Brazil: Expected Labour Law Changes In Brazil
Article by Joanne Martin
Labour law reform
Thenew Governmentplans to review/reformlabour law. In theory, the main goal of the reform would be to make employment contracts more flexible, with more possibilities for negotiations between the parties and unions involved. However, by now, there is no official proposal, bill or even schedule explaining such review/reform, and the matter is just an ongoing source of rumour.
The effective date is not known.
Action required:Noneat present.
Thenew Governmentplans to review/reformsocial securityin the public system: This reform will establish stricter criteria for the receipt of a public pension on retirement. In theory, although it will not directly impact employers in the private sector, it will certainly impact the employees who contribute to public social security system as this is compulsory in Brazil.
The effective date is not currently known but is likely to be in 2017.
Action required:Noneat present.
Court decision in relation permitted outsourcing: Currently outsourcing is permitted only if the outsourced services are related to the company’s ‘non-core’ activities. There is an important leading case awaiting judgment at the Supreme Federal Court (“STF”) concerning this issue. The case is meant to clarify the definition of what counts as a company’s core activity and, thus, the limits allowed for outsourcing.
Effective date : There is no specific date for the court’s decision to be issued but the expectation is that it will could be handed down within 2017.
Action required:Regardless the outcome of this case, companies will have to review their outsourcing activities to ensure they comply the limits of the new ruling. It is expected to have a large impact on all fields of the business.
Development of the E-Social System: This is a Federal Government project to unify in an electronic cloud system all information regarding employees and payroll. Employers will be required to make available to the authorities specified information about their employees in order to give the authorities a complete picture of the employer’s compliance with local law and statutes.
Effective from January 2018.
Action required:During 2017 companies must prepare for the implementation of the e-social system.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Bottom of Form
Congress passed the controversial outsourcing bill last month to the decry of unions across Brazil. However, the infamous outsourcing bill is only one aspect of a larger labor reform. President Temer actually announced his broad labor reform plan at the end of last year, as a “Christmas present” for the nation. This reform is currently under analysis in Brazil’s Lower House.
But while big businesses applauded the reform, labor rights groups weren’t exactly overjoyed with Temer’s idea of holiday cheer. Pro-business politicians argue that the labor reform is necessary to update the ancient labor laws with modern negotiation practices and to help fight unemployment. Meanwhile, labor groups fear the reform will remove their recourse to basic workers’ rights and actually worsen unemployment.
So which is it? In this post, we break down Brazil’s labor reform into five major points so that you can decide for yourself.
- Collective bargaining
One of the main principles to the labor reform is giving legal legitimacy to contracts signed through collective bargaining. The reform will actually give collective contracts greater legal weight than the current book of Labor Laws (CLT), which dates back to 1943. Many consider the CLT, written under the dictatorship of Getúlio Vargas, to have extremely strict regulations about worker protection and rights.
The current government believes the reform will give workers greater agency in negotiating their rights at the contract stage. Furthermore, they believe this reform will simplify the hiring process, strengthen the unions, and generate more jobs. Opposition groups argue that bypassing the CLT would throw fundamental workers rights under the bus.
- Temporary contracts
The proposed reform will also alter the rules of temporary contracts. Most importantly, the reform would increase the duration of temporary contracts to 120 days, with the possibility of another 120 day extension. Part-time employees would also be able to work under temp contracts.
Under current regulations, temp work can only last 90 days (with the possibility of an extension for another 90 days). To extend the contract further, employers must request an authorization from the Ministry of Labor.
Under the reform, temp workers would have the same rights guaranteed as fully contracted employees. Meaning, they would receive the same salaries, benefits, and overtime pay as their permanent counterparts. One difference is that they would not receive severance pay.
- 48-hour work week
Perhaps the most misunderstood and controversial aspect of the labor reform proposal is the regularization of the extended work week. The proposal brings the maximum work day to 12 hours once agreed upon among employees and employers. Overtime is then limited to four extra hours per week, extending the hourly work week from 44 hours to a possible 48 hours.
This particular proposal created outrage in Brazilians, and many thought that a 12-hour work day would become the new normal. That’s not true, according to ClaudinorBarbiero, a Brazilian expert in social security law. “In fact, employees could work less, because there will be a limit for the weekly journey. As it stands now, there is no limit,” he told plus55.
- Part-time workers’ rights
The reform also alters part-time workers’ rights. Currently, employers can hire part-time work for up to 25 hours a week without the option of overtime. The reform proposes extending this limit to 30-hour weeks without overtime, or 26-hour work weeks with the possibility of 6 overtime hours.
