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Law 13.467/2017– Main Aspect of the Brazilian Labor Law Reform
21 de May de 2019 | PublicationsDear Sirs,
1. As per your request, please find below a summary of the main aspects of the Brazilian Labor Law Reform which aims to give a modern and more flexible frame to the labor legal system.
2. On December 23rd, 2016 the Executive Branch proposed Bill of Law 6.787/2016, aiming to amend the Labor Law Code (known in Portuguese as “CLT – Consolidação das Leis do Trabalho”), which dates back to 1943 and to amend other laws which regulates the labor relationship between employers and employees.
3. According to article 64 of the Federal Constitution, the Ordinary Law proposed by the Executive Branch has to be approved first in the House of Representatives and then in the Senate before going to the Presidential sanction.
4. In the House, the aforementioned Bill was approved by 296 in favor versus 177 against. On April, 27th, 2017, the Bill was sent to the Senate, where it was renumbered and received the number PLC 38/2017. In the Constitution and Justice Commission of the Senate, the Bill was approved and was sent to the Senate where it was also approved.
5. On July 13th, the Bill of Law was sanctioned by the President Michel Temer, without any veto. It was converted into Law 13.467/2017. There was much speculation that some of the most polemic issues would be vetoed, such as:
I.iv – Intermittent Work;
II.iv – Working Hours – 12X36;
V.i – Work in unhealthy environment;
V.ii – Break before starting overtime work;
IX – Company’s commission;
X.2 – Law x Free Negotiation
6. However, the Bill of Law was enacted without any veto by the President. It is expected that the polemic issues (such as the extinction of the mandatory membership fee paid by the employees for the worker’s Unions) will be object of a Provisional Measure of the Executive Branch. So, there may be a coming back in some level.
7. It is important to note that the Law will be in force in a 120 days
period, counted as of its publication in the Official Gazette, which was last Friday, July 14th..
Therefore a vacatio legis will occur.
8. We point out hereinbelow the most relevant aspects of Law 13.467/2017:
I – Labour Agreement
I.i – Employer’s concept – Group of Companies
9. The new Law will reverse the jurisprudential ruling which was in the sense that companies under the same control, direction or management, would be considered as a Group of companies, and as such they would be jointly liable for the employment obligations related to the employees of any of the companies.
10. The economic Group will be characterized only if the common interest and goals of the companies and the joint actions are verified. The fact that the companies have the same shareholders, or the fact that the shareholders are of the same family will not be enough to characterize the joint liability of the companies involved.
I.ii – Freelancers (“Trabalhadores Autônomos”)
11. According to the new Law, hiring of freelancers, or contracted employees, even on a continuous basis, will not lead to the employment relationship and all the employee’s rights, as foreseen in article 3 of the Labor Code.
12. In other words, the Law turns to be legal what is practiced nowadays and is considered a fraud: to hire freelancers who work on a continuous basis and with exclusivity for one company.
13. Is important to note that the cost of hiring a freelancer may be higher than the cost of hiring an employee, so that the company has to analyze what is the best option of hiring vis-à-vis its needs and budget.
I.iii – Outsourcing
14. Article 2 of Law 13.429/2017 amends Law 6.048/74. In its article 4 it allows the outsourcing (by means of hiring of third parties) of all the activities needed by the contracting company, even for its core business.
15. The Law allows that several third party companies be hired for performing the same activity, or even allows the outsourcing for each specific type of business the contracting company performs. Therefore, the contracting company may diminish the costs with training its employees, with bonus and benefits plans and with HR in general.
16. It is important to note that the Law allows the outsourcing by hiring third parties which are gathered in companies, and not only the hiring of individuals.
17. The outsourcing may lead to an economy for the companies because the taxation levied on such agreements (taxes and social contributions) is lower. It is expected in a long term that a very significant part of the Brazilian population will turn to be entrepreneurs, or will work for the outsourcing companies.
18. We stress that the hiring of temporary employees and the outsourcing are two different contracts. The rules regarding the hiring of temporary employees were amended this year by the recent Law 13.429, which has been enacted on March.
