Brazilian Labor Law Review Sanctioned
Labor and Employment
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Dear Clients,
On July 13th, 2017, the Brazilian President sanctioned the Brazilian Labor Law Review, changing provisions of the Brazilian Labor Code (so called CLT) and of Laws 6019/74, 8036/90 and 8212/91.
Among the main changes in the law, we call your attention to the ones listed below; the approved text is still subject to possible amendments, as rumored by the press:
Company's Liability
- The simple fact of having the same partners or shareholders will not be sufficient to characterize the economic group between companies, for which it will be necessary to evidence the existence of integrated actions and common interests between them;
- The partner or shareholder who leaves a company will only be liable for the labor obligations related to the period in which he/she figured as a partner or shareholder of the company, and only regarding the lawsuits filed up to 2 years after the registration of the corporate act that confirmed his/her removal from the company;
- In the event of a succession between companies, the successor company becomes liable for all labor obligations (past and future), except in case of fraud, in which situation the succeeded company will be jointly liable for such obligations;
Collective Agreements Prevails over the law
- Collective Bargaining Agreements and Collective Agreements will prevail over the rules established by the Labor Code, except for situations involving professional identification, minimum wage, compensation for nighttime work greater than daytime work, weekly paid rest, overtime compensation at least 50% greater than regular work, number of vacation days, health and safety, Unemployment Savings Fund (“FGTS”), 13th salary, unemployment insurance, family allowance, maternity leave of 120 days, prior notice period proportional to the length of service, among others;
- Collective Agreements (meaning those negotiated by the company with the worker’s union) will prevail over Collective Bargaining Agreements (meaning those negotiated between the worker’s union and the company’s association); the previous rule under which only provisions of Collective Agreements that are more favorable to the employees prevail over Collective Bargaining Agreements will no longer be valid;
- Employees who hold higher education diploma and earn salaries higher than double the maximum amount paid by the Social Security Agency (currently this cap corresponds to BRL 5,531.31) will be able to negotiate their employment conditions on an individual basis, and such negotiation will have the force of law between the parties, prevailing over collective rulings, provided that certain limitations are respected;
Vacations
- Vacation periods may be split into up to three periods, one of which cannot be shorter than 14 days and the others cannot be shorter than 5 days each. Besides, employees working under part-time regime are no longer subject to pro-rated vacation periods based on their number of worked hours; they are now entitled to 30 vacation days after each 12 worked months;
- Employees younger than 18 years or older than 50 years are now entitled to split their vacation periods, observing the same rules applicable to all employees;
Working Hours
- The working hours offsetting system known as “Bank of Hours”, previously authorized only via collective negotiation, is now authorized to be implemented by individual agreement, as long as the offsetting occurs within the maximum period of 6 months;
- The hours “in itinere”, i.e. the hours incurred by the employee from home to work when the employer offers transportation to a workplace not served by public transportation, are no longer treated as time at the employer’s disposal or part of the employees’ working schedule;
- The payments related to overtime due to the lack of concession of lunch break, previously considered as being of a salary nature, are now expressly treated as being of an indemnification nature, for which reason they will not be integrated into the basis for calculating labor rights. In parallel, it will be possible to reduce the lunch break period to at least 30 minutes through collective negotiation;
- The periods in which the employees stay at the company’s premises for the purposes of performing private activities, as well as eating, resting, leisure, studying, personal relationship, uniform changing when such change is not required to be done at work, will no longer be considered as time at the employer’s disposal, for which reason companies will not have to pay overtime for the corresponding period if such activities occur out of the regular working schedule;
- It will be possible to establish the 12x36 working hours system through individual agreements, which was only authorized via collective negotiation, as long as the lunch and rest breaks are duly observed or indemnified;
- Part-time work, previously defined as that having duration of up to 25 weekly hours, is now considered as having a duration of up to 30 weekly hours without overtime work, or having a duration of up to 26 weekly hours with the possibility of performing up to 6 overtime weekly hours;
