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Brazil: 2019 Brazilian Economic Freedom Act reduces the state intervention in the economy

On 20 September 2019, the Brazilian federal government enacted Law n. 13,874 creating the so-called “Declaration of Economic Freedom Rights” (“Act”), aimed at reducing the current high level of bureaucracy in the Brazilian business environment.

The Act aims at promoting the entrepreneurship and innovation upon less state intervention in the private sector and is led by the following general principles: (i) freedom as a safeguard for the conduction of any business activity; (ii) good faith of the private party in relation with the State; (iii) the subsidiary and exceptional state intervention in the conduction of business activities; and (iv) the recognition of the vulnerability of the private party in comparison with the State.

The changes brought by the Act affect different legal provisions, most notably the Civil Code and the Brazilian Corporations Law, as well as regulatory, tax, insurance and labour laws.

In what regards the labour aspects, among the main changes there are rules related to the work booklet (“CTPS”), working hours control and “eSocial” system.

In what regards the work booklet (“CTPS”), the Act revoked several legal provisions and created an electronic system. The deadline for annotations on the CTPS will go from 48 hours to 5 days.

For working hours control, the new Act established that only companies with more than 20 employees will need to implement a system to control the daily working hours of its employees. In addition, companies will be able to adopt a system to control the working hours per exception (i.e. where only the deviation of the regular hours are informed) provided that a written individual agreement or a collective bargaining agreement, is established.

The Act also determined that the “e-social” system should be replaced by a simplified digital bookkeeping system for social security, labour and tax obligations.

Finally, the Act expressly states that the labour rights pertain to the individual, but also to the legal entity, and that the guarantee of these rights is essential for the economic growth and development of the country. Moreover, the Act imposes the observance of its principles and its provisions in the interpretation and application of labour regulation, which represents a challenge for the Brazilian Labour Courts.