What are the key aspects of Brazilian employment law that differ significantly from those in other jurisdictions, and how can global companies ensure compliance with these regulations?
The main differences from other jurisdictions is that Brazilian labour rights are deemed to be of public interest and may not be waived. In addition Brazil is widely known for being highly litigious in employment-related matters and for having substantial regulations on union representation (both to the employee and employers, according to their business activities, regardless their affiliation) once all employment relationships are subject to bargaining agreements.
To ensure compliance with Brazilian regulations, it is important that global companies have a comprehensive understanding of the local environment and evolving legal framework, including case law and upcoming reforms. Having an adequate exit process for employees, enhancing the mandatory benefit packaged, can be a successful strategy to mitigate the filing of new claims. Similarly, maintaining a good relationship with the employee unions is an important element for smoother employee relations.
How does the Brazilian Labour Code (Consolidação das Leis do Trabalho – CLT) impact the hiring process, employee contracts, and termination procedures for multinational corporations operating in Brazil?
The Brazilian Labour Code provides for detailed rules of the employment relationship, including hiring and terminating employees, as well as managing the employment relationship.
Under Brazilian labour laws, substance prevails over form. Therefore, written employment agreements are not required to evidence an employment relationship and are used to address specific matters, such as any form of special compensation, benefits, confidentiality and poste termination restrictive covenants. However, employers must complete certain sections of the employee’s employment booklet, and have similar records in the company’s books. The information is included in the eSocial system, which is an electronic system implemented by the federal government and mandatory for all companies in Brazil.
In Brazil, employment can be ended by decision of the company (with or without cause); of employee (resignation) or both (mutual consent). The required payments will vary depending on the way employment is ended.
Termination of employment triggers a statute of limitations for the filing of claims – up to two years after termination of the relationship, relating to period of five years counted backwards from the illing of the case.
What are the mandatory employee benefits in Brazil, such as vacation, 13th salary, and social security contributions, and how should global companies manage these obligations?
Under Brazilian law, an employee is entitled to the following mandatory rights and benefits (in addition to those provided by company or collective bargaining agreement):
- Minimum wage – national or established in the collective bargaining agreement.
- Annual mandatory salary increase.
- Annual Christmas bonus (‘13th month salary’).
- Annual vacation of 30 calendar days, plus vacation bonus.
- Severance fund (FGTS) equivalent to 8% of the employee’s monthly compensation.
- Other payments set forth in the collective bargaining agreement.
To ensure compliance with all above obligations, global companies must closely track not only federal legal framework, but also the applicable collective bargaining agreements.
What are the regulations surrounding employee dismissals and layoffs in Brazil, including severance payments, notice periods, and the role of labour unions in these processes?
Employee dismissal by decision of the company can be made at any time, for any reason (subject to few exceptions of job security), provided that notice of at least 30 days, up to 90 days total, is granted and the following titles are paid within ten calendar days after the last day of work, or the day after the last day worked in case of worked prior notice:
- Severance fund penalty: 40% of the balance of the employee’s FGTS.
- Compensation due until the day of termination.
- Accrued and prorated vacation, plus vacation bonus.
- Accrued or prorated Christmas bonus.
- Any additional labour rights provided in the employment agreement or applicable CBA.
It is possible to terminate employment for cause only in the specific situations provided for in art. 482, of the Labour Code.
Brazilian labour law does not provide specific criteria as to when a termination should be treated as collective, but the labour courts usually characterise lay-offs as collective when a large number of employees are terminated in connection with a definitive reduction of the workforce and as a result of an economic/business decision. According to the 2017 reform, a mass lay-off of employees did not require the union’s prior participation. However, the Brazilian Federal Supreme Court established through a general repercussion thesis that union’s participation is essential for mass layoffs. Thus, currently collective mass dismissals will require ‘prior union intervention’, but not conditioned to its prior authorisation.
How do Brazil’s anti-discrimination and workplace harassment laws affect company policies and practices, and what measures should be implemented to prevent and address violations?
In Brazil, companies are responsible for providing a safe work space, free of discrimination and harassment (both moral and sexual), and shall combat harassment through policies, trainings at least once every 12 months, for all employees, on topics related to violence, harassment, equality, and diversity; to provide internal channels that allows employees to file anonymous complaints, as well as internal procedures for receiving and following up on complaints.
These laws prohibit any discriminatory and restrictive practices regarding a person’s access to an employment relationship, or its maintenance, due to gender, origin, race, marital status, family status or age, also providing equal pay for equal work setting forth parameters through which the equalisation can be assessed. Labour courts in Brazil treat the termination of an employee with a serious disease (such as AIDS) as presumptively discriminatory.
The above actions will not only ensure legal compliance, but also help create a respectful and healthy workplace, protecting companies against potential lawsuits and reputational damages.