Key Developments for 2017

New Outsourcing Bill

A 10-year old bill passing through the legislative process (Bill of Law 4,330/2004) aims to regulate outsourcing in Brazil (the “Bill”). At the beginning of 2016, the Bill began to move towards conclusion. One of the main features of the Bill is that it allows outsourcing of core business, but it provides that the customer should be held jointly liable for the labour and employment rights of the outsourced employees. There are also two other bills addressing outsourcing in the Senate that are less favourable for companies in Brazil: (i) one (PLC30/2015) forbids the outsourcing of core business; and (ii) (PL 4302/1998) allows it, but includes an additional 30% charge for doing so. The bills will either be issued or dropped in the first semester of 2017.

Labour Reform

President Michel Temer has advocated for a potential Labour Reform during his term (which will end in December 2018), mainly focusing on “negotiation overlying the legislation”. At this point, there is no clear definition on the rights and benefits that might be altered. Due to the political environment, Temer has decided to prioritize other matters (such as the Welfare System reform), and push the labour revision to the second semester of 2017.

Key Developments for 2016

“Negotiation overlying the Legislation”: Supreme Court ruling on overtime payment

A key issue in Brazilian labour discussions in 2016 was whether collective bargaining agreements can overrule strict national legislation regarding employees’ rights and benefits. The Supreme Court has ruled in favour of the “negotiation overlying the legislation” on two important precedents: firstly, in 2015, regarding the full settlement amounts upon submission to a Voluntary Dismissal Programme; and more recently, with regard to offsetting overtime payment with other benefits. However, these particular Supreme Court decisions are not binding for all courts, and the Superior Labour Court is still deciding these matters.

“Prohibition to outsource the core business over freedom to enterprise”

There is no labour law addressing outsourcing in Brazil. In 2011, the Superior Labour Court issued Precedent No. 331 establishing that the outsourcing of core business is prohibited and that any company that outsources services should be held liable for all labour and employment obligations not paid by the outsourced company. There were several appeals questioning this Precedent, especially challenging the definition of “core business”, the freedom to do business, and the fact that the Brazilian Constitution guarantees the Principle of Legality (i.e. no one shall be obliged to do or not to do something except if there is a law regulating it). The Supreme Court recognized the general repercussions of the outsourcing matter, and a comprehensive and formal decision began in November 2016 and is expected to be handed down in 2017.

New Civil Procedural Code

The 2015 Civil Procedural Code entered into force in March 2016. The Superior Labour Court issued a normative ruling to determine which provisions of the 2015 Civil Procedural Code should be applied by the Labour Courts, and also promptly adapted a few precedents to the new procedural system (raising a discussion on whether these reviews are the Superior Labour Court’s ex officio legal attributions).

In any case, the most important procedural transformation refers to “repetitive appeals” decided by the Supreme Court and Superior Labour Court. A decision on one appeal selected to represent all “repetitive appeals” shall be binding. Thus, similar appeals shall not be accepted by the Appeal Courts. The purpose is to speed up judicial proceedings and ensure legal certainty.

With thanks to Vilma Toshie Kutomi and Tatiana Junqueira Ruiz of Mattos Filho for their invaluable collaboration on this update.