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Brazil

February 05, 2024

By Paul Hastings Professional

Back to International Employment Law

Brazil

KEY DEVELOPMENTS FOR 2024

New trends for employee benefits

Companies still face the challenge of hiring and retaining employees, and one of the key issues is compensation. Presently, companies usually offer long-term incentives, such as share-based payments and profit-sharing payments, to compensate executives who remain at the company for an extended period of time. However, younger generations are known to be less interested in long-term incentives, as they look for more immediate results and choose to prioritise well-being, both inside and outside the workplace. Experience in other countries is a common and sometimes decisive element when hiring young people. Highly specialised workers, usually in the artificial intelligence and technology sectors, move around the globe as digital nomads. Courses abroad are viewed as an important learning and networking experience, but generate the challenges of relocation, time zones, work visas, tax residency, and acquiring health plan coverage – in short, a solution that results in challenges for the human resources, legal and compliance departments. As a result, companies need to adjust to efficiently hire and retain new employees and maintain their competitiveness.

For 2024, employers are additionally looking to provide benefits focused on the well-being of employees, such as family planning, ranging from financial support for assisted reproduction treatments (e.g., in vitro fertilization, artificial insemination, egg freezing) to family counselling services. It is expected that these benefits are offered to all family types to improve inclusion of members of the LGBTQIAPN+ group. Employers will also continue/start offering discount plans at gyms and therapy allowances. Pet health insurance is another new fringe benefit provided by companies, given the trend of pet adoption. Therefore, these new incentives may be an excellent alternative for companies in 2024 to attract a modern workforce. However, prior to granting these new types of benefits, companies should review any potential labour, tax, regulatory and social impacts of such contributions.

Compliance with new D&I rules

Recent legislative changes have set out new obligations for diversity & inclusion compliance in Brazil. The Program to Hire More Women establishes seven measures to promote the hiring, retention and promotion of women in a safe and healthy workplace:

support for parenting in early childhood;
support for parenting through flexibility of work;
qualification of women in strategic areas for professional development;
support for women returning from maternity leave;
prevention of sexual harassment and other forms of violence at work, e.g., through lectures, training and the Internal Commission for Prevention of Accidents and Harassment;
granting certificates of compliance with the Program to Hire More Women; and
granting different conditions for providing credit to women.

Separately, the Racial Information Registry Law focuses on procedures and criteria for data collection regarding ethnic and racial diversity to promote equal opportunities in the workplace. Furthermore, the Equal Pay Law reinforces employers’ obligations to maintain the same criteria for equal payment of salary and benefits for women and men for the performance of work of equal value and in the same position. The Equal Pay Law provides new regulations that must be followed by companies with 100 or more employees. These companies must publish reports on salary transparency and remuneration criteria every six months, with due regard for the protection of personal data under the terms of the General Data Protection Law (“LGPD”). In view of these new regulations, employers will need to provide more training on prevention of harassment and other forms of violence in the workplace. Companies will also need to create or modify their whistleblowing channels to receive complaints related to discrimination criteria in the payment of salary and benefits to employees, as well as harassment allegations.

Union contributions

Since the Labour Reform in November 2017, union contributions were no longer mandatory by law, resulting in a loss of approximately BRL 3.1 billion in revenue for unions. The prevailing jurisprudence of the Superior Labour Court also ruled that clauses requiring mandatory union contributions from employers were invalid on grounds of compromising the autonomy of the union in negotiating the interests of the employees. However, in late 2023, the Federal Supreme Court changed its position on the collection of union assistance contributions, through an assembly of employees. Based on this decision, it is currently lawful for union assistance contributions to be paid by employees, provided that employees have the right to opt out. This will significantly alter negotiation scenarios in Brazil, and will strengthen the role of unions when negotiating collective bargaining agreements. Unions have also been responsible for the negotiation of D&I provisions in these agreements, such as equal treatment in the case of maternity leave, and it is likely that these demands continue to increase in 2024.

