At the end of 2014 the government amended the rules on guaranteed pay (Provisional Measure 664/2014) and unemployment insurance (Provisional Measure 665/2014). These measures will come into force in the next few months.

Guaranteed pay

Provisional Measure 664/2014 extends the period for which an employee must be unable to work due to a work-related illness or injury before he or she can make a claim to receive one year of continuous pay.

The former legislation (Law 8,213/1991) prescribed that an employee had to be injured or ill for a minimum of 15 days before he or she was entitled to one year of continuous pay. The new legislation has extended the period to 30 days. Consequently, companies will now be responsible for a longer period of compensation. Under the former legislation, the first 15 days of leave were paid by the company and the remainder (ie, until the employee was reinstated) was paid by the Social Security Agency.

The government's goal is clear. This change will help to reduce the social fund's costs by transferring costs to the private sector. Further, employees will be eligible to make fewer claims for guaranteed compensation, due to the new 30-day recovery period.

By law, both employees and employers can terminate the employment relationship at any time and for any reason, with or without cause. In other words, the concept of employment at will is fully recognised under Brazilian legal principles and precedents. Nonetheless, if an employee is entitled to pay, an employer cannot terminate the employment agreement until the end of the assurance period.

Once this new measure comes into force, employees who are reinstated before 30 days will be unable to make claims for guaranteed pay. Therefore, employers will be able to terminate their agreements. However, depending on the circumstances, termination may be seen as prejudicial against the employee, which could render the termination unlawful.

Unemployment insurance

Provisional Measure 665/2014 sets forth the following regressive grace period before employees can claim unemployment insurance:

  • first claim – 18 months;
  • second claim – 12 months; and
  • all other claim – six months.

By law, the government pays unemployment insurance. With regard to unemployment insurance, an employer's only legal responsibility is to register their employees according to law. Whenever turnover occurs, employers must report it to the Ministry of Labour and Employment, via the General Register of Employed and Unemployed Individuals.

Employers must ensure that they have correctly filed dismissal and employment information on the register, so that the government can efficiently manage who is entitled to insurance. Since 2013, information may be sent to the Ministry of Labour and Employment electronically. Failure to comply with this obligation may result in administrative fines and labour investigations.

Comment

Both measures are temporary. After their effectiveness period ends, Congress will vote on whether to make the measures permanent. However, after receiving several complaints from unions and different labour associations, changes may be made to the provisional measures.

For further information of this topic please contact Vilma Toshie Kutomi or José Daniel Gatti Vergna at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600), fax (+55 11 3147 7770) or email (vilma.kutomi@mattosfilho.com.br or jvergna@mattosfilho.com.br). The Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados website can be accessed at www.mattosfilho.com.br.

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