1. SOURCES OF EMPLOYMENT LAW
Employment laws in Brazil are mainly based upon the following sources, set out in order of priority:
In terms of the order of priority, where applicable, the Brazilian Constitution is the most important law source – it guarantees employees’ fundamental rights. The basic federal legislation governing the legal relationship between an employer and an employee in Brazil is the Brazilian Labour Code (Consolidação das Leis do Trabalho, CLT), enacted on 1 May 1943, pursuant to Decree-Law no 5452. The CLT is complemented by federal Brazilian labour legislation, the Federal Constitution, International Labour Agreements (eg ILO Conventions), jurisprudence, as well as by the collective bargaining arrangements (Acordos ou Convenções Coletivas de Trabalho) negotiated between the employees’ unions and the employers or their business sector’s representatives. The provisions contained in the CLT, as well as in the Federal Constitution, International Labour Agreements, and in the collective bargaining arrangements, are ‘public order’ rules as far as the benefits granted to the employees are concerned. Thus, they shall prevail in the case of conflict with provisions included in employment contracts that are less favourable to the employees.
Some of the most important federal Brazilian labour laws are as follows:
2. PRINCIPAL INSTITUTIONS
The Ministry of Labour and Employment (Ministério do Trabalho e Emprego, MTE) is the official government department responsible for employment matters in general, having the following main objectives:
The Ministry of Labour and Employment aims to promote employment and income policies, guaranteeing the development of labour relations based on social inclusion and improving work conditions.
The Ministry of Labour and Employment operates through the ‘Regional Labour Stations’ (Delegacias Regionais do Trabalho, DRTs). The DRTs are responsible for:
The Labour Public Prosecutor’s Office (Ministério Público do Trabalho, MPT) has the duty to defend the juridical order and the inalienable social and individual interests of employees. It is an independent and autonomous institution, with its own budget, career structure and administration, without functional subordination to any official body.
The MPT acts as an intervenient agency within the Superior Labour Court (Tribunal Superior do Trabalho, TST) and the Regional Labour Courts of Appeals (Tribunais Regionais do Trabalho, TRT), issuing opinions on pending appeals, with the sole purpose of guaranteeing that the labour laws are not violated. Since the new Federal Constitution enacted in 1988, the MPT has also started to act in the defence of the diffuse, collective and individual rights of employees, focused on five main areas: (i) eradication of child labour and regulation of teenage employment; (ii) fighting against slave labour and regulation of Indian employment; (iii) combating all forms of discrimination in the work environment; (iv) preserving the employee’s health and security; and (v) regulating employment contracts.
As an intervenient agency, the MPT is responsible for defending the correct application of labour laws by interfering in court cases in which there are public interests involved. In this regard, the MPT issues opinions, participates in trials and files appeals.
The MPT also (i) acts as arbiter and mediator in the solution of labour conflicts of collective nature, involving employees and companies or employees’ unions and business sector representatives (this possibility is foreseen in art 83, cl XI of the Supplementary Law 75/93 and was regulated by Resolution no 44 of the Superior Counsel of the MPT) and (ii) supervises the exercise of the right to strike off employees engaged in essential activities.
The role of the MPT involves receiving denunciations and officially commencing investigations that may result in the filing of public civil lawsuits (similar to class actions) in the defence of the rights of employees (diffuse, collective or individual homogeneous rights).
3. ROLE OF THE NATIONAL COURTS
The Brazilian labour court system is a specialised branch of the judiciary dealing with all kinds of claims emerging from work relationships. The Federal Constitution determines that the labour court system has unlimited jurisdiction over contractual issues derived from work relationships.
The labour court system encompasses three levels of jurisdiction, as follows:
As a general rule, each city has one or more trial labour courts. The Regional Labour Courts of Appeals have jurisdiction over one or more states and there are currently 24 Labour Courts of Appeals in Brazil. The Superior Labour Court is located in Brasilia, Federal District, where the other superior courts of Brazil are located and hears and decides appeals coming from the entire country.
4. EMPLOYMENT STATUS AND CATEGORIES OF WORKER
The question of whether an individual is an employee or is self-employed (independent contractor or worker) is an important one, as the legal rights of employees and non-employees vary significantly.
According to art 3 of the CLT, every individual who renders non-eventual remunerated services to an employer with subordination and on a permanent basis is considered an employee.