With thanks to Rafael Bispo de Filippis, Thatiane Campello Moitrel Tarouquela, and Solon Cunha of Mattos Filho for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2023

Potential impacts of the new Federal Government on the Brazilian Labor Law

The new President who was elected in Brazil will take office on 1 January 2023. His election represents a shift to the left wing. As a former member of a workers’ union and considering his public statements before the election and the Labour Party’s preliminary guidelines, the new government is expected to propose modifications on certain provisions that have been in effect in the past five years since the Labor Reform of 2017 was enacted.

In addition, as the protection of employees is a key flag for new the Government, it is also expected that labour authorities from the Ministry of Labor have additional tools to inspect companies and enforce the legislation. The Labor Prosecutor Office – although not part of the Federal Government – may also be encouraged by the new political environment to increase the number of investigations and administrative proceedings against companies. Finally, it is also expected that negotiations with workers’ unions will become more challenging. This may happen as a result of measures from the new Government to strengthen the power of these entities (such as changes in the 2017 Labour Reform) or even purely because of new political environment. Employers should monitor closely any modifications on the Brazilian Labor Law to ensure its compliance. In addition, a strategic look when dealing with labour authorities or unions is paramount.

Digital platforms to be regulated while the federal-level Appellate Court (“TST”) is expected to set a uniform understanding on employment classification.

The new Brazilian Government is also expected to regulate the work through digital platforms. Brazil is not different from other jurisdictions where there is much discussion on employment classification involving individuals who use digital platforms to render services. This regulation to be issued by the new government should address this uncertainty.

In addition, TST is expected to issue a very relevant decision for digital platforms in 2023 in a case involving Uber. Currently, there are diverse decisions rendered by Brazilian labor courts on misclassification disputes. Some panels of the TST have already ruled on the matter, but also with different understandings. For this reason, a higher panel of the Court – where several judges of the Court are seated – is reviewing one of these cases to make the Court’s case law on the matter uniform. The judgment session started in 2022, but it was suspended due to a request of further review of the case by one of the judges. The judgment is expected to be resumed in 2023. After this judgment by TST, it is likely that this matter will also be submitted to the Supreme Court. Companies that operate digital platforms should closely monitor the developments in legislation and the outcome of TST’s judgment, as both of them may impact their businesses.

Supreme Court to decide key employment matters in 2023.

The Supreme Court is expected to continue rendering relevant decisions in 2023 on labour and employment matters. One of the most relevant case that should be decided in 2023 deals with the requirement for justification for termination of Brazilian employees. As a general rule, employment in Brazil is at-will and employees may be terminated without cause, provided that they receive severance – except for cases where they are protected from termination such as pregnancy or leadership in unions. The Court will review a Decree issue by a former President that denounced the International Labor Organization Convention 158, which has a rule that protect employees against termination without cause.

The Supreme Court is also expected to issue decisions about the following employment trending topics for 2023: (a) discussion about impossibility to enforce an award against a company that was not named as a party to the relevant lawsuit during the discovery phase, but is part of the same corporate group of one of the defendants; (b) possibility to hire intermittent workers; (c) measures that may be adopted by judges to enforce court decisions, e.g. suspension of driver´s license and others; (d) minimum wages to be received by employees on nursing activities, which may impact especially companies on the health care industry, among others.

Considering the Supreme Court is the highest court of law in Brazil, companies should continue to pay close attention to the outcome of these disputes as they may impact their businesses.

With thanks to Rafael Bispo de Filippis and Thatiane Campello Moitrel Tarouquela of Mattos Filho for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2022

Diversity, equality and inclusion initiatives under public scrutiny

The diversity, equity and inclusion discussion has been at the center of public debate, so any and all initiatives (or lack thereof) are under public scrutiny by both traditional and social medias. Companies are being compelled by stakeholders (such as contractors, consumers, employees and investors) to establish a DE&I strategy and are suffering backlash for inertia and missteps on sensitive subjects. Moreover, strategic litigation on DE&I issues by racial, gender and human rights associations, as well as individual or collective claims relating to harassment based on protected characteristics, are currently trending.

Employers should therefore create or advance effective DE&I initiatives and review policies and proceedings (e.g. employment handbook, code of conduct, grievance procedure) from a DE&I perspective to mitigate potential risks.