- Extinction of the 15-minute break before beginning the overtime work;
Intermittent Employment Agreement
- Establishment of the Intermittent Employment Agreement, considered as the agreement by which employees will render services on a non-continuous basis, with subordination, alternating between periods of activity and inactivity determined in hours, days or months, with the exception of aviation workers;
Home office
- Home-office work is now regulated and the employees under this regime are expressly excluded from the working hours control system, as long as such condition is duly provided in their employment agreements;
Salary parity
- Possibility of establishing different salaries for employees with a difference of four (4) years or more of working for the same employer, but keeping the current requirement of both employees having two years working at the same time in the same function, among others;
- The legal requirements for recognition of salary parity will not be applicable when the employer adopts “Career and Compensation Plans” through internal policies or collective negotiation, regardless of Labor Ministry ratification;
- Salary parity will only be possible to characterize if the employees concomitantly work in the position or function, being extinguished the possibility of claiming salary parity with remote models (employees terminated before employee asking for salary parity was hired);
Indemnification nature
- Payments under the title of daily rates for trips, allowances, meal allowance (as long as such allowance is not paid in cash) and premiums (liberalities granted due to the performance of regular activities beyond the ordinary expectations) will not be of a salary nature, for which reason they will not be integrated into the employment agreement and the basis for calculation of labor rights and social security contributions;
Termination of employment agreements
- Establishment of the mutually agreed termination, in which the company will pay reduced prior notice indemnification and FGTS fine, while the employees will be able to access 80% of the balance in theirFGTS accounts;
- Change in the term for final payment of severance in the event the employee continues to work during the prior notice period;
- Extinguished the obligation to have the termination of employment agreements ratified by the workers’ union or any other authority;
- Companies are no longer required to negotiate mass lay-offs with workers’ unions;
- Voluntary Dismissal Plans and Encouraged Dismissal Plans will be valid instruments to obtain full releases from employees regarding the employment relationship, when they are implemented through collective negotiation;
Conflicts resolution
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Possibility of establishing arbitration clause to employees whose remuneration is higher than the double of the maximum amount paid by the Social Security Agency (currently this cap corresponds to BRL 5,531.31);
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Regulation of the Voluntary Jurisdiction Procedure for the purposes of ratifying out of court agreements;
Workers' representation
- Companies with more than 200 employees are now required to constitute an internal commission of employees, which is intended to represent the employees before the company’s management. The mandate of the member will last one year, and they will hold a job tenure of one year as from the date of the end of such mandate;
- Extinguishment of compulsory union dues;
Non-pecuniary damages
Labor Litigation
- The expert’s fees to be paid during labor lawsuits are now due by the employee (when he/she does not succeed in the claim subject to the expert’s assessment) even if such employee is a beneficiary of the “free access to the judiciary”, and there is a possibility that this encumbrance falls on the Federal Government;
- Attorneys are now entitled to fees from the succumbing party, varying from 5% to 15% over the amount stated in the liquidation decision;
Outsourcing
- Express provision as to the possibility of outsourcing any activities, including the company’s main activity;
- Employees of companies providing services are now granted the same conditions offered to the contracting company’s employees related to the concession of dining hall, transportation services, infirmary and medical care, training, hygiene and health and safety protection measures;
- Prohibits a person who was an employee or contractor of the company taking the services in the last 18 months to render services to the company through a services supply company of which that person now figures as a partner or shareholder, exception made to retired former employees or contractors;
- Prohibits former employees of the services contracting company who have been terminated in the last 18 months starting to render services to such company as employees of the services providers.
The Labor Law Review text that was sanctioned by Brazilian President is the same approved by the Congress, and will only be in force after 120 days as from its publication in the Official Gazette.
In case of news, we will keep you updated and we remain at your service for any clarification you may need in this regard.
Demarest Advogados