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Brazil: Mass Termination of Employees should be Subject to Prior Discussion with the Union

Authors:  Gabriela Lima, Mariana Fiorotto Pereira and Giovanna Prato

On 8 June 2022, the Brazilian Supreme Federal Court (STF) rendered a decision in the Extraordinary Appeal No. 999435, with “general repercussion” (theme 638), establishing that mass termination of employees should be subject to prior discussion with the union.

The decision of the STF was rendered in a case related to the termination of more than 4000 employees of Embraer, a Brazilian multinational aerospace manufacturer, in 2009. In the Extraordinary Appeal presented to the STF, Embraer and the company Eleb Equipamentos Ltda. challenged the Superior Labour Court’s decision that ruled that prior negotiation with the union was a necessary step before performing mass terminations.

In 2009, when Embraer’s mass termination occurred there was no regulation about mass terminations in our Labour Code, but several Labour Courts used to understand that a prior negotiation with the union was a requirement to perform mass terminations. In 2017, the Labour Reform became effective and introduced section 477-A in the Labour Code, which states that mass terminations should be treated similarly to individual terminations, i.e., not be subject to union prior consent or negotiation through collective bargaining agreement. Hence, after 2017, several decisions of our Labour Courts stated that it was not necessary to involve the employees’ union in mass terminations.

This new decision of the STF comes to change this later understanding of our Labour Courts.

According to STF’s decision, employers must discuss with the employees’ union before a mass termination is performed to encourage the dialogue between the parties and try to reduce the social and economic impacts of such terminations, but without imposing conditions or job stability situations.

The general repercussion thesis established with this decision is that: “Prior union intervention is an essential procedural requirement for mass terminations, which is not to be confused with unions’ prior authorisation or the need to have a collective bargaining agreement”.

This decision must be followed by the Lower Labour Courts whenever ruling similar cases.

Key Action Points for Human Resources and In-house Counsel

  • Based on the decision of theSTF and on the fact that mass termination is still a very controversial subject in Brazil, employers should discuss with the employees’ union prior to performing mass terminations (e., a dismissal that will involve a significant number of employees or a significant percentage of employees from the same department/area).