Case law developments regarding discrimination

The Supreme Court (“STF”) is expected to render relevant decisions in 2022 that may impact several aspects of employment and labor relations in Brazil, including the review of certain provisions of the 2017 Labor Reform. One of the most relevant decisions to be rendered by STF is if the terms and conditions negotiated in a collective bargaining agreement are deemed as a part of the individual employment contracts or if they may only be modified or forfeited upon a new collective bargaining agreement.

In addition, there are several other ongoing lawsuits at the STF that involve: (i) discussion about inclusion of a company that is part of the same corporate group of the defendant at the enforcement stage of proceedings; (ii) rules for the review of judicial precedents; (iii) whether tax authorities may make determinations regarding the employment relationship in tax inspections; (iv) whether the dismissal of employees with serious diseases should be automatically discriminatory or not; (v) intermittent work; (vi) discussion about the prefixation of the amount of an indemnity for moral damages based on the type of violation; (vii) whether individual or collective termination should be carried out without consulting with any applicable Union; and (viii) discussion about dismissal for cause of employees of public entities who were hired upon public tender, among others.

Employers should continue to monitor these cases at the Supreme Court. Once the decisions are final, employers should verify if there are any measures that must be adopted by them for ensuring compliance with the Brazilian Labor Law.

Right to disconnect

Discussions about the right to disconnect are a trending topic in light of the ongoing teleworking regime due to the COVID-19 pandemic. There is a Bill of Law currently at the Federal Congress seeking to regulate the right to disconnect. If implemented, employers may be obligated to avoid contacting employees outside their working hours by phone, e-mail, messages and conference call applications, except in cases of urgency. Disputes regarding this new development are expected in the near future. Employers should put in place policies on telework to encourage employees to disconnect and to ensure good working conditions, reduce overtime and guarantee the health, safety and well-being of employees, even when working from home.

KEY DEVELOPMENTS FOR 2021

Resumption of economic activities

Since March 2020, a state of public calamity declared by Congress due to the COVID-19 pandemic has been impacting several legal frameworks. This launched an intense legislative action in labour matters mostly aimed at giving more flexibility to companies whilst they navigate through the pandemic. A number of provisional acts were enacted in this period, but most of them expired as a result of the public calamity ending on 31 December 2020.

The expiration of those provisional acts followed by the resumption of economic activities in 2021 raised legal concerns relating to the post-pandemic labour environment in Brazil. This brings a leading and unique role for unions in the negotiation of collective bargaining agreements to address the lack of proper legal regulations on matters such as telework, for example. It is crucial that companies develop closer relationships to unions and increase their negotiation weaponry.

Reform on current union structure

A study group formed by labour judges, professors, and lawyers was created by the Government in August 2019 to further modernise the current labour regulations in Brazil. The Government aims to provide additional legal certainty in employment relations.

A possible proposal for a reform at the current union structure is expected. The changes will possibly allow greater flexibility for workers and companies to choose their own unions. This may include the existence of more than one union representing the same category of workers and employers in the same territory, which is not allowed by current legislation. The end of "union exclusivity" tends to stimulate competitiveness amongst unions to provide better representation and services to their members.

With thanks to Rafael Bispo de Filippis, Daniel Rodrigues Costa Torquato Landim and Thatiane Campello Moitrel Tarouquela of Mattos Filho for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2020

New law of economic freedom brings innovations

The recently enacted Law No. 13.874/2019 ("Law of Economic Freedom") establishes the declaration of economic freedom rights and guarantees of free initiative based on 17 principles of freedom, including 'freedom to work and produce', 'freedom to undertake', 'freedom to modernise', 'freedom to retain' and 'freedom of economic regulation'.

From a labor and employment point of view, the key points that companies should be aware of are as follows:

companies with more than 20 employees must register employees' working hours;
employers are now permitted to register any extraordinary hours worked by employees if there is a collective or individual agreement authorizing it;
the eSocial system will be replaced by a simplified digital system for social security, labor and tax obligations;
more specific rules for piercing the corporate veil of Brazilian entities have been created; and
digital documents now have the same validity as paper documents.

The Law of Economic Freedom provides a safer environment to conduct business activities, reduces bureaucracy and generally simplifies procedures that are necessary to run a local business.