19. When outsourcing, the contracting company hires a supplier company for rendering a determined and specific service. This latter one will be responsible for its employees allocated in the service, and there will be no subordination to the contracting company. On the other hand, the hiring of temporary workers is legal and possible if it fits in one of the following categories: temporary replacement of regular employees, or a need arising out of a complementary demand in the business. Other than those categories, the hiring of temporary workers will not be allowed.
20. The contracting company will seek a Temporary Contracting Agency to hire such kind of work and the agency will make the workers available for the contracting company. In this case, the workers will be oriented and will be subordinated to the contracting company and during all the temporary work, the contracting company will be responsible for exercising the coordination and supervision of such workers. Thus, the contracting company will be responsible for the safety, hygiene, and healthy environment for the workers. The temporary workers should have the same medical and hospital care granted to the regular employees of the contracting company, as well as meal tickets and voucher transportation.
21. The liability of the contracting company is subsidiary, meaning that the Temporary Agency will bear the burden of the labor rights.
22. The temporary work agreements are executed for a fixed term, which was much discussed in Congress when Law 13.4292017 was on debate. Therefore, such agreements cannot exceed 180 days, (as opposed to the former 90 days), consecutive or not. The initial term may be renewed for another 90 days period, provided that the need of such type of contract continues.
23. Another innovation of Law 13.429 is that the temporary workers may perform their activities even if they are related to the core business of the contracting company (and not only to secondary activities).
I.iv – Intermittent Work
24. The Law innovates and creates the intermittent work, which is similar to the “zero hours contract”, foreseen in the United Kingdom. In brief, it is the kind of work in which the services are not rendered on a continuous basis, so there is athermancy of work and inactivity.
25. The contracting company may requests that the employee works for one hour, two hours, three hours for two days a week, and his/hers compensation will be only the minimum wage per hour.
26. The payment of the 13th salary, the holidays, the severance fund, and the social contributions will be in proportion to the number of hours worked.
27. This new type of agreement will be beneficial to the companies which activities depend heavily on the season, like shops, hotels and restaurants. They will no longer need to hire and then dismiss the employees in the end of the season. Out of the season, the employees will still have an active employment relationship, but it will not generate costs to the employer.
I.v – Free negotiation with employees who earn more than R$ 11,000.00 (eleven thousand Reais)
28. The employees who have an university degree and that earn more than twice the cap of the pension paid by the General Public Severance Plan (which is approximately R$ 11,000.00) may not be syndicated meaning that she/he will not be represented by the Union and will be able to negotiate hers/his own benefits and salary with the employer.
29. In that case, the negotiation may differ from the terms and clauses of the collective bargain. It is important to note that the employee and the employer may agree on the arbitration procedure to solve any disputes arising out of the labor agreement, provided that the employee expressly accepts the arbitration clause.
I.vi – Personal Liability for the Company´s Labor Debts – Shareholders who exercise the Right to Withdraw
30. The Law aims to bring to the Labor Law a concept foreseen in the Civil Code according to which the shareholder who transfers and assigns all of hers/his quotas or shares to third parties, or to the remaining shareholders or quota holders and withdraws from the company will be liable for the debts accrued until the withdrawal´s date for a period of two years counted as of such withdrawal date.
31. The Law also foresees that the liability of the withdrawing shareholder or quota holder will be subsidiary to the company meaning that any liens or seizures will first be imposed on the company’s assets and cash, then on the assets owned by the actual shareholders and only if those are not sufficient, then the former shareholder’s own particular assets may be seized by a Court Order.
32. The current jurisprudential understanding is that the particular assets of the withdrawing shareholder may be seized because he/she/it, as employer, has profited from the employee’s work. The new Law gives a more reliable legal framework for the company’s shareholders.
I.vii – Labor Agreement’s Termination
33. The termination of the labor agreements which are in force for more than one year no longer needs to be prior approved by the worker´s Union or by the Regional Delegacy of Labor.
34. Also the collective termination of labor agreements will no longer need prior approval of the Union, or a prior collective bargaining.
