Brazil: Emergency Program for Maintenance of Employment and Employees’ Income

On April 1st, the Brazilian Federal Government issued the Provisional Measure (MP) No. 936/2020, which establishes an emergency employment and employees’ income maintenance program (Program) and determines additional measures that may be adopted by companies during the COVID-19 pandemic.

The Program has three (3) defined goals:

• Preserve employment and employees’ income during the state of public calamity;
• Ensure continuity of work and business activities;
• Reduce social impacts caused by the coronavirus

To achieve the goals of the Program, MP No.936/2020 establishes the following alternatives:

1.  Reduction of salary and working hours for up to 90 days

1. Reduction may be negotiated through individual or collective bargaining agreement:
   1. Individual agreement:
      1. For employees who receive salary up to BRL 3,135.00 and employees considered capable of negotiating their own rights (known as “hipersuficientes” in Portuguese) – i.e., employees that have university degree and salary currently equal or higher than BRL 12,202.12: reduction of salary and working hours in the following percentages 25%, 50% and 70%;
      2. For employees who receive salary between BRL 3,135.00 and BRL 12,202.12 or higher when the employees do not have a university degree: Reduction of salary and working hours of 25%.
   2. Collective bargaining agreement:
      1. Mandatory for those employees who receive salary between BRL 3,135.00 and 12,202.12 or higher when the employees do not have a university degree, except if the reduction will be of 25%;
      2. All employees: reduction of salary and working hours in different percentages than the ones mentioned in the items above (e.g., 20%, 40%, among others).

2.  Suspension of the employment agreement for up to 60 days

1. Suspension may be negotiated through individual or collective bargaining agreement:
   1. Individual agreement: only for those employees who receive salary up to BRL 3,135.00 and employees considered capable of negotiating their own rights (“hipersuficientes”); and
   2. Collective bargaining agreement: mandatory for employees who receive salary between BRL 3,135.00 and 12,202.12 or higher when the employees do not have university
2. During the temporary suspension of the employment agreement, the employee may opt to pay their social security contribution directly (segurado facultativo) to the Social Security Agency to count as length of service for retirement

3.  Emergency Benefit and monthly allowance

1. Employees are entitled to the payment of an emergency benefit (Benefit) on a monthly basis by the Federal Government during the period of the salary/working hours reduction and/or employment agreement suspension:
   1. Benefit due in the event of salary/working hours reduction:
      1. General rule: The Benefit is equivalent to the percentage of salary/working hours reduction applied to the monthly unemployment insurance amount to which the employee would be entitled to. Note: currently the maximum monthly unemployment insurance amount is BRL 1,813.03.
      2. Reduction of salary and working hours less than 25%: there is no right to the Benefit;
      3. Reduction of salary and working hours of 25% up to 49%: Benefit equal to 25% of the unemployment insurance amount that the employee would be entitled to;
      4. Reduction of working hours and salary of 50% up to 69%: Benefit equal to 50% of the unemployment insurance amount that the employee would be entitled to; and
      5. Reduction of working hours and salary higher than 70%: Benefit equal to 70% of theunemployment insurance amount that the employee would be entitled to.
   2. Benefit due in the event of suspension of the employment agreement
      1. 100% of the unemployment insurance amount to which the employee would be entitled to when they work for a company with revenue of up to BRL 4,8 million over the past year;
      2. 70% of the unemployment insurance amount to which the employee would be entitled to when they work for a company with revenue higher than BRL 4,8 million over the past year. In this case, the company must pay a monthly allowance equal to 30% of the employee’s
2. In both alternatives (salary reduction and employment agreement suspension), companies may opt to pay a monthly compensatory allowance (monthly allowance) to the employees and it will not have salary nature, i.e., it will not be subject to labor and social security contributions
   1. 1. 1. Companies with revenue higher than BRL 4,8 million over the past year: as mentioned above, in the event of suspension of the employment agreement must pay a monthly allowance to the employee equal to 30% of the employee’s

4.  Temporary job stability

1. In both alternatives, employees are entitled to job stability during the period of the salary/working hours reduction and/or suspension of the employment agreement plus an equal period thereafter (e.g., reduction of salary for 2 months = 4 months of job stability).
2. If the company terminates the employment agreement without cause before the end of the job stability period, besides the mandatory severance package established by law, the company will have to pay an indemnification as follows:
   1. Reduction of salary and working hours of 25% up to 50%: indemnification of 50% of the salary to which the employee would be entitled to during the job stability period;
   2. Reduction of salary and working hours of 50% up to 70%: indemnification of 75% of the salary to which the employee would be entitled to during the job stability period; and
   3. Reduction of salary and working hours higher than 70% and Suspension of employment agreement: indemnification of 100% of the salary to which the employee would be entitled to during the job stability

5.  Other conditions

Companies must inform the Government (Ministry of Economy) and the employees’ union in within 10 days counted as of the execution date of the agreement (individual or collective) to reduce salary and working hours or to suspend the employment agreements to enable to Government to perform the payment of the Benefit.

Collective bargaining agreements executed prior to the MP No. 936/2020 may be adjusted according to the specific measures proposed by such MP in within 10 days counted as of its publication date.

We are available to discuss the terms of the MP No. 936 considering the company needs and specific cases and assist with the implementation of the measure that best suits the company.

TozziniFreire Advogados attorneys are available to assist you with these and other workplace issues. For more information, please contact Mihoko Sirley Kimura (Partner) of TozziniFreire Advogados at Msk@tozzinifreire.com.br or visit www.tozzinifreire.com.br.

For more information please contact Joseph Granato, Communications Manager at L&E Global at joseph.granato@leglobal.org.