Brazil: Labor Reform Signed into Law, Opposition Remains

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By Ed Taylor

One year after taking office, Brazil's President Michel Temer has succeeded in pushing an unprecedented labor reform bill through congress, but opposition from the country's powerful labor court judges remains strong.

Temer signed the labor reform into law July 13, two days after the senate completed congressional approval. The government also released the draft of a decree containing nine minor alterations in the reform. The draft was presented to senate leaders and will also be discussed in the coming week with union leaders. No date was set for the release of the final version.

Among the nine proposed changes, four stand out:

  •   Under the reform, employees and management can agree to flexible work hours up to 12 in a single day. The government now says this must be part of a general agreement between management and unions.
  •   The reform states that for jobs with medium to small health risks, pregnant employees must present medical certificates to excuse them from work. The government now wants to maintain the current legislation prohibiting pregnant women from working in unhealthy situations in all circumstances.
  •   The reform allows companies to hire workers without fixed hours. The government wants to add a provision prohibiting for 18 months the rehiring of a terminated regular employee on a no-guaranteed-hours basis to prevent companies from firing full-time employees and rehiring them under the new regime.
  •   The reform calls for the creation of worker committees in companies with more than 200 employees. The proposed amendment would state that these committees cannot take the place of unions.

The government had been expected to slow the implementation of a reform making voluntary the current obligatory union tax paid by all workers. Temer rejected union demands, however, and left unchanged the proposed immediate shift to a voluntary payment.

‘A Boom in Suits'?

While unions and leftist political parties have vowed to continue to oppose the reform, its most dangerous opponents promise to be the 3,600 judges of Brazil's ubiquitous labor courts. The reform reduces their authority by permitting collective bargaining agreements between management and unions, which is expected to lead to fewer labor court suits against employers.

In response, the association that represents the judges together with Brazil's bar association released a statement on July 11 after the reform was approved claiming that many of its measures are unconstitutional.

According to the labor courts, the key part of the reform guaranteeing that collective bargaining agreements covering 15 issues can take precedence over labor laws is unconstitutional, said Guilherme Guimaraes Feliciano, president of the judges' association Anamatra, and labor ministry prosecutors operating within the labor court system are considering filing a challenge to the constitutionality of the reform before Brazil's supreme court.

The judges' association statement also warned that instead of reducing labor litigation the reform will increase it by an estimated 30 percent.

“Our expectation is that there will be a boom in suits,” Feliciano said. “If management expected a reduction, we unfortunately think there will be much more litigation over the next 10 years,”

According to Feliciano, suits will brought when employees realize that an agreement reached through collective bargaining is prejudicial to them.

“It will make no difference to the employee that the law changed and his union agreed,” Feliciano said. “He will perceive that he was prejudiced and he will turn to the [labor] courts.”

Billions Saved (or Lost)

Attorneys are also concerned with constitutional challenges.

“There is a large possibility that some of the items of the reform will be taken to the supreme court,” said Eloisa Machado, a law professor at the FGV law school in Sao Paulo.

“The success or failure of the labor reform will depend primarily on the behavior of the labor justice system, which could complicate the implementation of the reform's innovations,” said economist Helio Zylberstajn.

For companies, the success or failure of the reform will be translated into billions of dollars saved or lost. In June, the Santander bank released a study that found Brazilian companies collectively spend $10.3 billion annually in legal expenses for labor court litigation.

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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