35. The adhesion to a Voluntary Demission Plans (individually or collectively) will imply in full quittance of all the labor rights, provided that such plan was foreseen in the collective bargaining.
I.viii – Mutual Agreement to Terminate the Labor Agreement
36. The Law foresees that the termination of the labor agreement may be decided by mutual agreement (which so far did not exist). In that case, the employee will receive the holidays, the 13th salary, half of the salary as notice, half of the indemnification which has as taxable basis the amount deposited in the Severance Fund (FGTS) (the indemnification will be equal to 20% of the amount deposited in the FGTS account, as opposed to 40% of said amount, which would be due in case of regular dismissal). In that case, the employee will be entitled to cash out up to 80% of the amount deposited in the Severance Fund, but will not be entitled to receive the unemployment insurance.
II – Working Hours
II.i – Time at the Disposal of the Employer
37. The Law states that the time the employee spends with his/hers hygiene or changing the uniform (if not requested) will not be counted as time at the disposal of employer, or overtime. In addition to this the Law avoids a common situation which is that the employee stays in the company late at night, or outside his/hers shift, forging to be working extra time, when actually he or she is there at will.
38. Another innovation is that the time spent to arrive at the company´s premises (known in Latin as time in itinere) will no longer be counted as time of work. The working hours will start only when the employee really starts to render the services. Therefore the companies will start to provide transportation of quality to their employees. The casualties and accidents will diminish and so the cost with indemnification and with overtime.
II.ii – Part-time job
39. The part time job will be characterized as the work for 30 hours per week, with the payment in proportion to the time worked. The work may be reduced to 26 hours per week, with the possibility of working extra time. It will also be possible to reschedule the hours eventually not worked in a week, provided that those hours are worked in the immediate next week.
II.iii – Working Hours – “Bank of Hours System”
40. The regular working time may not exceed 8 hours a day and 44 hours a week. For lowering costs with the payment of overtime work, the companies usually adopt a system pursuant to which the hours worked above the daily or weekly period, may be offset with future hours of rest, system known as “Bank of Hours”. However, the adoption of such “bank of hours” was possible only if negotiated with the worker’s Union.
41. The proposed changes in the Law foresees that the bank of hours may be agreed upon by the employee individually (and not only as part of a collective bargain), provided that the setoff with future hours occurs in up to six months time.
42. The Law also states that any working hours setoff may be agreed upon, individually or collectively, being observed the limit of 10 hours of daily work and that the compensation occurs in the same month.
43. We highlight that the negotiation of such “bank of hours” with the worker’s Union used to be very tough: the Unions always required as compensation the granting of medical care plan to all the employees, the prohibition of dismissal of the employees while the bank of hours was in force and other clauses and conditions which lead to the failure of the implementation of the bank of hours ‘system.
44. Therefore the change in the Law is seen as an advance, since the negotiation no longer will involve the Unions and the employees by their turn may gain flexibility, so that their personal needs are met.
II.iv – Working Hours – 12X 36
45. The Law foresees that it will be possible for the employers to establish 12 hours of interruptive work, with or without a break for meals, followed by 36 hours of full rest. If there are not any breaks, the hours which should have been enjoyed as break time will be indemnified to the employee.
46. Such type of working hours shall be negotiated by the employee individually, or by means of a collective bargaining.
47. The exercise of such schedule of work will be possible even in unhealthy environments, but in that case a previous license will be needed.
II.v – Remote Work by means of Laptops, or Smart Phones
48. The new wording given to article 62 of the Labor Code (“Consolidação das Leis do Trabalho”) excludes the employees who work remotely by means of computers or cell phones of the chapter known as “Duration of Work”.
49. That means that such employees, even if while working remotely are under the employer’s supervision, will no longer have the right to overtime, the right to the additional night work time, and to the break between working times. Therefore, the work at the distance will be implemented by the companies with lesser risks of associated costs. In such kind of work the regular costs e.g. meal tickets, voucher transportation, costs associated with the space where the employee works, such as light and water bills and the bonus for working in an unhealthy environment will be spared.
