In July 2017, amid political turmoil and protests by the opposition and the labor unions, president Michel Temer sanctioned a new law implementing the controversial labor reform in Brazil.

Some of the law’s most significant changes impacting US multinationals include:

  • Labor Rights Negotiation: Agreements negotiated between companies and employees may override statutory requirements relating to labor rights such as: vacation usage, work shift, flextime arrangements, reduced meal breaks and remote work, among other points. However, some labor protections, such as FGTS deposits, minimum wage, 13th salary and vacation pay cannot be subject to negotiation.
  • Waivers and Releases of Labor Rights: Employees with college degrees who receive monthly salaries greater than or equal to twice the limit of benefits from the National Social Security Institute (INSS) will be able to negotiate valid release agreements and waive labor rights.
  • Outsourcing: It is now possible to hire service companies to provide services and activities even for those that fall within the company’s core business.
  • Remote Work: The parties to a remote work agreement shall agree on the use of equipment and payment of related business expenses (such as for electricity and internet access). The employee does not have to keep time records.
  • Dismissal for cause: Possibilities of discharge for cause by the employer are expanded beyond the situations under the current rules. Among these are loss of qualification necessary to the employee’s profession, such as a driving license, if caused by the employee’s intentional misconduct.
  • Termination by Mutual Agreement: Termination can be agreed between the parties, in which case severance will be reduced.
  • Mass layoffs: Collective terminations, also known as mass layoffs, will no longer need the agreement of the labor union. The same rules applicable to individual terminations shall apply to collective terminations.
  • Litigation: Employees will have to pay for court costs relating to any pleas that later are deemed groundless. Requirements for filing labor lawsuits are stricter and it will be easier to impose penalties against plaintiffs for litigating in bad faith by filing frivolous suits.

We thank our friend Leticia Ribeiro, a partner at Trench, Rossi e Watanabe (a Brazilian law firm with a cooperation agreement with Baker McKenzie), for her valuable contributions to this post. And, for more information, please contact your Baker McKenzie lawyer.