What counts as just cause
Article 351 of the Labor Code requires culpable conduct by the employee that, due to its severity and consequences, makes it immediately and practically impossible for the employment relationship to continue. An isolated mistake or a dip in performance is not enough: the law requires an actual breakdown of trust between the parties, assessed in light of the specific job and the degree of responsibility of the person involved. The law lists possible examples — insubordination to lawful orders, serious harm to the company’s assets, offenses to the physical or moral integrity of superiors and colleagues, or repeated unjustified absences — but none of these apply automatically: each case requires a case-by-case analysis of the severity of the facts and their real consequences for the employment relationship.
The disciplinary process is not a formality
Before imposing dismissal, the company must open a disciplinary process, notifying the employee through a statement of chargesA document the employer must give the employee at the start of the disciplinary process, describing with justification the facts alleged against them. with a reasoned description of the facts alleged against them. The employee has a deadline to present a defense and submit evidence, and the final decision must take that defense into account. A poorly conducted process, with missed deadlines or generic reasoning, is the most common reason a dismissal is later found unlawful in court, giving rise to compensation or reinstatement.
What case law says
The higher courts have been consistent: the severity of the conduct alone is not enough to justify dismissal. The Supreme Court of Justice, in a ruling of 8 July 2020 (case no. 19538/17.4T8LSB.L1.S1), found the dismissal of an employee who had tried a sample lipstick in a store to be unlawful, on the grounds that the sanction was disproportionate to the offense and that less severe measures — such as a reprimand or a suspension — were available and capable of restoring trust between the parties. The court reaffirmed the principle of ultima ratio: dismissal is only lawful when no other disciplinary sanction is sufficient to allow the employment relationship to continue.
In practice, this means the company must justify not only what the employee did, but also why nothing short of dismissal would resolve the situation. A disciplinary process that overlooks this balancing test — even in the face of proven facts — runs a real risk of being overturned in court, with the resulting compensation or reinstatement consequences.
© 2026 Horacio Baptista Ladera. All rights reserved. Reproduction prohibited without prior authorization.