I.i.vi – Break Between Working Times (“Intervalo Intrajornada”)
50. If the break between working times for meal and rest is not granted to the employees (be them urban or rural employees), the employer will have to indemnify the employees, but the basis of such indemnification will be reduced to the time not paid for, plus a bonus of 50% of the value of the regular hour worked.
III – Holidays
51. After each year of work, the employees have the right of 30 days of holidays. For such, the salary is paid with a bonus of 1/3, amount which has to be paid at least with a prior advance of two days.
52. Up today, this period had to be granted in total, or split in two periods: 20 days and 10 days, and such 10 days may be sold to the company, meaning that the employee will not be on holidays but will receive the amount due.
53. The new Law changes such rule. Therefore, it will be possible to split the 30 days of holidays in three different periods, being one no lesser than 14 days and the other two may not be less than 5 days each.
IV – Employer’s Liability for the non monetary damages caused to the employee
54. The Labor Code now expressly recognizes the employee’s right of privacy and other rights such as the right of publicity which were already protected by the Civil Code. Law 13.467 foresees that the right to freedom of speech, freedom of thinking, the right of privacy, the right to times of leisure and the right of physical integrity, among other, are protected. For the companies, article 223-D of the Labor Code, as amended, recognizes the intellectual property rights, such as the rights to its trade names and trademarks, to its trade secrets and to the privacy of letters.
55. The violation of such rights is subject to indemnification (non monetary damages).
56. There were cases of expressive amounts of indemnification granted to the employee, especially in case of moral harassment, or in case the employee had acquired an incapacity or illness due to the work performed. However, as the Law was silent about such matter, each case was trialed and the ruling was according to each Judge’s perception of the facts of the case.
57. Now, the Law foresees types and amounts of indemnification and a cap (ranging from one to fifty times the employee’s salary), being possible to the companies to make a more realistic contingency, in case of a lawsuit filed against it.
V – Women’s Work
V.i – The Work in an Unhealthy Environment
58. The pregnant women, or the women who are breast feeding may not work in a severe unhealthy environment (maximum level of danger, such as in the mines, or in the radiology sector of hospitals). However, they may work in the unhealthy environment if it is classified under the low or medium levels of danger, such as in certain sectors of the hospitals and clinical laboratories, provided that the employee presents a medical declaration allowing such work.
59. If she does not have a medical permission, and the company does not have any other occupation for her, she shall be licensed of work and shall stay at home. The company will pay her salary during all the pregnancy and during the maternity leave (120 days period after giving birth). During such period, the job and the salary are secured.
V.ii –Break Before Overtime Work
60. The Law revokes article 384 of the Labor Code (“Consolidação das Leis do Trabalho”) according to which before starting the overtime work women had the right of a 15 minutes break.
VI – Young Apprentices
61. The Ministry of Labor has intensified the control over the companies in what regards the obligation to hire a minimum number of young apprentices (who are 14 to 16 years old) and who are learning their jobs (“menores aprendizes”). The companies do hire them but keep them as apprentices even when they have long ceased to be (and should be hired as regular employees), just for the accomplishment of the aforesaid minimum number. It is a way of exploitation of the work of those who are more vulnerable because of the age and of the lack of perspectives.
62. The Public Labor Attorneys have filed lawsuits against the companies for such practice and impose heavy penalties for the violation of the Law.
63. The Law changes that scenario because it clearly states that once the fixed term contract with the apprentice has expired, the agreement will turn to be for an undetermined term, and he or she may not be counted as an apprentice any more. In addition to this, the activities which are not compatible with those of a young apprentice (specified for in the collective bargaining) are not to be accepted as legal in an agreement with an apprentice.
VII – Salary
64. The amounts paid to the employees, even on a continuous basis, such as meal tickets, traveling expenses and out of pocket expenses, reimbursement of costs, bonus and premium shall not be counted as salary and will not be considered as taxable basis for any taxes and social contributions charges. This is a huge change, since up today the companies had to be very careful with such payments, since the jurisprudence is abundant in the sense that almost everything was salary, if payment was frequent or regular.
