Brazil: Rules for Job Protection Program Released

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By Ed Taylor

July 29—Brazil's labor ministry released on July 21 the rules for a job protection program designed to slow this year's steady increase in unemployment.

Under the Employment Protection Program, participating companies can reduce the salaries and hours of their employees by up to 30 percent in times of crisis. Workers would only lose 15 percent of their salary, however, with the government covering the other 15 percent using funds from the Workers Assistance Fund.

According to the rules announced July 21, companies attempting to join the program must demonstrate that they are in economic trouble and that over the last 12 months they either reduced their work force or enlarged it by no more than 1 percent. They must also prove that they have exhausted all other labor-related measures to deal with their difficulties, such as compensatory time off and leaves of absence.

Companies must then negotiate the terms of the salary reduction with labor unions representing their workers. While participating in the program, companies cannot fire any of the workers covered by the salary reduction. These workers will also have job protection after the program ends for a period equal to one-third of the time the program was in effect.

Companies will have until December to join the program, which will continue at least until the end of 2016.

The cost of the program for the government is estimated at $35.8 million over a 12-month period.

Sensitive Moment

The program comes at a sensitive moment for Brazil with the economy in recession and job dismissals on the rise. In the first half of this year, the labor ministry reported that the economy lost a net 345,417 jobs, the first decline in 16 years. Nationwide unemployment is now running at 8.1 percent and is expected to continue to rise through the end of the year.

One of the most affected sectors is the auto industry where 18,000 workers are currently on leaves of absence to help reduce swollen inventories. Luiz Molan, president of the National Association of Auto Manufacturers, said that three auto companies are already negotiating entry to the job protection program with labor unions.

“No employer likes to lose [its] workers, especially those who are skilled,” Molan said. “We need skilled workers to overcome the crisis and the employment protection program is a fundamental instrument for this.”

Not all union leaders, however, have endorsed the program with many claiming that it is an effort to help companies at the cost of workers.

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