Country snapshot
Key considerations
Which issues would you most highlight to someone new to your country?
Brazilian law and courts are protective of employees. Workers’ rights are often inflexible, but as of November 2017, the list of bargaining matters has increased through the so-called labour reform. On the other hand, dismissal is usually a straightforward matter which can be made at the company’s discretion. Social security taxes are expensive (almost 30%), but companies must often provide assistance to employees (eg, meal vouchers and healthcare services).
What do you consider unique to those doing business in your country?
There are certain benefits that are unique to Brazil; for example, the Government Severance Indemnity Fund for Employees (FGTS). The FGTS is a fund kept by the government for the benefit of employees to which employers make monthly contributions of 8% of total compensation. Employees can access the fund if they are involuntarily terminated. Weekly paid holiday must be added on top of overtime and commission.
Is there any general advice you would give in the employment area?
Do not make an employment-related decision before being fully aware of the consequences and costs as reviewing or reversing such decisions is usually impossible.
Emerging issues/hot topics/proposals for reform
Are there any noteworthy proposals for reform in your jurisdiction?
Brazilian employment law has been undergoing substantial reform since November 2017.
There is one bill of law worth mentioning, which increases penalties for gender compensation gaps caused by discrimination.
What are the emerging trends in employment law in your jurisdiction?
The employment law reform that has been in effect since November 2017 has had some issues. There has been some criticism about the new provisions overruling pre-existing case law, thus changing the traditional views and approaches on employment that the courts have maintained for many years. Outsourcing is now permitted for all activities if:
- the contracting company does not have any supervision over workers;
- the services are specialised; and
- the services company has the economic capacity to provide the labour.
Other reforms are new but nonetheless controversial, such as developments in intermittent work (employment on demand), which has been criticised for offering unreliable and uncertain work and wages. Adjustments are also required, for example, because union fees used to be compulsory and have now been made voluntary, there has been a sudden drop in union funding, despite the fact that collective agreements can now cover new topics, which is likely to increase union activity.
The employment relationship
Country specific laws
What laws and regulations govern the employment relationship?
The Labor Code is the main regulation which covers the employment relationship, but there are several other relevant federal laws and regulations. For example, the Regulatory Standards – which are issued by the Ministry of Labour and concern workplace health and safety – are particularly relevant. Labour Courts at the appellate and superior levels issue case law in the form of consolidated precedents. These are not equivalent to statutes but indicate how courts will adjudicate specific matters when the law needs interpretation or if there are any legal loopholes.
Who do these cover, including categories of worker?
These regulations cover all foreign and Brazilian workers who hold work permits. However, some provisions are specific to certain professions or categories of worker.
Misclassification
Are there specific rules regarding employee/contractor classification?
Yes. Contractors are not covered by labour laws; however, the parties cannot opt for a contractor agreement if the work routine is typical of an employment relationship. Litigation for misclassified employment frequently occurs. In this situation the contracting company bears the burden of proving the contractor’s actual independence.
Contracts
Must an employment contract be in writing?
No, but having an employment contract in writing is recommended to guarantee the enforcement of internal rules.
Are any terms implied into employment contracts?
The law provides for fundamental employment terms, which apply irrespective of confirmation.
Are mandatory arbitration/dispute resolution agreements enforceable?
Until November 2017 the Superior Labour Court held the position that alternative dispute resolution was illegal. However, there is now a new legal provision which permits the arbitration of conditions that are intrinsically negotiable, although it is doubtful that this provision will be effective. First, it might not be a complete solution because fundamental rights cannot be negotiated through arbitration and second, because the courts can overrule any arbitration agreement if it violates any constitutional principles.
How can employers make changes to existing employment agreements?
Changes to employment agreements can be made unilaterally if they are merely organisational or operational and by mutual consent in all other situations. In any case, the change must not adversely affect the employee (eg, cut salary or benefits) or it will not be valid.
Foreign workers
Is a distinction drawn between local and foreign workers?
A distinction is made between local and foreign workers only in terms of total headcount – Brazilian companies must have at least two or three different nationals (by headcount and payroll).
Recruitment
Advertising
What are the requirements relating to advertising positions?
Recruitment advertisements must not contain irrelevant or discriminatory conditions.
Background checks
What can employers do with regard to background checks and inquiries in relation to the following:
(a) Criminal records?
Criminal record checks are permitted only in exceptional circumstances, such as when recruiting armed guards.
(b) Medical history?
Medical history checks are not permitted.
(c) Drug screening?
Drug screening is not permitted.
(d) Credit checks?
Credit checks are not permitted.
(e) Immigration status?
Employers can check the immigration status of prospective employees.
(f) Social media?
If a prospective employee’s social media is publicly available, then it can be checked by an employer. However, this can be tricky as there is a risk of discovering information concerning the individual’s political, sexual or religious orientation and such information cannot affect any decision regarding the offer of employment.