New legislation relating to remote work

The Government issued a special set of telework legislation in Provisional Measure 927/2020 ("PM927") to help companies during the COVID-19 pandemic outbreak. These rules are temporary and were designed to facilitate telework arrangements during the pandemic. If PM927 is confirmed by Congress, these rules will be in force until 31 December 2020, when the Public Calamity Status declared by Congress expires. After this date, the 2017 telework legislation will apply.

The legislation sets out the following rules for the telework regime: (i) the employee can work at the employer's premises to perform activities that require her/his attendance, provided that the majority of the work is still carried out remotely, (ii) telework must be agreed between the employee and employer in the employment agreement, which should state the working activities, who will be responsible for the equipment, infrastructure and expenses (including whether or not the employee will be reimbursed for such expenses), (iii) the employer can unilaterally cancel the telework arrangement and revert to the regular work regime by giving 15 days' notice, (iv) the equipment, infrastructure and payment of expenses by the employer are not considered compensation for payroll purposes, (v) the employer must instruct employees to avoid occupational illness and work-related accidents and the employees must sign a statement of responsibility, and (vi) employees are exempt from having their working hours controlled.

Changes to HSE regulations

In line with the process of simplifying labor standards in Brazil, the Brazilian Government has started the process of modernizing the Regulatory Norms ("NRs") on Health, Safety and Environment ("HSE"). The revision of the NRs helps to address the Government concerns regarding the productivity and competitiveness of businesses in Brazil and are aimed at stimulating economic growth but still protecting employees. Some of the changes that have been implemented can be summarised as follows:

General provisions on occupational health and safety: New provisions have been included to regulate employers' duties to train, guide and capacitate its employees in relation to occupational risks, prevention, control measures and security procedures.
Prior inspection and certification by labor auditors: The Government has revoked the previous NRs which required prior inspection and certification by labor auditors as a condition for opening and operating new business establishments in Brazil.
Embargoes and interdictions: The new NRs include procedures that must be used when inspecting potential risk. Labor authorities can now set an embargo whenever work, activity, machine or equipment presents an imminent or substantial risk.
Work safety in machinery and equipment: Amendments to the existing NRs allow entrepreneurs to seek alternative solutions to adapt their machines and equipment to ensure compliance with HSE rules, provided that these alternative solutions are supported by technical standards.
Hygiene and comfort conditions: Amendments to the existing NRs have reduced the number of requirements in respect of hygiene and comfort conditions, which were expensive for employers and had little positive impact for employees. Examples of the changes introduced include the requirement that locker room areas must comply with minimum dimensions according to the total number of employees, and the obligation to maintain cafeterias under very specific conditions. In addition, according to the new wording of the NRs, establishments with commercial or administrative functions, with up to 10 employees, may have only one individual restroom.
Fines for non-compliance: There were 6,800 possible fines under the former NRs, but these have been unified and reduced to 4,000.

KEY DEVELOPMENTS FOR 2019

Challenges to the Labour Reform

It has been one year since the Labour Reform came into force and brought some legal certainty to the employment context and improvements to the business environment in Brazil. However, the Labour Reform has been subject to challenges that are yet to be resolved before the Supreme Court.

In June 2018, the Supreme Court confirmed the end of the union mandatory taxes, one of the most controversial topics in the Labour Reform. In addition, other rules in the Labour Reform have been subject to challenge and will be heard by the Supreme Court in 2019. These are:

limitations to the right to file lawsuits without paying for Court fees;
work on demand;
inflation accrual on bonds posted for appeals in lawsuits;
cap on damages;
permission for pregnant and lactating women to not engage in unhealthy work;
permission to set 12x36 work shifts in individual employment agreements and terms; and
obligation to disclose amounts claimed when filing labour lawsuits.

A decision from the Supreme Court will increase legal certainty.

Uncertainty surrounding the law on collective terminations

Another area of uncertainty is the new rule in the Labour Reform which gives employers the right to engage in collective terminations without previous negotiations with labour unions. This new rule should have been enough to put an end to the long standing case law that obliges employers to negotiate with unions before proceeding with collective terminations. However, some labour courts are ruling against the new legislation and there are decisions confirming that there is still an obligation to negotiate with unions.

The Labour Reform rule will only prevail when the right to carry out collective terminations without previous negotiations is upheld by a panel of justices at the TST or at the Supreme Court. More challenges to the new legislation are expected to take place in 2019.

