Brazil: Congress Approves Labor Reform

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By Ed Taylor

Brazil's Senate July 11 approved the country's most extensive labor reform since its Consolidated Labor Laws (CLT) were approved in 1943.

The reform, which had already passed the lower house of congress, will allow companies and unions to reach joint agreements on 15 specific labor issues that would take precedence over existing labor legislation, giving them the force of law. Collective bargaining agreements have become more common in recent years but have always been subject to review by Brazil's ubiquitous labor courts, which have often rejected them in deference to the rigid provisions of the CLT. The reform also takes away the courts' power to impose new labor obligations on employers through their rulings.

For Luciana Freire, legal director of the Sao Paulo State Federation of Industries, Brazil's leading business association, giving precedence to collective bargaining agreements over labor legislation is the key feature of the reform.

“It is very important for what is negotiated to be respected by the judiciary,” Freire said in a July 11 statement.

Among other issues, companies and unions will be free to negotiate flexible hours up to 12 in a single day without requiring overtime compensation as long as the weekly and monthly totals remain no higher than 44 and 220 hours, respectively. Profit-sharing programs, the division of vacation time, productivity bonuses, safety issues, and salary and job plans would also be subject to collective bargaining.

To guarantee senate approval, Brazil's President Michel Temer agreed to alter some parts of the reform through veto or decree.

Key Provisions

Significant reforms, most effective in November, include the following:

  •   The work week for temporary employment will be set at 30 hours, instead of 25 as now. The government expects this to result in the hiring of up to 5 million more temporary workers, but according to attorney Carla Blanco Pousada of the law firm Filhorini, Blanco and Cenciarelli, it will also require employers to negotiate new contracts.
  •   Employers will be allowed to hire workers without fixed hours. In such cases, work contracts would set an hourly wage and workers would be called when needed. In response to union concerns that this would result in companies firing full-time workers and rehiring them on an as-needed basis, presidential aides promised July 11 that a decree will be issued prohibiting the rehiring of full-time workers on a part-time basis within 18 months of termination. The measure may also be restricted to certain business sectors, primarily retailers.
  •   The annual union tax now imposed on all workers, whether union members or not, will be made voluntary. Many of Brazil's 11,326 labor unions only exist because of the tax and its limitation is expected to reduce this total. Pressure from these unions is expected to force the government to phase out the mandatory tax gradually.
  •   Employers and unions will be allowed to negotiate a reduction in what is now a mandatory one-hour lunch period. Temer is expected to veto this provision.
  •   Restrictions will be imposed on pregnant employees working in jobs that may pose health risks. This provision is expected to be modified or vetoed.
  •   Work at home will for the first time be legally regulated. According to labor attorney Anna Thereza de Barros of the law firm Pinheiro Neto, this will probably require the renegotiation or amendment of existing employment contracts.
  •   In companies with more than 200 employees, worker committees must be formed with authority to negotiate directly with management to resolve work issues without union participation.
  •   Employees with university degrees and earning monthly salaries in excess of $3,500 would be allowed to negotiate employment contracts directly with management and without union participation.
  •   Consultation with unions will no longer be required before a company conducts multiple dismissals.
  •   Employees will be allowed to negotiate resignations with management. At present, severance pay is only available from the government fund if an employee is fired. The reform would permit workers who quit to negotiate with employers for up to 80 percent of their fund entitlements. In such cases, employers would have to pay a 20 percent fine.
  •   Under certain circumstances, employees suing companies in the labor courts may be required to pay court costs to file lawsuits or appeal decisions.
  •   The superior labor court position that the terms of employment contracts remain in effect even after the contracts have expired unless altered by a new contract has been revoked, a significant victory for employers.

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

For more information on Brazilian HR law and regulation, see the Brazil primer.

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