(g) Other?
Educational and professional checks are the only other checks which can be made by a prospective employer.
Wages and working time
Pay
Is there a national minimum wage and, if so, what is it?
Yes, the national minimum wage is R998, per month, but collective agreements may provide for higher wages.
Are there restrictions on working hours?
Working hours are restricted to a maximum of eight hours per day and 44 hours per week, but many collective agreements provide for fewer than 44 hours per week. Certain categories of workers are limited to working six hours per day and 36 hours per week (eg, those on rotating shifts and bank employees).
Hours and overtime
What are the requirements for meal and rest breaks?
If a worker has a shift of up to six hours, they are entitled to a 15-minute break; if the shift is longer than six hours, they are entitled to a one-hour break.
How should overtime be calculated?
Overtime should be calculated by dividing salary by monthly total hours worked and multiplying this by a premium of 50% on business days or 100% on holidays. Collective agreements may provide for higher overtime renumeration.
What exemptions are there from overtime?
High-level management are exempt from overtime pay, as are external workers, provided that it is not possible to control their work. After the reform, teleworking is also an exempt category.
Is there a minimum paid holiday entitlement?
Salaries paid by the calendar (month or fortnight) already take into consideration weekly holidays. Overtime and commission (paid by completed transaction) must accrue a premium corresponding to the division of monthly work days by holidays.
What are the rules applicable to final pay and deductions from wages?
Final pay consists of:
- wages;
- accrued vacation and 13th salary (prorated);
- pay in lieu of notice (if applicable); and
- contributions to the Government Severance Indemnity Fund for Employees (FGTS), plus severance equal to 50% of total FGTS contributions.
The company must withhold taxes as applicable and may deduct up to one month’s salary under special circumstances.
Record keeping
What payroll and payment records must be maintained?
Payroll and employee registration cards must be maintained for public audits. Companies must also update employee details in their work and social security card. Companies must also upload relevant employment information in a system called E-Social until the end of 2019.
Discrimination, harassment & family leave
What is the position in relation to:
Protected categories
(a) Age?
Any form of discrimination is prohibited. Protection against dismissal may be provided for in collective agreements.
(b) Race
Any form of discrimination is prohibited. Employers can be fined approximately R5,100 for salary inequality which results from racial discrimination.
(c) Disability?
Any form of discrimination is prohibited. Companies with more than 100 employees must have at least 2% of their workforce made up of people with disabilities. This percentage increases to 5% according to the total number of employees.
(d) Gender?
Any form of discrimination is prohibited. Employers can be fined approximately R5,100 for salary inequality which results from gender discrimination. Employers are prohibited from asking for applicants to take pregnancy tests during the application process. Pregnant women are protected from the date of conception to up to five months after their baby is born.
(e) Sexual orientation?
Any form of discrimination is prohibited.
(f) Religion?
Any form of discrimination is prohibited.
(g) Medical?
Any form of discrimination is prohibited. Employers are forbidden from asking for AIDS test results during the application process. Employees on medical leave cannot be terminated. If an employee has a medical condition which is work-related, they are protected for one year after medical discharge. The dismissal of employees with socially stigmatised diseases is presumed to be discriminatory and entitles the victim to reinstatement and any overdue salary or twice the amount of overdue salary on the date of the judgment.
(h) Other?
Union officials, members of safety committees and members of worker committees are protected workers. There are some other protected categories that are uncommon. Collective agreements may provide for other types of protection.
Family and medical leave
What is the position in relation to family and medical leave?
Medical leave is mandatory if the employee has a medical diagnosis. Parents have the right to family leave in order to escort their children to medical appointments. Collective agreements may provide for other types of family or medical leave.
Harassment
What is the position in relation to harassment?
Harassment is prohibited and is a just cause of action for moral damages. Any individual who commits sexual harassment is subject to criminal charges.
Whistleblowing
What is the position in relation to whistleblowing?
There are no legal provisions which cover whistleblowing; however, there are bills of law currently pending.
Privacy in the workplace
Privacy and monitoring
What are employees’ rights with regard to privacy and monitoring?
The monitoring of corporate media and proprietary devices is permitted but the company must have a policy to inform employees about its privacy and monitoring policy.
Companies can collect and process data that is necessary for employment but must seek permission from others to do so.
The use of closed-circuit television in communal company areas is permitted.
To what extent can employers regulate off-duty conduct?
Employers cannot regulate off-duty conduct, but employees have statutory duties of loyalty, non-compete and non-disparagement.
Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?
Employers have no right to access employee’s social media passwords.
Trade secrets and restrictive covenants
Intellectual Property
Who owns IP rights created by employees during the course of their employment?
If the employee’s role involves creation, the company usually owns any rights to the intellectual property created by the employee. If the role does not involve creation, but the intellectual property was created during work hours, then the company and the employee co-own the IP rights. If the intellectual property was created off-duty but was done so with the use of company resources, the employee owns the IP rights.