New legislation on data protection

Following the EU General Data Protection Regulation, Brazil enacted its own General Data Protection Law (“LGPD”) which was enacted in August 2018, but it will not come into force until February 2020.

The LGPD applies to the gathering, use, treatment and storage of personal data from employees or job applicants. Employers’ practices such as recruitment, hiring and administering employees will need to be adapted to the LGPD requirements and HR procedures must also be reviewed.

It is advisable, for instance, to request express consent from applicants who apply for job vacancies. Such applicants must agree to share their personal information with the potential employer. If the consent does not include the storage of data, the applicant’s personal data must be deleted if the applicant is not hired.

Employment agreements are also impacted by LGPD. For new employees, it is advisable to provide language in the employment contracts justifying treatment of personal data. The justification may be allowed on the grounds of compliance with contractual obligations and statutory provisions. Consent from employees may also be a ground for justification. However, consent may be withdrawn at any time by the employee, which is something that should be taken into consideration by the employer when choosing this type of justification. A privacy policy is also highly advisable to provide more detailed information on data protection that is not provided in the employment contracts.

The LGPD imposes heavy penalties in the case of non-compliance. Fines can be up to 2% of the company’s revenue. Besides the administrative penalties, the company and its officers may also be held liable in criminal and civil proceedings.

The examples above are far from exhaustive, as the LGPD also impacts other employment routines. Despite the long period until the LGPD comes into force, it is important that employers start to review and adapt their internal procedures to avoid facing penalties for non-compliance.

KEY DEVELOPMENTS FOR 2018

The Labour Reform – Liability for Labour Related Debts – Economic Groups, Partners and Successive Employers

Congress enacted Federal Law No. 13,467/2017 (effective as from November 11, 2017), establishing significant changes to several aspects of employment and labor relations in Brazil (the so-called Labor Reform). The changes include:

even when it is verified that companies within the same economic group work autonomously, in certain prescribed circumstances the economic group will be recognized as jointly liable;
partners who depart from companies are liable for labor-related debts related to the time they were partners of the entity and for two years after their departure;
confirming earlier court decisions, the successor is liable for labor obligations related to the period he was in the company;
in the event of fraud, the predecessor partner or company will be jointly and severally liable.

The Labour Reform - Outsourcing

Certain obligations must be followed by the contracting company and the contractor (outsourcing company) and certain conditions must be stipulated in the outsourcing/services agreement.
Employees who are terminated cannot for a period of 18 months thereafter take up employment with an outsourcing company providing services to the former employer.

The Labour Reform – Working Hours

An offsetting system for over time may be agreed individually with an employee for a period of 6 months or collectively (through a CBA) for 1 year.
If a worker does enjoy the entire meal/rest break, an indemnity will be payable in respect of the period of break which was not provided with 50% additional pay over the normal hourly rate.
Certain situations that were considered by the courts as time in which the employee is available (waiting for work), and therefore subject to hours that may add to overtime, are no longer deemed part of the work hours.
The 12x36 shift pattern is only permitted if provided for in a CBA, except for certain categories of workers who already have this special shift pattern established by specific statutory provisions.

The Labour Reform – Compensation Benefits

Career plans are valid without the approval by the Ministry of Labor.
No parity (equal pay for equal work) in the event a career/salary plan is established in the employer’s policy or CBA.
If no career plan is in place, the following requirements would require equal pay: 4 years continuity of service and 2 years in the same: (i) position; (ii) place (facility), (iii) activities, (iv) productivity and (v) technical expertise demonstrated in the role.
Bonus (“gratificação legal”): bonus due to promotions (“gratificação de função”) and commissions will be treated as part of the employee’s compensation.

The Labour Reform – Contractual Aspects

Vacation may be divided into up to 3 periods (one period cannot be shorter than 14 days and the other two shorter than 5 days).
Home office: a written agreement and/or company’s policy must address the use of equipment, expenses and the nature of the activities; the employee is not entitled to overtime if the working hours are not controlled.
Part-time employment is permitted, but it is limited to 30 hours per week and overtime work is not permitted.
More flexibility for certain highly compensated employees who hold university or college degrees, employers and employees may be able to agree, individually (without the need of a CBA) on certain labor matters such as hours of work and annual compensation.
Contracting with an individual as an independent contractor: if there is evidence of subordination / control over the contractor then the contractor may be considered an employee.
New possibility of termination by mutual agreement but out-of-court settlements must be ratified by labor court.
No need to ratify employment terminations at trade unions.