The four key requirements of an employment contract (and, consequently, for a person to be considered an employee) are that (i) he or she must be an identified individual (the services must be rendered by that specific person and not by someone else); (ii) the services rendered must be non-eventual and continuous; (iii) the employee must be subordinated to the employer; and (iv) the employee must receive salary in compensation for the services rendered. If one or more of these factors is absent, there cannot be an employment contract and the person shall not be considered an employee.
If these factors are present, there will be an employment contract. In determining whether or not an individual is an employee, labour courts must analyse the factual elements of the relationship, often disregarding the language of contracts that may not be consistent with these facts. Labour courts follow what is called the ‘principle of reality’ based on which facts prevail over contracts. Labour courts have suggested that a worker is likely to be an employee if he or she:
These are not by any means exhaustive lists. However, in general, the greater the degree of personal responsibility an individual undertakes, the more likely he or she is to be considered self-employed rather than an employee.
Employee Self-employed
All labour rights (foreseen in CLT) Contractual rights All collective bargaining arrangements rights Not applicable
Unfair dismissal protection Not applicable Race, sex and disability discrimination protection Race, sex and disability discrimination protection Written particulars of terms of employment Not applicable
Payment of wages free of any deductions not Payment of wages free of any deductions properly authorised not properly authorised Minimum wage for the category Not applicable
Entitlement to redundancy payment Not applicable Subject to the equal pay for equal work rule Not applicable Maternity rights (and parental leave) Not applicable
Statutory sick pay Not applicable A safe place of work Not applicable Statutory minimum termination notice period Not applicable
Categories of employee
The three main categories of employment contracts are:
(iii) part-time.
Indefinite term contracts are those which run indefinitely until notice is given (by employer or employee) or until they end in some other way (eg on retirement). This kind of contract is the default in Brazilian labour legislation.
Fixed-term contracts are those in which the normal course will terminate on:
This kind of contract can be renewed only one time and cannot exceed two years (including the renewal). If the employee is continuously employed for two years, it will be compulsory for the employer to contract the employee for an indefinite term.
The fixed-term contract is only valid if: (i) the services that are rendered by the employee are transitory and seasonal in order to justify the fixed term; or (ii) it is an experience contract (art 443 of the CLT). The fixed-term contract is regulated by CLT and Law no 9.601/98.
A worker is considered a part-time worker if he or she works a 25-working hour week or less (art 58 of the CLT). These working hours correspond to five working hours per day. Workers who work part-time have the same rights and obligations as those who work full-time and the salary must be proportional to that paid to full-time workers. The main categories of workers who are not considered employees are the following:
Directors
The term ‘director’ refers to a statutory office held in a company. A director holds his or her position as a director by virtue of appointment to that position. The circumstances in which a director can be removed from his or her office are not dictated by employment law but, rather, by corporate laws and statutes of the companies.
From a labour law standpoint, a director is someone with effective powers of corporate management, representation and command of the company, being at the centre of the company’s decision-making process.
That being said, Brazilian scholars and court precedents indicate that the true director of an organisation cannot be considered an employee, since the nature of the position is incompatible with the basic characteristics of a labour relationship, mainly the so-called subordination requisite. The idea behind it is that a person cannot simultaneously be the employer and the employee.
In practice, most directors are also employees of the company and therefore, when taking over a position of director, the employees should have their labour contracts suspended or terminated.
In other words, the employment bond between the company and the employee will remain; however, the effects of their employment contracts will be suspended for the period of time the individual serves as a director of the company, which means that all labour-related benefits are not due for the period the employee remains a director.
However, if the company does not invest the employee with the necessary powers to represent the company as described above (such as powers of corporate management, representation and command of the company) the alleged director will be considered an employee and will be eligible to all applicable labour rights.
5. CONTRACT
As indicated in section 4.1 above, the basic elements of an employment contract are: (i) the performance of services by an individual to an employer, (ii) on a regular and continuous basis, (iii) with ‘subordination’ and (iv) with compensation for such work or service.
Employees must provide employers with certain documents/information in connection with the formalisation of the labour contract:
Although there is a formal requirement that obliges the employers to register the labour contract in the employees’ labour card, no written contract is required by law. Written contracts are, however, advisable to make certain specific rules of each activity/company known to the parties and applicable with no doubt.
