In Timor-Leste, the labor law framework recognizes two primary types of employment agreements: Individual Employment Contracts and Collective Labour Agreements.

Individual Employment Contracts

Individual employment contracts are written agreements between an employer and a single employee outlining the terms and conditions of their employment. These contracts are mandatory under the Timor-Leste Labour Code, Article 24. In the absence of a written contract, the employer bears the burden of proving the terms of the employment.

The Labour Code establishes a baseline for the content of individual employment contracts. Key elements typically included are:

• Identification of parties: Names and contact details of the employer and employee.
• Job description: A clear definition of the employee's role and responsibilities.
• Remuneration: Details of salary or wages, including payment frequency and any benefits.
• Working hours: Schedule of work hours, including rest periods.
• Leave entitlements: Details on annual leave, sick leave, and other forms of paid leave.
• Termination: Clauses outlining the grounds and procedures for termination of employment by either party, including required notice periods and severance pay.

Collective Labour Agreements

Collective labour agreements are negotiated between a trade union representing a group of employees and one or more employers or an employers' organization. These agreements establish working conditions for a specific category of workers or an entire company.

Collective bargaining agreements typically address broader issues impacting the workforce, such as:

• Wage scales and benefits packages.
• Working hours and overtime arrangements.
• Training and professional development opportunities.
• Health and safety standards in the workplace.
• Dispute resolution mechanisms.

Employment agreements in Timor-Leste should clearly define the rights and obligations of both the employer and the employee. To ensure a comprehensive and legally sound agreement, several essential clauses must be included.

Parties to the Agreement

The agreement should identify both the employer and the employee by their full legal names. It should include the employer's registration details if applicable and specify the employee's position title.

Term and Commencement of Employment

The start date of employment should be defined. It should be specified whether the employment is for a fixed term or an indefinite term. The terms for contract renewal should be outlined if applicable to a fixed-term contract.

Remuneration and Benefits

The employee's base salary should be clearly stated, including whether it is paid monthly, bi-weekly, etc. Any additional benefits offered, such as overtime pay, bonuses, allowances (housing, transportation), health insurance, etc., should be specified. The payment method (bank transfer, cash) and pay cycle should be outlined.

Work Schedule and Leave

The standard work hours per day and week should be defined. Rest periods and breaks should be specified. The entitlement to annual leave, sick leave, and other forms of leave should be outlined, following the legal minimums established by Timor-Leste's Labour Law.

Duties and Responsibilities

The employee's main duties and responsibilities associated with the position should be clearly outlined. The reporting lines and supervisory structure within the organization should be defined.

Termination of Employment

The grounds for termination by either party should be defined, following the provisions outlined in the Timor-Leste Labour Law. The notice periods required for termination by the employer or employee should be specified. Severance pay entitlements in case of termination without just cause should be outlined.

Dispute Resolution

A process for resolving any disputes arising from the employment agreement should be established. This might involve internal mediation or recourse to the Labour Authority of Timor-Leste.

In Timor-Leste, the Labour Code allows for probationary periods in employment agreements. These periods provide a window for both employers and employees to assess suitability before a full commitment to the position is made.

Key Points on Probationary Periods

• Purpose: The probationary period allows either party to terminate the contract without notice or justification, and no compensation is owed unless otherwise agreed upon in writing.
• Duration: The maximum probationary period depends on the type of employment contract:
  • For an indefinite term contract, the maximum probation is 1 month except for positions of high technical complexity, responsibility, or trust, where it can be extended to 3 months.
  • For fixed-term contracts, the probationary period is shorter:
    • For contracts of 6 months or less, up to 8 days probation is allowed.
    • For contracts of more than 6 months, up to 15 days probation is allowed.
• Seniority: An employee's seniority starts from the beginning of the probationary period.

Additional Considerations

Employers should utilize the probationary period to evaluate an employee's skills, performance, and fit within the company culture. On the other hand, employees can use this time to assess if the job aligns with their expectations and career goals. It is recommended that employers provide clear feedback and guidance throughout the probationary period to maximize its effectiveness. Understanding the legal framework and best practices surrounding probationary periods can help both employers and employees in Timor-Leste navigate this initial phase of employment more effectively.

Confidentiality clauses are a common feature in employment agreements in Timor-Leste, designed to safeguard an employer's confidential information from unauthorized disclosure by employees. While there are no specific legal provisions in Timor-Leste that directly regulate confidentiality clauses, general principles of contract law, as outlined in the Timor-Leste Civil Code, apply. These principles ensure that the clauses are freely consented to by both parties, lawful, and reasonable in scope.

Confidentiality Clauses

The employee should understand the scope of confidential information and not be pressured into signing the agreement. The information protected must be legitimate business secrets and not general knowledge or information publicly available. Furthermore, the clause should not restrict the employee's ability to perform their duties or future employment opportunities unreasonably.

Non-Compete Clauses

Non-compete clauses in Timor-Leste are less common than confidentiality clauses. These clauses limit an employee's ability to work for a competitor or start their own competing business after leaving the company. Timor-Leste's Labor Code does not explicitly address non-compete clauses. However, Article 300 of the Labor Code promotes the protection of the employee's freedom of work. This suggests that courts might scrutinize non-compete clauses to ensure they do not unduly restrict this freedom.

For a non-compete clause to be enforceable in Timor-Leste, it should be limited in duration, geographically limited, and only cover specific activities that could genuinely harm the employer's competitive advantage.