The Labour Reform – Collective Aspects and Procedural Aspects

Certain rights may now be negotiated with trade unions and CBAs (taking precedence over statutory rights), however there remains certain protected rights which cannot be collectively negotiated.
End of mandatory payments to unions: payment conditions may remain the same depending on provisions on CBAs.
Collective or mass termination: prior negotiation with trade unions or execution of CBAs is not required; dismissal plans (usually providing extra severance payments) shall entail a full and irrevocable release of the employment agreement when expressly agreed between the parties.
Companies with more than 200 employees required to create a body to represent them.
The Labor Reform also brought several changes to the procedural aspects of litigation.

KEY DEVELOPMENTS FOR 2017

New Outsourcing Bill

A 10-year old bill passing through the legislative process (Bill of Law 4,330/2004) aims to regulate outsourcing in Brazil (the “Bill”). At the beginning of 2016, the Bill began to move towards conclusion. One of the main features of the Bill is that it allows outsourcing of core business, but it provides that the customer should be held jointly liable for the labour and employment rights of the outsourced employees. There are also two other bills addressing outsourcing in the Senate that are less favourable for companies in Brazil: (i) one (PLC30/2015) forbids the outsourcing of core business; and (ii) (PL 4302/1998) allows it, but includes an additional 30% charge for doing so. The bills will either be issued or dropped in the first semester of 2017.

Labour Reform

President Michel Temer has advocated for a potential Labour Reform during his term (which will end in December 2018), mainly focusing on “negotiation overlying the legislation”. At this point, there is no clear definition on the rights and benefits that might be altered. Due to the political environment, Temer has decided to prioritize other matters (such as the Welfare System reform), and push the labour revision to the second semester of 2017.

KEY DEVELOPMENTS FOR 2016

“Negotiation overlying the Legislation”: Supreme Court ruling on overtime payment

A key issue in Brazilian labour discussions in 2016 was whether collective bargaining agreements can overrule strict national legislation regarding employees’ rights and benefits. The Supreme Court has ruled in favour of the “negotiation overlying the legislation” on two important precedents: firstly, in 2015, regarding the full settlement amounts upon submission to a Voluntary Dismissal Programme; and more recently, with regard to offsetting overtime payment with other benefits. However, these particular Supreme Court decisions are not binding for all courts, and the Superior Labour Court is still deciding these matters.

“Prohibition to outsource the core business over freedom to enterprise”

There is no labour law addressing outsourcing in Brazil. In 2011, the Superior Labour Court issued Precedent No. 331 establishing that the outsourcing of core business is prohibited and that any company that outsources services should be held liable for all labour and employment obligations not paid by the outsourced company. There were several appeals questioning this Precedent, especially challenging the definition of “core business”, the freedom to do business, and the fact that the Brazilian Constitution guarantees the Principle of Legality (i.e. no one shall be obliged to do or not to do something except if there is a law regulating it). The Supreme Court recognized the general repercussions of the outsourcing matter, and a comprehensive and formal decision began in November 2016 and is expected to be handed down in 2017.

New Civil Procedural Code

The 2015 Civil Procedural Code entered into force in March 2016. The Superior Labour Court issued a normative ruling to determine which provisions of the 2015 Civil Procedural Code should be applied by the Labour Courts, and also promptly adapted a few precedents to the new procedural system (raising a discussion on whether these reviews are the Superior Labour Court’s ex officio legal attributions).

In any case, the most important procedural transformation refers to “repetitive appeals” decided by the Supreme Court and Superior Labour Court. A decision on one appeal selected to represent all “repetitive appeals” shall be binding. Thus, similar appeals shall not be accepted by the Appeal Courts. The purpose is to speed up judicial proceedings and ensure legal certainty.

With thanks to Daniel Landim, Rafael de Filippis and Domingos Fortunato of Mattos Filho Advogados for their invaluable collaboration on this update.