In addition to the express terms that the parties may include in the labour contract, some terms are implied by law or provided for in the collective bargaining arrangements. The terms implied by law are the so-called ‘labour principles’, provided for in the Constitution and in the CLT. Therefore, even when the parties choose to have a written contract, it is not possible to derogate from or reduce any of the implied terms, such as the right to equal pay for equal work and the right to equal treatment, among others. Whenever there is a collective bargaining arrangement applicable to a certain class of workers, all the rights provided by it will become part of the labour contract of those employees.
Furthermore, there are implied terms that will be part of any labour contract. As such, it is not usual to have them in writing, although they consist of mandatory rights. Examples are:
Working time limits and rest breaks:
Annual vacation:
• 30-day vacation after each period of 12 months of work, the so-called vesting period. The 30-day vacation must be taken in the 12 months following the vesting of the vacation right. Otherwise, the employee becomes entitled to twice his or her vacation pay (monthly remuneration plus the one-third vacation bonus). The employee is entitled to receive his or her regular monthly remuneration while he or she is on vacation. In addition, the employer must pay to the employee a ‘vacation bonus’ equal to one-third of the employee’s monthly remuneration.
Christmas bonus (one-thirteenth salary):
• employees are entitled to receive an annual Christmas bonus equal to their highest monthly remuneration (if remuneration is fixed, the one corresponding to the last month, if variable, the average received during the preceding 12 months). The employer must pay the Christmas bonus to its employees as follows: 50 per cent between February and November of each year, or at the time the employee goes on vacation, if he or she so requires during the month of January; and the remaining 50 per cent up to 20 December of each year.
Guarantee Severance System:
• Brazil had two severance systems: (i) the ‘Guaranteed Severance Fund’ (Fundo de Garantia por Tempo de Serviço, FGTS) system, or ‘new’ system, created in 1966; and
(ii) the ‘CLT’ or ‘old’ system, which is contained in the CLT. Prior to the enactment of the new Brazilian Federal Constitution on 5 October 1988, employees could opt for either system within 365 days after commencement of an employment relationship. The ‘old’ system was revoked by the new Federal Constitution, and since 5 October 1988, the only severance indemnity system in effect in Brazil is the FGTS system. Under the FGTS system, an employer must make monthly deposits into a blocked bank account opened in the name and on behalf of the employee (the ‘FGTS account’). Each such deposit is in an amount equal to eight per cent of the employee’s monthly remuneration. The employee’s FGTS account is made part of a specific fund managed by a Brazilian government agency, earns interest and is subject to monetary correction. The employee has access to his or her FGTS account only under limited circumstances. Furthermore, based on Complementary Law no 110/2001, until September 2006, employers are also required to deposit the special social contribution on the employee’s FGTS account, calculated at the rate of 0.5 per cent of the employee’s remuneration. This money goes to the government and not to the employee.
6. TERMS AND CONDITIONS
As mentioned above, a written contract is not a legal requirement. However, if the parties choose to have one, the contract will necessarily follow the requirements of any other contract.
The principal statement information shall include:
The precise terms of an individual’s employment contract will be subject to negotiation between the parties. Some of the typical clauses included are:
Employee’s obligations:
7. EMPLOYEE REPRESENTATION
The labour unions are associations of employees who render the same economic or professional services, aiming at the defence of the collective and individual rights and interests of their fellow members.
In Brazil, according to the Federal Constitution, the association of professional/labour unions is free. However, the law prohibits the co-existence of more than one professional/ labour union for the same economic activity in the same territory.
Neither the state nor the government can interfere or intervene in the professional/labour union’s organisation and it is not necessary to get official authorisation to organise a professional/labour union.
It is the responsibility of the professional/labour union to defend the rights and interests of the professional category, including judicial and administrative matters.
The Federal Constitution establishes that, in companies with more than 200 employees, there will be an elected employee representative, with the exclusive objective of promoting and improving the understanding between employer and employees.
The Federal Constitution grants employees’ participation in the company administration in exceptional circumstances in certain cases determined by law.
One of the primary objectives of the co-administration institution is to reformulate the social structure of the company, in an attempt to democratise the power of the employer.
The participation of the employees over the company’s administration would be put into effect by employees’ councils elected by the employees.
There is no law that regulates this institution and the labour unions do not advocate the right to co-administration. Therefore, in practice there is no co-administration in effect in Brazil.
