Almost one year on from the enactment of Law 13467/17 (the labour reform), early feedback suggests that the reform has proved to be an effective and positive change.

Overview of reform

The labour reform sought to modernise and introduce flexibility into the labour market by transforming the employee-employer relationship through technological advances. Nonetheless, there was significant debate over the potential adverse consequences – particularly for employees due to the imbalance of power between employers and employees. However, after almost one year, the labour reform has had positive effects on the employment sector.

Remote work increased

Previously, companies were hesitant to institute remote work policies due to the lack of regulation, which left them exposed to overtime pay claims. Following the reform, many companies are introducing remote work policies and encouraging their employees to work from remote locations. If companies follow the legal requirements set out by the labour reform, they will not be required to provide overtime pay. As such, companies are rapidly expanding their use of remote workers, as employees do not want to spend exorbitant amounts of time commuting to work. Further, this practice reduces companies' costs, while making work environments more flexible.

Imbalance of power reduced

The labour reform has helped to mitigate the imbalance of power which previously existed between employers and employees. Under the reform, an employment agreement negotiated between a company and a high-level employee (ie, an employee with a university degree who receives a monthly salary above Rs11,291 (around $3,000)) will prevail over the law or any applicable collective bargaining agreement, in certain cases. This means that companies are more confident when negotiating flexible terms in employment agreements directly with high-level employees.

Union contributions now voluntary

In relation to unions, employers and employees were previously required to pay contributions to their respective unions. Following the reform, these contributions are now optional and conditional on prior and express authorisation. While some argued that this change was unconstitutional, the Supreme Court recently issued a decision recognising its constitutionality.

Further, companies can now directly negotiate an offset system (so-called 'bank of hours') with employees, without having to involve their respective labour union. Under this system, instead of paying overtime, companies can store an employee's overtime hours as credit hours, which the employee can take as holiday within six months.

Labour lawsuits significantly reduced

Another effect of the labour reform is the substantial reduction in labour lawsuits filed before the labour courts throughout Brazil. The labour justice system is divided into 24 labour appeals courts and the Superior Labour Court. According to a recent Superior Labour Court survey, 355,178 labour lawsuits were filed in the first quarter of 2018. This is compared with the 643,404 lawsuits filed in the same period during 2017. In other words, the number of labour lawsuits has reduced by 44.79%.

The results of the reduced number of lawsuits are already noticeable in all spheres of the labour justice system. According to the Superior Labour Court, between January and May 2018, the number of cases heard by first-instance trial courts (around 1.5 million) was higher than the number of cases filed before them (around 1.3 million). This situation marks a turning point for the labour justice system, as the number of lawsuits before the trial courts has been higher than the number of lawsuits decided upon since 1991. With fewer cases to review, the labour justice system is expected to be more accurate, technical and faster.

One explanation for this reduction is that following the labour reform, employees who lose a case must pay attorney and court fees. Further, if an employee misses the first hearing, they cannot file a new lawsuit until they have paid the court fees for the previously filed lawsuit.

Comment

One year on from the labour reform, the first impressions are favourable for both employers and employees. This has had a positive impact on employment relationships in general.

For further information on this topic please contact Dario Abrahão Rabay, Catharina Madalena da Rocha Miranda Carvalho de Araujo or Fernanda Frezarin Kazakevicius at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email (drabay@mattosfilho.com.br, catharina.araujo@mattosfilho.com.br or fernanda.kazakevicius@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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