Labor Law

The rights and duties of employers and employees are set out in the “Consolidation of Brazilian Labor Laws – CLT.”

Hiring

Employees
An employee is any individual that renders services, is subordinate to an employer, and receives a salary. As a general rule, an employee is hired when the employer makes an inscription in the employee’s personal Labor Card Book and the company registers the
employee in its books for the purpose of making the social taxes payments.
The law does not require a written employment contract. Oral agreements can constitute binding employment contracts, subjecting the employee and the employer to the rules and regulation of the CLT. Terms of employment can be expressed, implied or oral. Most
terms and conditions of employment are subject to statutory requirements and include mandatory benefits such as, working hours, holidays, notice of termination and final payment.

1Contracting for Services
When contacting for services rather than entering an employment relationship, subordination must be absent from the contract terms. Subordination must also be absent from the actual day to day practice. Reality of the relationship will prevail over written contract terms. If subordination is proved, the agreement may be considered an employment contract.
1 See Article 444 of the CLT.
Employment Relationships
Fixed Term Temporary Employment Contract
Fixed term contracts are only permitted under specific situations.

2
a) Services that are temporary or essentially transient: An example is the hiring of a technician to oversee the implementation of new equipment for a twelve month period.
b) Transient business: The hiring of service personnel for an eight month period to accommodate an exceptionally large order.
c) Trial period: Employment contracts can specify a probationary period. Statutory Maximum Terms
a) Fixed term contract: Up to two years.
b) Trial period: Up to ninety days. It is possible to renew a trial period as long as the ninety day limit is observed.
Termination: Temporary/probation contract terminates automatically at the end of its term. Final payment to the employee is limited to (i) normal salary up to the date of termination (ii) untaken vacation pay (iii) pro rated thirteenth salary.

Sales Commissions
Payment pertaining commissions for an accomplished sale are due upon completion of the transaction. Sales commissions paid to employees are classified as salary and should be included in calculations pertaining to any additional salary provided by law, including
vacation, 13th salary and FGTS.

Non-Compete Clauses
The Federal Constitution ensures all individuals the freedom to seek and secure employment. Based on this principle, the Labor Courts have ruled that any agreement or clause prohibiting individuals from working for competitors after their termination to be
violation of Constitutional labor protections. Such agreements may be considered null and void.
Despite such protections, civil courts will often uphold non-compete clauses where the individual voluntarily contracts to restrict his/her own freedom of professional practice, partially waiving the rights vested in him by the law. Non-compete clauses which
include reasonable limitations of time, territory, core business and provide financial compensation for the non-competition are generally upheld.
2
See Article 443 of the CLT.
Reasonable financial compensation generally is equal to the product of the non-compete term (months) and the employee’s monthly salary or wage. Best practice is to stipulate that a portion of the employees monthly salary is financial compensation for the agreed
upon non-compete term.

Employee Rights
Work Day3
The standard work day is 8 hours and the standard work week is 44 hours. Overtime is capped at 2 hours per day with a weekly maximum of 12 hours. A 50% surcharge must be paid for all overtime hours worked.
Minimum Wage
Minimum wage is based on GDP performance and inflation and is expected to reach R$800 per month by 2015. Some States have minimum wages which are greater than the national requirement. Minimum wage may also be greater than the national requirement
if the employee performs certain activities (i.e., activities considered to be dangerous). Collective bargaining agreements applicable to employees may also dictate minimum wages.
Family and Medical Leave
a) Paid Maternity Leave: Female employees in Brazil are entitled to four to six month of maternity leave.
b) Compassionate Leave: An employee is entitled to a maximum of five consecutive working days of compassionate leave. This leave can be used for the death of a partner, parent, child, sibling or a dependent of the employee.
c) Sick Pay: Employees who are insured by the social security fund are entitled to receive sick pay, provided their disability is temporary. Employees are entitled to their salary for disabilities which prevent them from working for more than 15 days.
Such compensation is administered by the government.
d) Disability: Those who become unable to work as a result of a work-related accident or illness may be entitled to receive compensation, sick pay, disability benefit and early retirement benefits. Payments are made from the social security fund or from
private insurance policies held by the employee or his employer.
3
See Article 58 of the CLT.
Terminating Employees
Notice and Final Payments
Either party may terminate the employment relationship upon notice. The statutory minimum notice period (“Aviso Previo”) is thirty (30) days. Payment in lieu of notice is also permissible.
Final payment to the employee must include:
1. Normal pay up to the date of termination (pro rata when applicable);
2. Unused vacation pay (pro rata when applicable);
3. 13th Salary (pro rata when applicable); and
i. Employees have the right to an additional salary bonus every year equal
to 1/12 of the employee’s monthly salary. The 13th Salary is the
equivalent of a mandatory Christmas bonus and is generally distributed
in two installments during November and December.
4. All bonuses, overtime or benefits calculated up to the date of termination.
Termination without cause requires that the employer pay a penalty. The penalty premium is equivalent to 40% of Unemployment Compensation Fund (FGTS) deposits made by the employer to the individual’s account. This penalty premium does not apply
if termination is for good cause.

