Assessing Brazil’s labour law reform one year on Assessing Brazil’s labour law reform one year on

Assessing Brazil’s labour law reform one year on
02 Jan 2019

It is just over a year since Brazil undertook some of its most sweeping labour law reform in generations. But while expectations of what the changes would mean were high at the time, the end-results appear to have fallen somewhat short.

Although the new regulations were intended to modernise the country’s legal framework governing employee relations in a bid to help revitalise its economy, a significant number of legal challenges have meant that employers have implemented them only haphazardly. Here is an overview are where things are at today:

Intermittent work reforms

One of the more controversial parts of the law, which focused on intermittent work, has actually been relatively successful. Employers can now hire workers on hourly wages and call on them only when needed.

Originally the fear had been that companies would replace full-time employees with on-call workers and only hire people if they did not want to pay overtime. Instead, those employers that have implemented the legislation have found it has helped them create a more flexible workforce that is ready to go when required. 

Moreover, the Superior Labour Court (Tribunal Superior do Trabalho or TST)  has indicated that the number of employment-related lawsuits has fallen by about 70%, from 289,700 new claims in November 2017 to 89,000 a year later.

On the downside though, while the labour law reforms were supposed to help create new jobs, in reality this has not been the case. According to recent research from the Brazilian Institute of Geography and Statistics (IBGE), there are still more than 12 million unemployed people in the country.

Flexible working hours and vacations

Prior to the reform, if employees wanted to work banked hours, or take time off in lieu, it was necessary to submit a request for approval to the Workers Union. But negotiations can now take place between employees and employers and be agreed at an individual level. This situation has led to some employers introducing a flexible working hours system.

As for changes to vacation policies, these mean that employers can now split employees’ vacation period into three as long as the staff member agrees and one chunk of holiday amounts to at least 14 business days. 

Employee agreement

Another shift that has made an impact over the last year is that employees can now negotiate terminations with their employers. In the past, they were only entitled to severance pay if they were fired, which led some staff to request dismissal. But the law has now been changed to enable workers to terminate a labour agreement through mutual consent, and with severance pay.

Uncertainty

While Brazil’s labour law reforms have been in place for just over a year, some employers have proven reluctant to abide by all of the rules. Currently, more than 20 claims have been filed with the Supreme Court (STF – Supremo Tribunal Federal) questioning the legality of some of the changes, which includes setting a limit to compensation levels for ‘moral damage’.

Moreover, following a change of political leadership Brazilians are no longer certain that the legislation will actually remain in place. The problem is though that, by failing to implement it, employers could potentially be missing a trick.

 Joyce Martinusso

Joyce Martinusso is a legal supervisor at TMF Brazil. She has more than 10 years experience in Brazilian labour law and labour claims. She graduated in law at the Universidade de Mogi Das Cruzes, but has also studied such specialisms as Brazilian labour reform and contract law.

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It is just over a year since Brazil undertook some of its most sweeping labour law reform in generations. But while expectations of what the changes would mean were high at the time, the end-results appear to have fallen somewhat short.

Although the new regulations were intended to modernise the country’s legal framework governing employee relations in a bid to help revitalise its economy, a significant number of legal challenges have meant that employers have implemented them only haphazardly. Here is an overview are where things are at today:

Intermittent work reforms

One of the more controversial parts of the law, which focused on intermittent work, has actually been relatively successful. Employers can now hire workers on hourly wages and call on them only when needed.

Originally the fear had been that companies would replace full-time employees with on-call workers and only hire people if they did not want to pay overtime. Instead, those employers that have implemented the legislation have found it has helped them create a more flexible workforce that is ready to go when required. 

Moreover, the Superior Labour Court (Tribunal Superior do Trabalho or TST)  has indicated that the number of employment-related lawsuits has fallen by about 70%, from 289,700 new claims in November 2017 to 89,000 a year later.

On the downside though, while the labour law reforms were supposed to help create new jobs, in reality this has not been the case. According to recent research from the Brazilian Institute of Geography and Statistics (IBGE), there are still more than 12 million unemployed people in the country.

Flexible working hours and vacations

Prior to the reform, if employees wanted to work banked hours, or take time off in lieu, it was necessary to submit a request for approval to the Workers Union. But negotiations can now take place between employees and employers and be agreed at an individual level. This situation has led to some employers introducing a flexible working hours system.

As for changes to vacation policies, these mean that employers can now split employees’ vacation period into three as long as the staff member agrees and one chunk of holiday amounts to at least 14 business days. 

Employee agreement

Another shift that has made an impact over the last year is that employees can now negotiate terminations with their employers. In the past, they were only entitled to severance pay if they were fired, which led some staff to request dismissal. But the law has now been changed to enable workers to terminate a labour agreement through mutual consent, and with severance pay.

Uncertainty

While Brazil’s labour law reforms have been in place for just over a year, some employers have proven reluctant to abide by all of the rules. Currently, more than 20 claims have been filed with the Supreme Court (STF – Supremo Tribunal Federal) questioning the legality of some of the changes, which includes setting a limit to compensation levels for ‘moral damage’.

Moreover, following a change of political leadership Brazilians are no longer certain that the legislation will actually remain in place. The problem is though that, by failing to implement it, employers could potentially be missing a trick.

 Joyce Martinusso

Joyce Martinusso is a legal supervisor at TMF Brazil. She has more than 10 years experience in Brazilian labour law and labour claims. She graduated in law at the Universidade de Mogi Das Cruzes, but has also studied such specialisms as Brazilian labour reform and contract law.

OTHER ARTICLES THAT MAY INTEREST YOU

Brazil reintroduces unpopular payroll tax

Minding your manners in Brazil

What to think about when setting up shop in Brazil

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