Another change is to increase vacation time to 30 days regardless of the number of hours worked, equal to the vacation days allotted to full-time workers. Part-time workers may also get the option of exchanging 1/3 of their vacation days for a financial bonus.
And, finally, we get to the outsourcing bill. Under current regulations, companies can only outsource “non-core” activities, such as security or maintenance. However, the new bill liberates outsourcing to any kind of labor, central or otherwise to the company’s services. For example, a hospital may outsource its security or cleaning staff, but now it could even potentially outsource its doctors and nurses – formerly hired directly by the institution.
Furthermore, current legislation allows outsourced employees to seek recourse for labor violations from either the company using their services or the third-party staffing agency. However, the new bill limits workers to seek recourse with third-party staffing agencies rather than the contracting company. Meaning, worker violations will add another middle man who is one step removed from the actual infraction.
Supporters of the bill argue that it improves company productivity, reduces costs, and creates greater flexibility in contract negotiations. They also argue that the bill will provide better work conditions and bring more protection to outsourced employees. However, workers rights groups remain skeptical that the government may just be trying to pass off responsibility for labor disputes. In fact, the numbers don’t look too good for outsourced workers to begin with. They already make on average 25 percent less than directly contracted workers, and have less leverage with which to negotiate pensions, job security, and other benefits.
The outsourcing aspect of the labor reform was actually approved separately due to a little maneuver by Brazil’s Lower House. The tricksters brought in a forgotten outsourcing bill from the 90s that was already approved by the Senate in order to bypass their likely disapproval. Now, President Temer will look over the bill and give the final approval or veto to make it labor law.
General context of the job market and litigation trends before the labour courts
Back to top
The labour market in Brazil has suffered the direct impact of the ailing economy and adapted itself to the economic climate. According to data furnished by the Applied Economics Research Institute (IPEA), the cycle of recession that has affected the Brazilian economy since the second semester of 2014, continues. Retractions of such magnitude were last observed in the second semester of 2003.
Statistical data furnished by the Ministry of Labour and Employment1 revealed a retraction of 33,953 jobs in the month of August 2016. In the past 12 months, the reduction was of the order of 1,656,144 jobs.
The increase in unemployment has translated into an increase in litigation in the Labour Courts. According to the Superior Labour Court2, 2,132,008 labour claims were filed in the period between January and September 2016 – a 6.4% growth in relation to the same period in the previous year.
Back to top
Brazilian law does not provide specific mechanisms for the protection of employees’ privacy vis-à-vis the employer’s authority. Workers’ dignity and free enterprise are equally protected by the Constitution, and the object of an inevitable clash of principles, which is resolved by the courts based on the concepts of proportionality and reasonability.
With regard to employees’ privacy, a ruling is awaited from the highest Labour Court – the TST – in answer to the following question: “Does the requirement that job candidates submit a police record certificate give rise to claims for moral damages?”3. The Court’s stance on such issue will serve as a binding precedent for all other cases involving this matter.
In a public consultation held by the TST in June 2016, several different opinions were heard from the academic world, attorneys, public defenders and prosecutors. The principle of legality was indicated as the factor that removes that requirement: in the absence of a specific legal provision, employers cannot demand the presentation of such police record certificate. By doing so, the employer would be illegally violating the candidate’s privacy, which could bring forth cause for a claim for moral damages. Furthermore, in the opinion of the Prosecutor’s Office, that requirement reinforces the social exclusion of those whose cases are still pending in court or who have been convicted, thus making it even more difficult for them to return to the job market.
In the above-mentioned public consultation, one of the arguments raised was that the emotional distress that could give rise to a claim for moral damages would only exist if the candidate were exposed to third parties or subjected to another discriminatory situation, instead of merely being asked to submit his or her police certificate. Following the same line of argument, moral damages would only be justifiable if the certificate submitted actually showed a criminal history and the submission occurred during the employment period, thus giving rise to dismissal. Those who defend the negative response to the question submitted to the Superior Labour Court recalled that, in practice, employers can easily access the criminal history records of job candidates, or even of regular employees.
Should the Superior Labour Court decide that such requirement is legal, then it will merely be facilitating the background check as desired by the recruiter and, in the event the candidate is rejected in a selection process, will thus supply the candidate with more arguments to claim that he/she was discriminated against. If, on the other hand, the TST’s conclusion is that such requirement is illegal, recruiters will continue to adopt informal means of conducting background checks on the candidates. In such event, indeed, the candidates whose certificates show a criminal conviction may be discriminated against, but will have great difficulty in proving that their recruiter has had access to their criminal history and, consequently, that there has been any discrimination.