65. The new Law will allow the employers and employees to negotiate more freely the compensation based on goals and productivity, such as comfort for productivity, premium for productivity, shares in profits for productivity, and these will not give rise to higher taxes, or social contributions charges and also will lead to a retention of employees, who will be more compensated and pleased to work for the company.
66. It is important to note that contrary to the present scenario, the Law states clearly that all amounts paid to the employee as medical and dental care, regardless of the fact if those services are rendered by the employer itself or if they are outsourced, such as hospital and medical fees, costs with braces and glasses, all kind of costs with prosthesis, and so on, will not be considered as salary and will not be considered taxable basis for the taxes and social security charges.
VIII – Annual Quittance
67. The Law innovates with the creation of an annual quittance of all the labor rights arising out of the employment agreement. Such quittance will be executed by and between the employer and the employee and will be mediated by the worker’s Union and once executed there would be no legal grounds to file any lawsuit against the company to discuss such rights.
IX – Company’s Commission
68. The Law innovates also in the sense that it created the possibility of the companies which do have more than 200 hundred employees to create a Commission to negotiate with the employer. The employees who are elected as Commission´s members may not be fired (they have job security), unless the termination of their employment agreement is based on discipline, or due to a fragile economical or financial situation of the employer.
X –Union Law
X.i – Worker’s Union Mandatory Membership Fee
69. One of the major points of the Law is that it extinguishes the annual membership fee to the worker’s Union, which was mandatory for each and all employees of all categories. Now the employee who really wants to contribute will have to authorize the employer in writing to discount the membership fee in the payroll (Up today, the employee had to expressly oppose to the discount which is done every March, sending a letter to the employer, which, by its turn, forwarded the letter to the respective Union).
70. In addition to this, the company may at its discretion, not discount the membership in the payroll, if in its understanding it should not be the case.
71. This is a radical change for the companies and employees because, in order to survive, the Unions will have to reorganize themselves, will have to cut expenses and will need to work for the benefit of the employees who they represent. It is expected that only the strongest Unions will survive and this reorganization will be beneficial to the companies, since the Unions will have to do more, to be more updated and more business oriented.
X.ii – Law X Negotiation
72. The Law foresees some matters which may be negotiated by and between the company and the Worker’s Union, or by and between the two Unions (employers’ and workers’). The negotiation may result in diminishing the employee’s rights to a certain extent. The matters where negotiation is legal are:
I – working hours, the Constitution being observed;
II – individual bank of hours;
III – Break between work times, being observed the minimum of thirty minutes for work time longer than 6 hours;
IV – adhesion to the Unemployment Insurance Program, which is governed by Law 13.189/2015;
V – Job description and wage structure, as well as the definition of which positions are to be considered key positions, with no right to bonus for overtime;
VI – corporate internal regulations;
VII – right to have one worker´s representative in the company´s headquarters;
VIII – remote work, on duty shift, intermittent work;
IX – compensation based on productivity, including tip received by the employees and compensation for individual performance;
X – Work time control and registration;
XI – change of holidays;
XII – young apprentices’ quotas;
XIII – unhealthy ranges and classification;
XIV – extension of work time in unhealthy environments without the approval of the Ministry of Labor offices;
XV – bonus on goods or services granted as part of an incentive programs;
XVI – profit sharing or results.
73. The Law also allows that the employer and the employees agree on reduction of salary or work time reduction, provided that the workers do have their jobs secured during the validity period of the collective bargain.