Restrictive covenants
What types of restrictive covenants are recognised and enforceable?
Non-compete covenants are valid as additional protection for intangible confidential information, but covering key positions only. Such covenants also require compensation and can last no longer than 24 months. Competition during employment is prohibited by statute, unless permitted by the company.
Non-solicitation covenants are permitted but there are no effective mechanisms with which to enforce such covenants.
Confidential information is protected by law.
Non-compete
Are there any special rules on non-competes for particular classes of employee?
There are no specific rules covering non-competes, only general principles of law. Case law has demonstrated that non-competes are valid as additional protection for intangible confidential information, but covering key positions only.
Discipline and grievance procedures
Procedures
Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?
The dismissal of protected union officials can be made only for just cause, which is determined by a special legal proceeding, called a judicial inquiry.
Companies are not required to document internal investigations, but it is recommended that they do so, as in the event of litigation, the company bears the burden of proving the employee’s misconduct and convincing the judge that the disciplinary action was proportionate.
Written reprimands, suspension letters and termination by just cause must include a summary description of the facts and the corresponding legal basis for the action taken.
There is no grievance procedure.
Industrial relations
Unions and layoffs
Is your country (or a particular area) known to be heavily unionised?
There are many unions throughout Brazil and their numbers vary according to the economic activity in the region. Therefore, the states of Sao Paulo, Rio de Janeiro, Minas Gerais and Rio Grande do Sul are heavily unionised.
What are the rules on trade union recognition?
Unions have the exclusive statutory authority to represent all workers of the corresponding trade in a designated region.
What are the rules on collective bargaining?
Collective bargaining agreements are negotiated by and between unions and their counterparts and industry associations and are therefore binding on all workers and companies within the respective trade and territory. They provide for salary adjustment, but also often additional benefits (eg, overtime and night-hour premiums). Such agreements are generally valid for one or two years.
Termination
Notice
Are employers required to give notice of termination?
Yes, employers and employees must give notice of termination. The employer may choose to indemnify in lieu of notice. An employee who fails to give notice is subject to a one-month salary deduction from their final pay, which companies often waive.
The standard notice period is 30 days, but employers must pay incremental notice of three days per year of work if the employee worked for the company for more than two years.
Redundancies
What are the rules that govern redundancy procedures?
There are no rules concerning redundancy procedures. Redundancy is treated as termination without cause or for convenience.
Are there particular rules for collective redundancies/mass layoffs?
Until November 2017, and in correspondence with relevant case law, companies had to consult with the relevant unions to negotiate the conditions of collective redundancies, including extra severance. However, unions did not have the right to veto such decisions. Companies were only required to enter into negotiations to agree on benefits in an attempt to mitigate any negative social impact. If any union refused to cooperate, companies could seek court mediation or implement an independent benefit package.
The law now stipulates that no consultation or negotiation is required for collective redundancies and mass layoffs. However, it remains to be seen if the courts will refuse to enforce the new provision on the ground that it violates constitutional principles.
Protections
What protections do employees have on dismissal?
Employees are entitled to mandatory severance and other benefits that may be provided in collective agreements. Certain types of employee have temporary protection and cannot be dismissed, except for just cause (eg, pregnant women, employees returning from a work accident, members of safety committees and union officials).
Courts/tribunals
Jurisdiction and procedure
Which tribunals or courts have jurisdiction to hear complaints?
The Labour Court which is a specialised and independent branch of the federal courts, has jurisdiction to hear complaints.
What is the procedure and typical timescale?
A typical employment complaint procedure involves:
- a written complaint;
- a written defence;
- the first hearing;
- an expert examination (if necessary);
- an additional hearing (if necessary);
- a judgment;
- appeals;
- a judgment of appeals;
- special appeals (if there is violation of federal law or its application is inconsistent with case law);
- an appeal to the Supreme Court (few cases involving constitutional matters, usually such cases concern class actions);
- enforcement (if the complaint is granted);
- a stay of execution (limited to discuss liquidation and procedural aspects of enforcement);
- appeals; and
- special appeals (as above).
Most cases are eligible for one level of appeal only. A typical timescale for a case is two to three years. If there are additional levels of appeal, the case could last up to five years. If enforcement requires a complex assessment, an additional one or two years could be added. Complex cases may take twice as long as straightforward cases.
Appeals
What is the route for appeals?
The trial court’s decisions are appealable to the regional courts. Each state has a regional court, except for Sao Paulo, which has two. The regional court decision may be appealable (although there is no possibility for a review of the facts) to the Brasilia Supreme Court. Cases involving constitutional matters may also be appealable to the Supreme Court. If the court of origin refuses to process the appeal (eg, for a lack of formal requisites), the party may submit an interlocutory appeal seeking the higher instance court to overrule the decision and review the appeal.
