Companies allowed to renegotiate, suspend labor agreements

Brazilian firms severely affected by the Covid-19 pandemic are obtaining favorable decisions in court to suspend, delay, or renegotiate debts from prior labor agreements. In some cases, negotiations are not litigious, and workers agree to receive their severance packages in several installments. However, decisions are made on a case-by-case basis, taking into consideration the value of the agreements and the companies’ cashflow situation, meaning not all petitions are being granted, especially those involving smaller amounts.

The speed at which severance agreements are being reached displays a stark contrast with the legal insecurity faced by companies regarding individual agreements to cut salaries or suspend job contracts. Legislation permits companies and workers to reach agreements in order to diminish payroll burdens and avoid layoffs, while the federal government has pledged to cover a proportion of workers’ salaries over three months. 

The measure was contested by Supreme Court Justice Ricardo Lewandowski, who decided that trade unions must make an input in individual agreements between companies and workers before they are signed. After government backlash, he added that if trade unions do not make a statement within ten days, individual agreements should be allowed to move forward. But while the federal government believes this grants enough legal security, companies are still wary of facing future legal issues.    

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