Terminating Employees with cause

Employment can be terminated with cause for the following reasons:
a) Acts of insubordination;
b) Violation of trade secrets;
c) Dishonesty;
d) Acts of violence or any act injurious to the honor or reputation of the employer or superiors. Exceptions exist for legitimate cases of self-defense and defense of third-party interests;
e) Abandonment of employment;
f) Inappropriate conduct or lack of self restraint; and
g) Acts contrary to national security (must be proved in an administrative proceeding).
h) Under said cases, the employee will receive a compensation corresponding to the days worked during the month, accumulated vacation and the additional one-third bonus in respect to accrued vacation.

Obligations Upon Dismissal

When a contract is terminated without cause the employee has the right to:
a) 30 days notice;
b) Vacation;
c) One-third vacation bonus;
d) Outstanding salary for the days worked during the month of dismissal;
e) Release of the FGTS deposits, with a fine of 40% on the total amount deposited in the employee’s FGTS account.
Employee’s Severance Guarantee Fund (FGTS): All employers deposit 8% of the employee’s monthly compensation in a special bank account in the name of the employee at the Federal Savings Bank. This fund may be withdrawn by the employee upon retirement. It can also be withdrawn on certain occasions, such acquisition of a house and termination of employment without cause.
Plant Closings
In the event of a plant closing, a company should take the following steps:
a) List all the employees that will be dismissed and establish a timetable for dismissal;
b) Conduct a case-by-case analysis of all employees employed on a temporary basis;
o Court decisions establish that temporary employment stability ceases when the employer winds down its operations. However, this issue is not settled. Best practice is to conduct an analysis of each case before determining whether to make indemnification payments.
c) Conduct a case-by-case analysis of all employees leave and negotiate separation agreements; and o According to Brazilian law,  employee agreements suspended due to illnesses, occupational diseases, or disability related to employment accidents, cannot be terminated when the company closes down its activities. Generally, the best practice is to negotiate the termination of each suspended agreement.
d) Analyze measures for reduction of future risks.
Waiver of Employee Rights
Employee waiver of legal labor rights is not valid unless the agreement is executed in court. Brazilian labor courts do not usually recognize a private settlement between the employer and the employee. Out-of-court waivers generally have no legal effect and do
not exempt the company from payments required by the law and/or the Brazilian labor courts.
Sexual Harassment
Sexual harassment is classified as a crime and defined as “interaction with the purpose of; or abusing the relationship of authority or superiority inherent to the discharge of one’s position or function in order to, obtaining favors of a sexual nature.” An employee whom
has been sexually harassed is entitled to receive all severance payments, plus moral damages.
Sexual harassment by an employee is not an express cause for termination of employment. However, criminal sanctions are applicable.
Sexual harassment is a criminal misdemeanor with a penalty of imprisonment for up to two months for anyone who “imposes upon someone or disturbs someone’s peace by ill will or censured motive.” Employers can argue that an employee who commits sexual
harassment can be terminated with cause for the following reasons: (1) Acts injurious to the honor or reputation of the employer or superiors; and/or (2) Inappropriate conduct or lack of self restraint.
Discrimination
Discrimination during recruitment and the course of employment based on sex, national origin, race, color, marital status, family situation and age is prohibited. It is considered a criminal offense to demand a medical certificate, test or statement regarding sterilization or pregnancy.
In practice it is difficult for the government to police procedures pertaining to the hiring process. However, the Labor Public Prosecutor’s Office uses it influence and attempts to prevent employers from asking candidates for any information which may be used for discriminatory purposes (i.e., questions based on religion, race, etc.). Best practice dictates that these type of questions not be included in written questionnaires.
Employers have a very difficult time defending themselves in relation to violation of discrimination laws. A discriminatory act of an employer often provokes immediate action by the affected individual, as well as, action by the employee’s union. Best practice dictates that employers exercise extreme caution in order to avoid discriminatory practices.
Depending on the number of people employed in a company, the company is expected to have 2% to 5% of disabled workers.
Unions and Collective Bargaining
Employees are free to organize professional and union associations. A specific number of workers are not required for the formation of a union.
Basic characteristics of unions and union membership:
a) Individuals are not obliged to become members of an union;
b) Employees may belong to only one union;
c) Unions represent a professional category within a certain geographic territory, being no smaller than a municipality;
d) Unions are part of the Labor Union Confederation which consists of federal union organizations;
e) Union structures are based on professional or industrial categories (i.e., steel workers belong to the steel workers union, engineers to the engineers union, etc.).
Parties cannot refuse to participate in the collective bargaining process. If one party fails to participate, the Regional Labor department has the authority to call the interested parties to attend a round table meeting at which a Labor Department backed agreement will be negotiated and enforced.
In addition to conditions of employment that are the subject of a collective bargaining agreement, unions are also claiming jurisdiction over issues such as unemployment protection, outsourcing, production modernization and other issues indirectly related to
working conditions.
Drug Testing
Employees cannot be forced to undergo any medical examination, except for those mandated by law. Health tests consisting of blood and urine samples, as well as other tests, intended to find out whether the employee has used alcohol or drugs are not permissible.
Employees may refuse to undergo any medical exam on the following grounds:

A) There is no legal obligation to submit; or B) Submission would be a violation of the constitutional principle protecting the person’s private life and intimacy.
However, periodic medical examinations are generally considered to be in the interests of both parties and may be required by law. Disciplinary action may be taken against employees who fail to undergo medical examinations required by law.
Record Keeping
Work regulations approved by Ministry of Social Protection must be made public to all employees within 15 business days. Employers must post copies of both workplace and hygiene regulations. These regulations must be posted in two different visible locations.
All employers must maintain a Labor Inspection Book that documents an employee’s date of hire, as well as, the beginning and end of paid vacation.
Employers must also record overtime hours. Documentation should include the employee’s name; number of authorized overtime hours completed, specify what hours of the day correspond to the overtime hours; and include the base salary used to determine
the corresponding surcharges.
Periodically the Labor Inspection Book must be stamped by the local inspection office of the Ministry of Labor.
Disclaimer
The content of this document is intended for informational purposes only. The information should neither be construed as legal advice nor used as a substitute for consulting an attorney about specific practices and legal questions.
Information about the Authors
Lucas Kurtz is an American attorney admitted to practice in the state of North Carolina. He
currently services as Director of US Law & Compliance at the Brazilian law firm of Manhães
Moreira Advogados Associados (MMAA). Prior to MMAA, Mr. Kurtz practiced finance and
corporate law at a large US law firm and as an internal auditor for an international retailer and a
global consulting business. Mr. Kurtz studied at Saint John’s University School of Law, earned a
Juris Doctor, cum laude, from the University of South Carolina School of Law and a Bachelor of
Arts in Mathematics, magna cum laude, from the State University of New York at Albany. Lucas
communicates in English and Portuguese. Email: lucas.kurtz@mmaalaw.com
Martin Mahlstedt is a law clerk for Manhães Moreira Advogados Associados (MMAA). Martin
is a recent graduate of the University of Birmingham School of Law in the U.K, he also holds an
M.A. in International Security and Terrorism from the University of Nottingham and has been
with MMAA since 2011.