Other recent changes in labour legislation
Back to top
The incumbent President, Michel Temer, has been signalling movement towards various reforms, especially in the area of labour and social security legislation. One of the highlights is the commitment to open for discussion the prevalence of collective agreements over legal provisions. In other words, companies and labour unions would be able to negotiate a given work condition even if this is contrary to the labour legislation. Another envisaged reform involves the creation of a landmark law to govern outsourcing. No such reforms have made any progress yet, but the mere announcement of the possibility caused a strong reaction on the part of union leaders.
In these times of serious ethical crisis and even a certain amount of discredit on the part of Brazilian society in relation to the political class, the Supreme Court assumed a forward-thinking position, thus signalling possible reforms and even developing some of them early on. In this regard, it has recognised, in a real case, not only the prevalence of the agreement over the law, but also the legality of the 12-hour working day. As for outsourcing, the Court may issue an opinion even before Congress passes the Bill. In such event, the Judiciary will be signalling guidelines contrary to those adopted by the Labour Courts, and thus acknowledging free enterprise.
Prevalence of agreements over legal provisions
In addition to workers’ guaranteed rights, the Brazilian Constitution provides for “the recognition of collective agreements between labour and employers’ associations and between labour unions and companies”. Notwithstanding such recognition, the archaic model of state-made rules as the exclusive or prevalent source of labour rules is still applied, with a certain degree of disregard for collective negotiations.
In September 2016, the Supreme Court recognised, in a specific case, the prevalence of the collective agreement over legal provisions (case “RE” 895759). According to the Supreme Court, the constitutional principle of recognition of collective agreements is pertinent solely when the content of the rules being negotiated does not oppose certain binding legal precepts. Reference is made to the labour-related rights provided in the Constitution, involving public policy. Accordingly, the Supreme Court had already issued this opinion while examining case RE 590415, in March 2016.
In case RE 895759, an employee claimed payment of the hours they spent commuting (in itinerehours), something that had been suppressed under the collective agreement. According to the employee, such suppression was illegal, since the payment of such hours is guaranteed under the CLT – the Consolidation of Labour Laws. Therefore, the suppression by means of a collective agreement, even if made in exchange for other advantages, breaches the law and those constitutional precepts that ensure minimum conditions for the protection of employees.
As per the prevailing opinion in the decision: (a) the Constitution authorises the reduction and restriction of labour rights under a collective agreement – lawful instruments of prevention and self-governance in labour disputes; (b) the Constitution also recognises the collective autonomy of the groups as a lawful mechanism whereby employees govern their own lives, including at work; and (c) in the sphere of labour law, there is no such lack of symmetry of power as is seen in individual relations governed by employment law.
Such premises serve as an indication of the growing tendency in the sphere of the Supreme Court to confer special relevance to the principle of autonomy of intent within the scope of collective labour law. After such decision, collective negotiations are strengthened and gain prestige, even when the negotiations result in the suppression of certain rights guaranteed by the CLT. In times of crisis, negotiation proves to be an excellent alternative to legislation, provided that the values that are an integral part of public policy are preserved.
Although the above-mentioned Supreme Court decision signals the modernisation of labour relations and even anticipates the reform announced by President Michel Temer, the prevalence of the agreement over the legal rules still provokes strong resistance on the part of many legal professionals. As per the latter’s allegations, such prevalence would open the doors to all kinds of uncertainty, including because many labour unions, in the absence of union freedom, would not have any legitimacy to represent workers’ interests.
Notwithstanding the Supreme Court’s decision of September 2016, the TST – the Superior Labour Court – upheld the invalidity of the clause contained in the collective agreement referring to the hours spent commuting (case RR-205900-57.2007.5.09.0325). Such clause established that the daily commuting time corresponded to one hour and the corresponding payment was calculated based on the wage floor for such class. Moreover, such clause considered that such payment qualified as indemnification, as the compensation would not be part of the wages for contractual or legal purposes. The lower court, the Labour Court of Appeals for the 9th Circuit, held that it was possible to suppress the hours spent commuting, or the rights deriving therefrom, only in exchange for some other advantage, which did not occur in the case at hand. Such opinion was followed by the majority of the members of the Superior Labour Court. For the dissenting opinion, the advantage offered consisted of granting the employee free transportation for commuting.
12-hour work day
In September 2016, the Supreme Court held that the 12-hour work day was constitutional. The decision was rendered in a lawsuit against Law No. 11,901/2009 (case “ADI” 4842), which authorised firefighters to work up to 12 hours at a time, followed by 36 hours of rest, totalling 36 hours of work per week.
