, many of whom are on fixed-term or temporary contracts. Changes to dismissal rules, working time flexibility, and contract duration will shape their employment conditions as much as those of Portuguese nationals.

The outcome of this afternoon's session will likely determine whether a deal is possible before the government's self-imposed spring deadline. If no agreement emerges, the reform faces a presidential veto and potential shelving -- a scenario that would leave employers frustrated and unions relieved, but the underlying tensions in Portugal's labor market unresolved.