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Brazil’s labor reform becomes effective on November 11. What will change?

. Nov 08, 2017
labor reform brazil Workers protest the government's labor reform. Photo: Reuters
labor reform brazil

Workers protest the government’s labor reform. Photo: Reuters

Approved by Congress and President Michel Temer back in July, Brazil’s labor reform will go into effect on November 11. Law number 13,467/2017 altered over 110 articles of the country’s legal labor framework. While most changes will be implemented immediately, some still require further negotiations between companies and workers.

The government argues that the labor reform is necessary to update Brazil’s ancient labor laws with modern negotiation practices and to help fight unemployment. Meanwhile, labor groups fear the reform will remove their recourse to basic workers’ rights and risk worsening unemployment, which already affects over 13 million Brazilians.

To make things easier, we’ve broken down the big changes to come with the new labor code:

Collective Agreements and Labor Conventions

One of the core points brought by the reform is legal legitimacy to contracts signed through collective bargaining. The reform actually gives collective contracts greater legal weight than the current book of labor laws.

However, there are exceptions. The Brazilian Constitution protects some “essential rights,” which include: minimum wages; higher pay for night work; paid weekly rest; and paid extra time at rates at least 50 percent higher than regular work hours. Also untouched by the reform are the number of vacation days per year; safety-related issues; maternity leave of 120 days; and advance notice proportional to the length of service.

That debunks a widely spread interpretation that collective agreements would be, by definition, detrimental to workers. The new legislation offers more freedom for parties to agree on specific working conditions.

Home office

For the first time in history, home offices will be regulated in Brazil. Per the new legislation, there must be a balance between productivity for the company and respect for the workers’ quality of life. The reform says that home office allows workers to balance their professional and personal lives, while reducing company costs.

The reform states that the specifics, including compensation for equipment usage or power and Internet expenses, must be addressed in the work contract.

Intermittent work

This is one of the reform’s most controversial points. It allows companies to hire people for small periods and pay them by either the hour or the day of work. The amount paid by the hour must be specified in a contract. It cannot be lower than the value of an hour’s fraction of the minimum wage, or what other employees would make with the same job.

Workers are also entitled to receiving benefits calculated proportionally to how much they worked, including vacation, severance payments, social security, and the 13th salary (an end-of-the-year bonus salary, established in 1962). Employees must be summoned at least three days in advance. If companies fail to honor their committed, they must pay within 30 days a fine equivalent to 50 percent of the salary that would be due.

After rendering the services as agreed, the employee will be immediately paid. It is also important to point out that after 12 months from the date of hiring the employee acquires the right to vacation.

Employee’s representatives within companies

The Constitution already protected employees’ rights to have their representatives in companies with over 200 workers. Now, the reform regulates how that will happen.

Workers will be able to choose at least three representatives to represent them in negotiations with management. These representatives must be chosen by workers and have all the rights of a regular employee, with two years of stability.

Representatives will be responsible for resolving labor disputes within the company, including the payment of labor sums, in the course of the labor contract or severance pay.
The minimum number of representatives is established as follows:

  • 200 – 3,000 employees: 3 representatives
  • 3,000 – 5,000 employees: 5 representatives
  • Over 5,000 employees: 7 representatives

Termination

The reform offers a new method to end employment, the so-called “mutual and consensual termination.” This allows the employee and company to jointly decide to terminate the contract and commit to a compromise.

Up until now, workers who quit a job or were dismissed for a ‘just cause’ were not allowed to withdraw money from their FGTS severance fund. If they were fired, employers would pay a fine equivalent to 40 percent of the amount in their FGTS fund, and the worker would be allowed to withdraw the amount. Now, the mutual termination method allows the worker to touch 80 percent of his FGTS fund; companies would only have to pay 20 percent of the fine.

This change came under criticism, as unions warned that companies could coerce workers into accepting “mutual” terminations.

Vacation in installments

Up until now, workers were able to split their vacation time (30 days per year) into two periods of at least 10 days. Those under 18 or over 50, however, were not allowed the split. The Labor Reform lifts this restriction and allows workers to split their vacation time into three stints – one of which must be for at least 14 days, and the other two for a minimum of five consecutive days each. Vacation time cannot begin on weekends or two days prior to a holiday.

Working hours

Unions feared that the reform would allow companies to increase the weekly work journey. However, the Ministry of Labor issued a statement explaining that the already established 44-weekly hours would not be touched. The reform will allow collective agreements to regulate how workers will comply with their 44-hour workweek.

The reform creates the possibility of a 12-hour work day (followed by 36 hours of rest), respecting the limit of 44 hours per week (or 48 hours, with overtime) and 220 hours monthly.

Breaks

One of the controversies generated by this topic is that the Reform allows breaks within the working day to be negotiated; its only requirement stipulates that at least 30 minutes of rest must be granted to a worker during the standard 8-hour workday. Prior to retirement, the worker was entitled to at least one hour, and a maximum rest or rest period of two hours.

Equal pay for equal work and allowance

With the reform, the definition of equal pay for equal work becomes stricter. Now, the concept of “equal work” will only apply to those employees working in the same sector, performing the exact same duties.

And in terms of allowance, different payments to employees such cost allowance, traveling expenses, bonuses, medical insurance, and meal assistance will no longer fall under the employee’s salary.

Union tax

Union tax was a mandatory contribution prior to the Labor Reform – both to registered employees and autonomous professionals, as well as employers. Now, it will be optional. The previously established deadlines will not be modified for those who choose to contribute to their union entities.

Termination of the employee relation – ratification before Union

Before the reform, the termination of a contract had to be approved by a union or the Ministry of Labor, seen as a way to prevent abuse from companies. Now, that will no longer be required.

The approval of an employee’s termination contract can now be created within the company before an employer’s lawyers and the official; the assistance of the Union will be made available.

Outsourcing

Previously, companies were only able to outsource “non-core” activities such as security or maintenance. However, a new law approved by Congress liberates outsourcing to any kind of labor, central or otherwise to the company’s services. For example, a hospital may have previously outsourced its security or cleaning staff, but now it could even potentially outsource doctors and nurses – positions that were hired directly by the institution.

The Labor Reform highlights that contracted employees will be entitled to the same rights as regular employees of the contracting company, when they provide service in their premises. However, that applies only to certain areas such as: food and transport assistance; medical and outpatient care in the premises of the contractor or place designated by him; appropriate training, when required; health conditions and measures to protect health and safety at work.

 
Iure Pontes Vieira

Ph.D. in Public Law, winner of the European Academic Tax Thesis Award in 2011. He is a founding partner of Pontes Vieira Advogados

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