Although the Brazilian Constitution restricts working hours to eight hours a day and 44 hours per week, the Supreme Court held that the 12-hour work day is not harmful to employees’ health. The reason for this is that those 12 hours of work are followed by 36 hours of rest, up to a weekly limit below the limit established in the Constitution. In addition, the Constitution already provides for 12-hour work days, by means of an agreement to offset hours in the context of collective agreements. In this aspect, the Supreme Court and the Superior Labour Court agree. Since 2012, the Superior Labour Court has consolidated such opinion, as can be verified in Precedent 444, thus admitting a 12-hour work day followed by a 36-hour resting period.
Although the Federative Republic of Brazil proclaims that free enterprise is one of its foundations, the Superior Labour Court has issued an opinion restricting this principle in relation to outsourcing. Indeed, through Precedent 331, the TST limited the outsourcing of services to ancillary or supporting activities, such as security and cleaning, and prohibited outsourcing for so-called core activities.
After being approved by the Lower House, Bill No. 4,330, of 2004, is now pending approval at the Senate and adopts a different view compared to the TST opinion. Unlike Precedent No. 331, the Bill (currently named “PL 30/2015”), authorises full and unrestricted outsourcing, including outsourcing of a company’s core business.
Simultaneously to the processing of such Bill, in Congress, the Supreme Court is soon expected to judge an important case involving outsourcing – a case named “CENIBRA” (“ARE” 713211).
It seems that the opinion of the Supreme Court will be decisive, in that it will establish the parameters for outsourcing. Obviously, the authority to establish a landmark law is vested in the legislator. However, the Congress, in view of its rather tarnished image in public opinion, prefers to adjourn such voting instead of facing the fury of those who oppose the outsourcing. On the other hand, the Supreme Court, free from corporatist pressures and keeper of the Constitution, in hearing the CENIBRA case, will almost certainly change the restrictive opinion of the TST with regard to outsourcing, thus acknowledging free enterprise without prejudice to maintaining the work as of value.
Extended applicability of collective agreements
Although the extended applicability [“ultra-atividade”] of collective agreements is not the specific target of the reforms announced by President Michel Temer’s administration, the Supreme Court has modified the view imposed by the TST, which has been discouraging collective negotiations.
Through the extended applicability mechanism, the effects of the collective agreements are extended beyond their expiration. Brazilian labour legislation does not include regulations for such events: once the collective agreement has expired, and in the absence of any new negotiation, the individually agreed terms will prevail. According to the CLT, the effects of normative instruments are limited to a period of two years, after which they cease to be valid.
The Superior Labour Court, at first, through Precedent 277, issued a ruling limiting the effects of a judicial disposition on a collective labour lawsuit, thus preventing the worker from claiming any further advantage after the expiration thereof. In 2009, such Precedent was altered to include collective agreements under such prohibition. Hitherto, the content of such judicial dispositions, collective agreements and other collective arrangements were not included in individual employment agreements. The courts’ opinion was consistent with the law. In 2012, the Superior Labour Court revised the guideline contained in Precedent 277. Then, the clauses contained in collective agreements started to be considered part of the individual employment agreements, and may be amended or suppressed only through a new collective agreement. The 2012 revised version eliminated the reference to the judicial disposition.
In October 2016, in a single-judge decision, the Supreme Court determined that all ongoing cases be interrupted, including the effects of any decisions rendered in the sphere of the Labour Courts involving the extended applicability of the collective agreements (case “ADPF 323”). The grounds of such decision included acknowledgment of the collective autonomy of intent within the scope of the Supreme Court. The Justice also highlighted that, between the expiration of the previous agreed rule and the next supervening rule, the worker is protected by the wide range of rights established both in the Constitution and in other applicable legislation.
Evidently, such change of paradigm encounters resistance on the part of the Justices of the Superior Labour Court. In an article entitled “A caminho de um novo e desnecessárioDireito do Trabalho – A tristesina de Sísifo” [“Towards a new and unnecessary Labour Law – The sad fate of Sisyphus”], some Justices reproduce the criticism, even if concealed, to the Supreme Court’s ruling.
Many union leaders themselves oppose the new ruling, as it is much more comfortable to maintain old advantages than negotiate new ones every year.
Premiums for unhealthy and hazardous work – cumulative payment
According to the Brazilian Constitution, work done in hardship, unhealthy or dangerous conditions justifies payment of a premium, according to the criteria established by law. In turn, the Consolidation of Labour Laws governs only the work done in unhealthy and dangerous conditions, without making any reference to a premium for work in circumstances of hardship.
