Labour and employment law in Brazil

Introduction

In Brazil, Labour Law is protective of employees. Some basic principles implicitly or expressly provided by Law will govern any employment relationship in Brazil. The most relevant principles are: (a) prevalence of facts: in the determination of labour consequences, the relevant facts surrounding an employment relationship will prevail over formal documents; (b) prohibition of detrimental changes: employers are prevented from making changes to employment terms and conditions that are detrimental to employees, whether or not the employee has previously consented with the change; and (c) joint liability (group of companies): companies belonging to a group of legal entities under the same control, direction or management are jointly liable for the obligations of any company belonging to such group with respect to employment relationships.

Key Points

• The most common practice is hiring workers as employees.
• Employment agreements in Brazil are usually for indefinite term; fixed term employment agreements are only allowed in specific situations.
• All companies and employees are mandatorily represented by Unions.
• Employments are at will, meaning that any party may terminate the employment agreement without cause upon mandatory prior notice and payment of the severance.
• Work permits must be requested whenever a foreigner wants to work in Brazil.

Legal framework

In Brazil, labour relations are a matter of Federal law, so the States and Municipalities have no power to legislate over labour matters. Therefore, labour rights are nationally standardised and the same labour costs and consequences will apply regardless of an employer’s place of business or place of incorporation.

The basic principles concerning labour relations in Brazil are contained in the Labour Code, the so-called “Consolidação das Leis do Trabalho – CLT”, enacted on 1 May 1943. On 11 November 2017, the Labour Reform became effective. It changed more than 100 articles of the Brazilian Labour Code. The changes intended to: (i) update the Brazilian Labour Code, (ii) improve labour relations, (iii) value collective negotiations between workers and employers, (iv) reduce the number of labour claims filed every year, (v) reduce the workforce informality, and (vi) simplify labour procedures.

New Developments

N-1 – Psychosocial risks

As of May 26, 2026, in view of the new terms of the Regulatory Standard No. 1 (NR‑1), companies in Brazil must address work‑related psychosocial risk factors as part of their mandatory Risk Management Program (PGR) and adopt a proactive approach to mental health in the workplace.

In accordance with NR-1, companies must adopt processes structured according to the PDCA cycle (Plan, Do, Check, Act), applying it directly to occupational risk management to ensure continuous improvement and effective control of working conditions.

The organisation’s responsibilities in occupational risk management extends beyond the mere preparation of documents. It requires the implementation of dynamic and ongoing processes, encompassing planning, execution, monitoring and corrective actions throughout all stages of risk management.

Paternity leave

Another significant new development is the enactment of Law No. 15,371 on 31 March 2026, which gradually extends paternity leave from 5 to 20 days, as follows:

• 10 days, as of January 1, 2027;
• 15 days, as of January 1, 2028;
• 20 days, as of January 1, 2029.

The implementation of the 20-day period is subject to compliance with the fiscal targets set forth in the Budget Guidelines Law, pursuant to Section 1 of Article 11 of the Law. If the fiscal target is not met, the extension to 20 days will only become effective as of the second fiscal year following the achievement of such target.

Companies enrolled in the “Empresa Cidadã” Program (Citizen Company Program) may extend paternity leave by an additional 15 days, beyond the mandatory statutory period, through a tax incentive.

With respect to paternity pay, the benefit will be funded by the Social Security system. For employees under a regular employment relationship, payment will be made by the employer, with the possibility of subsequent offset against Social Security contributions, under a model similar to that currently applied to maternity pay.

The Law also prohibits arbitrary termination or termination without cause of the employee from the start of paternity leave until one month after its end. If termination occurs after the employee has notified the employer and before the start of the leave, in a manner that prevents the enjoyment of the benefit, the employee will be entitled to double compensation for the stability period.

Another relevant point is the employee’s obligation to notify the employer, at least 30 days in advance, of the expected paternity leave period, together with:

• a medical certificate indicating the expected date of birth; or
• a certificate issued by the Child and Youth Court indicating the expected date of issuance of the judicial custody order.

In cases of premature birth, leave will begin immediately, with the employer being notified as soon as possible.

The Law also ensures the employee’s right to take vacation immediately following the end of paternity leave, provided that this intention is communicated at least 30 days in advance of the expected date of birth or issuance of the judicial custody order. This advance notice requirement is waived in cases of premature birth.

In cases involving the birth or adoption of a child or adolescent with a disability, the paternity leave period will be increased by one third.

Hiring of Independent Contractors (“pejotização”)

The use of Independent Contractors (“ICs” and “Pjs”), commonly referred to in Brazil as “pejotização”, has long been a strategic workforce model for companies operating in the country, particularly in technology-driven, service-oriented and cross-border environments. Despite its widespread adoption, the hiring of ICs in Brazil remains one of the most legally sensitive and closely scrutinized labour topics, largely due to the country’s highly protective labour framework and litigation-prone environment.

Under Brazilian law, the formal designation of an individual as an independent contractor does not, by itself, prevent the courts or labour authorities from recharacterizing the relationship as an employment relationship. Brazilian Labor Courts traditionally apply a primacy of reality test, focusing on the factual circumstances surrounding the provision of services rather than the contractual form adopted by the parties.

In recent years, however, the legal debate surrounding pejotização has evolved and become increasingly complex — particularly at the constitutional level.

Given the large number of similar cases, the Brazilian Supreme Court (STF) admitted the discussion under the general repercussion system, meaning that its final ruling will have binding effect on all similar cases nationwide.

Although no trial date has been set so far (it is expected to occur this year – 2026), due to the high volume of appeals on this issue, since April 2025, the STF ordered the nationwide suspension of all lawsuits involving ICs and PJs arrangements until a final and binding decision is issued.

The STF is expected to decide on three main points:

1. The legality of hiring individuals as independent contractors, including through personal legal entities (“PJs”);
2. Jurisdiction: whether cases involving alleged fraud in civil or commercial contracts — with potential recognition of employment relationships — should be heard by the Labor Courts or the Civil Courts;
3. Burden of proof in misclassification or fraud allegations — i.e., whether it lies with the contractor or with the company.