8. INFORMATION AND CONSULTATION
Articles 162 and 163 of the CLT establish that companies must have Internal Commissions for the Prevention of Accidents (Comissão Interna de Prevenção de Acidentes, CIPA) in each of their premises that have a minimum of 20 employees. The requirements to have a CIPA in place vary depending on the level of risk of the company’s activities. The Ministry of Labour and Employment classifies the level of risk per activity for this purpose in one of its ordinances.
The CIPA aims at monitoring and reporting the risk conditions of the labour environment and requesting the necessary measures to eliminate and neutralise the existing risks.
The CIPA will be formed by employer’s and employees’ representatives. The employer appoints its representatives and their replacements in the CIPA. The representatives of the employees in the CIPA must be elected by the employees, irrespective of labour union affiliation.
The CIPA will be registered at the ‘Regional Labour Stations’ within a period of ten days after the election and appointment of its members.
Profit sharing is the remuneration paid to the employees by the employer, as foreseen in the labour contract, referring to the distribution of profit among the employees in a company.
The Federal Constitution (art 7o) lists profit sharing as one of the basic employment rights in Brazil. Law no 10,101/2001 governs the setting up of a profit sharing plan.
Article 2 of Law no 10,101/2001 determines that the profit sharing plan must result from negotiation between the company and the workers, and should follow one of the following two possible procedures:
between the company and the union representing its employees, and in each case the legal requirements of the collective bargaining arrangement must be observed.
Also, the criteria to define the amount of profit sharing due to each employee must be objective (as opposed to discretionary) and the payments of profit sharing have to occur not more often than semi-annually.
Although the law provides for arbitration or mediation to solve any problems during negotiation, this is not in fact very common.
Article 611 of the CLT determines that the unions representing employees and the business sector representatives (also known locally as employers’ unions) may enter into collective bargaining arrangements containing provisions that will be applicable to all employment agreements within the professional categories they represent. The CLT also provides for collective bargaining arrangements to be entered into by the employees’ unions and the companies directly. In this case, the provisions of the arrangement are applicable only to the employees of the company which is a part of it.
Collective bargaining arrangements are mandatory and must be entered into on an annual basis. Each business sector has a month in the calendar year when negotiations for the annual collective bargaining arrangement take place. These arrangements often deal with salary adjustments and other rights of the employees that are particular to each business.
Although the collective bargaining arrangements are mandatory, affiliation to the unions is not mandatory for employees and affiliation to business sector representative entities is not mandatory for employers either. These entities have standing to represent the employees and companies by law in their respective territories. Therefore, collective bargaining arrangements bind even non-affiliated employees and employers.
The participation of the employees’ labour union in collective bargaining arrangements is imperative. This results in a less unbalanced negotiation between employers and employees, as employees’ unions are usually well structured and experienced.
Law no 9.601/98 sets forth the so-called bank of hours, which is a system that aims at allowing employers to offset overtime hours by releasing employees from working regular hours after they work overtime. The new criterion in effect since the enactment of Law no 9,601/98 establishes a period of time of one year during which the offsetting of overtime hours should occur. At the end of the period of one year, any overtime hours due must be paid to the employees.
The offsetting of overtime hours on an annual basis will only be effective if it is implemented and regulated by a collective bargaining arrangement. The implementation of an overtime offsetting system without the collective bargaining arrangement governing it subjects the employer to have the offsetting declared null and void and having to pay all the overtime hours worked (offset or not) by the employees.
9. EQUAL OPPORTUNITIES
The Federal Constitution prohibits any form of discrimination.
Law no 9.029/95 forbids any distinction or limitative practice during recruitment, employment or termination of employment on the grounds of sex, marital status, race, colour, nationality or national or ethnic origin, disability, sexual orientation, religion or belief.
The following practices are considered crimes:
The termination of an employment contract based on a discriminatory act gives the employee the right to claim:
Discrimination on the grounds of sex, marital status, race, colour, nationality or national or ethnic origin, disability, sexual orientation, religion or belief is prohibited during recruitment, employment, termination of employment and post-employment.
Discrimination against disabled individuals is prohibited during recruitment, employment, termination of employment and post-employment.
The Federal Constitution and the CLT establish that employees who perform the same
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services to the same employer in the same location must receive the same pay. Therefore, if the services rendered by a male worker are equal to the services rendered by a female worker, the salary must be exactly the same.
It is unlawful to refuse a position to a prospective employee on the grounds of their belonging to an employees’ union. It is also illegal to dismiss an employee on ‘union grounds’.