The Consolidation of Labour Laws provides that the value of the premium paid for unhealthy work may be 10, 20 or 40% of the minimum wage, depending on the degree of risk to which the employee is exposed. The value of the premium for dangerous work, in turn, corresponds to 30% of an employee’s salary.
In consonance with the law, whenever an employee is entitled to both premiums, he/she should choose one of them, as cumulative payment is not permitted. Nevertheless, in April 2016, the Superior Labour Court, through its 7th Panel, ruled that if an employee is simultaneously exposed to dangerous and unhealthy conditions, he/she will be entitled to receive both premiums. This is justified by the fact that the unhealthy work premium seeks to protect the employee’s health, whereas the dangerous work premium refers to the employee’s life. That is, both premiums may be accumulated as they protect different life’s goods (case “RR-773-47.2012.5.04.0015”).
The conclusion reached with such ruling is that when the Brazilian Constitution guaranteed the payment of a premium for work done under hardship, unhealthy or dangerous circumstances, it did not restrict the cumulative payment thereof. And it could not have done so as Brazil, as a signatory of ILO Conventions 148 and 155, agreed to adopt all means to eliminate the risks arising from simultaneous exposure to different substances. Hence, according to such decision, the legal provision that prohibits the cumulative payment is not compatible with the Brazilian Constitution or with international rules.
In April 2016, a similar case was ruled in the TST, by [panel] SDI-1 (case “E-ARR-1081-60.2012.5.03.0064”), which was contrary to the decision above. As per this new ruling, cumulative payment is permitted only when the triggering events of such premiums are different. In order to explain the meaning of a triggering event, the case of mining workers was used as an example: they work in direct contact with detonation of explosives. As detonation of explosives exposes the mining worker to intense noise, the employee is eligible to receive a premium for unhealthy work. But he is likewise exposed to the risk of death during such explosive detonation procedure. Therefore, detonation of explosives, in spite of corresponding to a single activity, offers a double risk for the employee. In other words, despite posing a risk to one’s health and life, the cumulative payment of the premiums is not possible because it is a single activity.
In October 2016, there was a new change of opinion. The same [panel] SDI-1 this time decided that the cumulative payment is also prohibited in the case of different triggering events (case “E-RR-1072-72.2011.5.02.0384”). In this case, a metal worker claimed cumulative payment based on the allegation that he was exposed to noise and dust above the limits permitted by law (i.e., triggering events of the unhealthy work premium) and also to inflammable substances (i.e., triggering events of the hazardous work premium).
As can easily be noted, it is the legislator’s attribution to establish when such premium is payable and if cumulative payment is allowed or not. This is not the role of the Judiciary.
Payment of overtime to external vehicle drivers
The National Confederation of Transportation filed a lawsuit before the Supreme Court (case “ADPF 381”). It sought the suspension of the decisions involving payment of overtime to external vehicle drivers. According to the Confederation, before the enactment of Law No. 12,619/2012, the collective agreements were used to establish that drivers who drove a vehicle until a certain distance from the carrier’s headquarters or branch would not be subject to the fixed daily working hours, nor to the control of such hours or the payment of overtime.
Nevertheless, the Confederation alleged that, after the advent of the mentioned law, the Labour Courts started denying the terms of the collective agreements in such regard, and held the companies liable for the payment of overtime. The rationale behind these decisions is related to the fact that it is now possible to monitor the daily work hours by electronic means such as the tachograph and vehicle tracker.
In a single-judge decision rendered in June 2016, the Supreme Court rejected such claim on the grounds that the Labour Courts’ position was to deny the terms of collective agreements in regard to such monitoring of the drivers even before the advent of Law No. 12,619/2012. The Confederation appealed. The appeal is pending judgment at a Plenary Session of the Supreme Court.
The courts’ position denying the terms of collective agreements concerning the monitoring of drivers even before the advent of Law No. 12,619/2012 derived from their interpretation of article 62, I, of the Consolidation of Labour Laws. The said legal provision exempts the employer from controlling the daily hours of work of employees who work outside the company’s premises. As a result, such employees are not entitled to remuneration for possible overtime. Nevertheless, there is a strong tendency that the Labour Courts may consider that the mere feasibility of monitoring disqualifies the exemption mentioned above, which, in turn, may render the control of the hours worked mandatory and, therefore, the payment of overtime.
On the other hand, to the extent that the Supreme Court has tended to admit the prevalence of the agreements over the legal provisions, this matter may gain new perspectives.