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.
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 (v) simplify labour procedures.
The Labour Reform changed significantly the labour relations in Brazil and gave more flexibility for employers and employees to negotiate labour conditions. Such Reform also reinforced the validity of collective negotiations with the Unions, establishing that the collective bargaining agreements should prevail over law.
The main aspects changed by the Labour Reform are:
- negotiation with the Union prevailing over the Law, except when regarding health and safety matters and the rights established by the Federal Constitution and taxes;
- negotiation with employees with university degrees and monthly salary higher than two times the cap amount of the benefits granted by the social security agency (currently a monthly remuneration that corresponds to approx. BRL 12,200) will prevail over the collective bargaining agreement (“hypersufficient employee’’);
- outsourcing of core business is allowed;
- remote work, including the obligation to provide employees with guidelines related to health and safety matters when working from home;
- alternatives for resolution of conflicts, including arbitration, validation of private release agreements by courts, negotiation and annual release of labour obligations;
- Intermittent worker;
- premiums, even if paid on a habitual basis, will not be part of the employee’s salary, thus not subject to labour and social security charges, if granted on a discretionary basis and for employees with outstanding performances;
- classification of moral damage indemnification in light, medium, severe and extremely severe, in which indemnification may vary from 1 to 50 times the last monthly salary of the employee;
- union contributions are no longer mandatory;
- termination by mutual agreement, which has a lower severance package in comparison to the termination without cause.