When Michel Temer took office in May 2016, he promised to push through reforms. During the months that Congress debated whether or not to impeach his predecessor Dilma Rousseff, Mr. Temer gathered support from economic elites by promising to follow a radical pro-business agenda, a break from the excessive state interventionism that marked Ms. Rousseff’s tenure and helped push the Brazilian economy into its worst recession on record. The Crown jewels were two reform bills: one to overhaul Brazil’s pension system and a labor reform. While the former never made the light of day, the former came into effect one year ago, in November 2017.
The reform was surrounded by controversy. Though those on the left of center dubbed it “the end of Brazil’s Consolidation of Labor Laws, the reform has faced little resistance from labor courts across the country and has been thoroughly enforced. However, its results are by no means what was promised.Over the past 12 months, Brazil has generated 372,748 new formal jobs – way below the 2 million that were promised for the first two years by then-Minister of Labor Ronaldo Nogueira.
It was not for lack of warning. When the labor reform was being debated on in Congress, Labor Prosecutor-General Ronaldo Curado Fleury argued that studies from the OECD and the International Labor Organization showed that countries in economic recession that made their labor rights more flexible, such as Mexico or Spain, didn’t raise the amount of people in their formal job market. “Economic development creates jobs – not fewer rights for workers,” he declared. “Hirings depend less on the cost of labor than they do on the demand for products.”
Intermittent and outsourced labor
One of the reform’s most controversial points allows companies to hire people for small periods and pay them by either the hour or day of work. According to José Eymard Loguércio, a lawyer for Brazil’s main central trade unions, many reports state that companies fired employees only to rehire them as outsourced labor or intermittent workers. In the latter case, workers are no longer entitled to a steady salary, and only get paid for the hours they are on duty.
According to a survey by the National Confederation of the Industry (CNI), 63 percent of Brazilian industries used outsourced labor – and 84 percent intended to increase the share of outsourced workers in their labor force after the law passed. “We still don’t have the updated data, but outsourcing should increase in the near future,” said a director at CNI.
On August 31, the Supreme Court decided to allow the outsourcing of any work activity or occupation – even core activities. This means that a hospital, for instance, is not only allowed to outsource its cleaning staff, but also its doctors and nurses. Business owners complained that the lines between core and support activities were becoming blurry, which brought them judicial problems.
Rules for intermittent work, however, are still pending a Supreme Court decision. According to the Superior Labor Court, a total of 19 cases discussing the constitutionality of the labor reform are pending before the Supreme Court. The list includes rules allowing pregnant women to work in insalubrious conditions.
Fewer labor lawsuits
If there’s one area in which the labor reform really has had an effect it is in relation to lawsuits pitting employers against employees. According to data published by the Superior Labor Court, the number of new lawsuits has dropped by 38 percent. Between December 2017 and September 2018, trial courts received 1.4 million labor complaints – against 2.2 million in the previous period.
This is a result of provisions in the reform that establish that if an employee loses his/her labor dispute, he/she is the one who must pay compensation to the former employer and all lawyer fees. Before the new rules came into effect, even in the case of a defeat, workers were not forced to pay anything.
In November 2017, just prior to the labor reform rules coming into effect, there was a rush to the labor courts in order to escape the pro-business rules – leading to an abnormal number of lawsuits: 289,700. One month later, though, that number dropped to 84,200.