74. On the other hand, the following rights are untouchable and may not be negotiated:
I – rules regarding the professional identification, including the employee´s Professional Card;
II – Unemployment Insurance, in case of dismissal;
III – amount to be deposited monthly in the Severance Fund and amount to be cashed out by the employee in case of dismissal;
IV – minimum wage value;
V – 13th salary;
VI – value of the night shift hour which is greater than the daily hour;
VII – salary protection, being the nonpayment of salary a crime;
VIII – family salary;
IX – right to rest in the weekends, which is compensated by the salary;
X – Over time shall be compensated with at least 50% plus, if compared to the regular work time;
XI – vacation days (minimum of 30 days annually);
XII – compensation of vacations shall be at least the regular pay plus 1/3;
XIII – maternity leave;
XIV – protection of women´s place in the market, with the grant of specific incentives;
XV – previous notice of at least 30 days, prior to dismissal, or to be calculated in proportion to the time worked for the company;
XVI – observance of health, hygiene and safety rules, according to the Ministry of Labor norms and regulation;
XVII – additional pay for the performance of unhealthy, dangerous or hazardous activities;
XVIII – compliance with the right to retire;
XIX – the employer must pay the insurance for covering on the job risks (accidents and others);
XX – right to sue the company for collecting the labor debts, which have been accrued in the past five years, with due observance of a statute of limitation of 2 years, counted as of the date of termination of the employment relationship;
XXI – prohibition of prejudice against disabled employees;
XXII – prohibition to hire teenagers who are lesser than 18 years old to perform dangerous or unhealthy work, or to work in the night shift, and prohibition to hire children and teenagers who are younger than 16 years old, unless if they are young apprentices, when they have to be at least 14 years old;
XXIII – the employer has to ensure the protection of children and teenagers;
XXIV – the employer has to ensure that the freelancers and the regular employees do have the same rights;
XXV – the employee has the right to choose to be associated or a member of any Union and has the right to oppose to any discount of the membership fee, which is no longer compulsory;
XXVI – right to strike. The employees may decide on the time of the strike and which rights are to be fought for;
XXVII – definition on the services/activities to be considered essential to the community and thus not subject to the legal right to strike;
XXVIII – taxation and other third parties credits.
75. Until today, if the employer and the employee agreed on some clause which was against the Law, it would be subject to the Court´s declaration in the sense that it was null and void. As the Law has innovated with more topics which may be object of negotiation and with the extinction of the compulsory membership to the worker´s Union, it is expected that the employers will have more space and freedom to negotiate clauses and conditions customized to their business.
X.iii – Prohibition to Collective Bargain Validity Extension
76. The new Law states that according to article 614, paragraph 3rd of the Labor Code, the collective bargain has a two years validity and it is forbidden to interpret that its effects are extensive, or are beyond such term of validity.
X.iv – The Collective Agreement will Prevail on the Collective Bargain
77. The collective bargain contains the rules agreed upon by and between the worker’s Union and the employer’s Union. The collective agreement, by its turn, contains the rules agreed upon by and between the worker’s Union and a determined company.
78. Up today, if there was a conflict between the norms (collective agreement and the collective bargain), the most favorable norm to the employee would prevail. Therefore, if the collective agreement and the collective bargain had clauses and conditions which were in contradiction, the norm which was more favorable to the employee would prevail and be applied to the case.
79. However, the order of the norms was amended by the new Law. Henceforth, if there is conflict of the norms, provided that the matter in dispute is possible to be negotiated (as per section X.II above) the clauses and conditions mentioned in the collective agreement, even when less favor to the employees, will prevail on the clauses and conditions of the collective bargain.
80. According to the legal framework in force until today, the companies faced several difficulties in negotiation, because the Unions made several demands in order to accept the company’s requests.
81. The worker’s Unions, as a condition to execute a collective agreement, usually required that the employees’ jobs were secured or demanded additional benefits, like providing health insurance, an increase in the meal tickets and even the payment of a bonus to the worker’s Union itself.
82. The innovation by the Law and the weakening of the workers’ Unions (resulting out of the extinction of the compulsory membership fee) will most probably lead to a better scenario for the companies which may negotiate work conditions which are more adequate to their business.
83. This being the comments of the most important aspects of the new Law, we remain at your disposal for any further clarification you may need.
Yours Sincerely,
BARBARA BRENTANI RONCOLATTO
ELCEM CRISTIANE PAES GAZELLI
CRISTIANE GALINDO DA ROCHA