All female employees, regardless the length of their period of service, are entitled to 120 days of ordinary maternity leave with pay. To be entitled to the benefit, the employee must notify the employer, by means of a medical certificate, of her pregnancy within 28 days before the delivery date.
The maternity leave can be extended by two weeks (before or after the delivery), when necessary, as determined by a medical certificate.
During pregnancy, the employee is entitled to be transferred to another position if demanded by her health. Also, pregnant employees can reduce their work hours whenever necessary for the purpose of medical examinations.
All terms and conditions of the employment agreement are preserved during the period of ordinary maternity leave. Certain terms and obligations are also preserved during the period of additional maternity leave.
According to the Federal Constitution, employees have employment stability (guarantee) and cannot be terminated other than for cause during pregnancy and for five months after delivery of the baby.
Employees may be entitled to take one day off as paternity leave upon the birth or adoption of a child.
9.7 Adoption leave
An employee who adopts a child or obtains a custody award for child adoption is entitled to an adoption leave period as described below:
All terms and conditions of the employment agreements are preserved during the period of ordinary adoption leave.
10. DISCIPLINE AND TERMINATION
10.1 Disciplinary procedures
Employers may terminate an employee at anytime without having to follow any specific rule/procedure, by paying the termination package provided by law: see section 10.2 below. Employers may, however, warn employees in case of failure to comply with obligations that would not be serious enough to suggest the suspension of the employment agreement or its termination for cause. The warning, suspension and termination are the disciplinary actions the employer can use. It is common that employees are suspended after more than one warning and terminated for cause if, after suspended, the employee again engages in the same improper conduct.
10.2 Termination by employer
Termination without cause
Considering that the general rule is that the parties may terminate the employment at any time, when the employer is the one willing to terminate the labour contract without a cause, the following payments are due upon termination:
The exception to the employers’ right to terminate employees without cause are cases in which the employees have employment stability or guarantee. In these cases, the employee can only be terminated with cause and can seek reinstatement through a court injunction if terminated without cause.
The following are the main cases of temporary stability: (i) pregnant employee (see section 9 above); (ii) duly elected union members (since they enrol to run for the position until one year after their term); (iii) CIPA member elected by the employees (as (ii) above); and (iv) employees who suffer work-accidents (for one year after they return to work).
Termination for cause
The termination for cause is the most severe penalty that may be imposed on an employee. This is because, in such cases, the employee will not be entitled to the indemnity due upon termination, but only to balance of salary and accrued vacation that has not been taken.
Actions which may lead to a termination for cause, specified in art 482 of the Labour Code, are:
In all these cases, if the employee goes to court to challenge the employer’s decision to terminate the labour contract for cause, the burden of proof will always be on the employer.
10.3 Termination by employee
Termination without cause
As mentioned above, the employee does not need to have any grounds for terminating an employment contract. However, the employee is also expected to give 30 days’ prior notice to the employer. Therefore, if the employee leaves before such period is completed he or she will have to indemnify the employer.
Termination for cause
The employee may also terminate an employment contract for cause, in which case he or she will be entitled to the indemnity due in case of termination without cause. However, to be entitled to this indemnity, the employee will have to go to court in order to have a court decision confirming the termination for cause.
According to art 483 of the CLT, the actions that constitute just cause for the employee’s termination of the employment contract are:
11. COLLECTIVE DISMISSALS
Collective dismissals are not mentioned in Brazilian labour law. Therefore, there are no special rules/procedures to be followed, meaning that the standard indemnity mentioned in section 10.2.1 above must be paid to all dismissed employees. Also, there are no formal requirements to be followed, such as notification of labour authorities etc.
Since the 1990s, when the privatisations took place in Brazil, it became usual to design and implement programmes that have the purpose of motivating employees voluntarily to resign with payments that are usually above that legally required. These programmes, known as voluntary termination programmes, have been quite common in cases of downsizing and closing down of operations and they aim at reducing the labour claims that usually follow these events.
12. FORTHCOMING LEGISLATION
There are many bills waiting for approval by the Brazilian Labour Congress that have as their main aim to make labour law more flexible. These rules are called the labour law reform. For now, all that can be said is that there is a lot of pressure from the business community to make labour laws less complicated and the cost of employees lower. However, at this stage it is impossible to anticipate any of these laws.
13. USEFUL REFERENCES
Statutes and statutory instruments
www.planalto.gov.br
www.senado.gov.br
General bodies
www.mtb.gov.br
Case law
www.tst.gov.br
