Home 12. Labor Law in Brazil - A Brief Overview

 

12. LABOR LAW IN BRAZIL - A BRIEF OVERVIEW

Authors:

Maria Lúcia Menezes Gadotti -

Stüssi Neves e Advogados /

Regina Célia Teixeira e Juliana Campão Roque -

Sonia Marques Döbler Advogados

12.1. Introduction

The Labor Code (CLT) is the legal statute that governs labor relationships in Brazil and on a supplementary basis by the Federal Constitution, specific laws for certain professions and other laws providing on several matters of labor relationships and the entire regulations issued by public authorities, among several other legal provisions.

The Labor Code is an extremely protectionist law characterized by the old exaggerated intervention of the Government in the regulation of contracts, the parties being allowed, exceptionally, and provided that it does not conflict with the law, to freely convene. To understand and accept this legislation is not an easy task.

We shall address below certain important topics to comprehend Brazilian Labor Law, being necessary, however, ab initio to address the principles on which it is based.

12.2. The principles of labor law

12.2.1. The Principle of Protection

The principle of protection is undoubtedly the one that distinguishes the Labor Law, and it is of essence to it's the existence and understanding of such Law. This principle also contains in itself three other class-principles, which are: the in dubio pro operario principle, the more favorable rule application principle and the most beneficial condition principle.

This principle identifies itself with the purpose of the labor law itself: to break the proposition of equality of the parties, compensating the economic lack of sufficiency of the employee with regard to the employer's superiority, with the legal protection proclaimed by him.

Notwithstanding its importance, it is certain that there are not few criticisms to this gender-principle, mainly due to its broad and generalized applicability to any and all circumstances existing in the labor scenario.

Therefore, adaptation of this gender-principle to the current times is advocated, with, the removal of its absolute character of an exaggerated protection with very little or no freedom at all which was imposed to it so that it can be effectively enforced by whom really needs it.

12.2.2. The in dubio pro operario Principle

This principle aims at provoking the most favorable interpretation of a certain and dubious rule in favor of the employee. It has been harshly criticized, due to its incompatibility with the current moment being experienced by the labor law, with the necessary impartiality to the labor judge and with the equality principle guaranteed in the majority of the Constitutions.

 

12.2.3. The Principle of applying the most favorable rule

The principle of the most favorable rule application aims at guaranteeing to the employee the rule that is more convenient to him/her, even in the event of non compliance with the hierarchy of the rules.

The first sense of this principle originates from the analysis of several meanings of one same rule, while the second originates from the confrontation between the several rules which are applicable to one same situation.

The most suitable theory, for the evaluation of this principle is the one of the conglobation of the rules consolidated in the interpretation of the set of laws and not of its portion.

12.2.4. The Principle of the most favorable condition

This principle, despite having its own peculiarities, to the extent that it assumes the existence of a previous rule already applied in the concrete case and projects is applicable particularly to each employee, is intimately related to the principle of the most favorable rule referred above as well as the principle of harmful contractual inalterability.

The principle of the most beneficial condition has as in its scope to guarantee the evolution of the labor rules, under the viewpoint of protection, thus weakening, the edition of rules which may diminish the accomplished rights by a previous rule.

However, the conditions are not incorporated into the contract in the manner expressed by this principle, and its amendment may occur as is the case of conventional clauses, which have their existence limited to the effective period of the collective rule on which they were based, so they are not definite conditions.

12.2.5. The Principle of non-waiver of rights

The principle of non-waiver of rights finds support in the worker's tutelage, thus preventing that this one, due to ignorance or lack of capability to negotiate agrees with the loss or decrease of the legal or contractually guaranteed rights.

Therefore, the autonomy of will is limited. Although this principle does not prevent the worker from surrendering, said waiving becomes null, as it breaches the guarantee recommended by the Labor Law.

Hence, this principle is based on the worker's fragility that, due to this inaptitude may be compelled and forced to waive the rights under the law or the contract in order to keep his job. The unavailability of the rights constitutes a general rule in the labor law.

This non-waiver principle of rights was inserted in several rules of the CLT, such as the 9th, 444 and 468 articles.

12.2.6. The Principle of continuity of the employment relationship

The Labor Law establishes the continuity of the employment agreement and this factor enables the worker's integration into the company's structure, acquiring economic and social safety, thus attaining improvement in the labor conditions, which is the teleological goal of Labor Law. But the beneficial reflexes of the continuity are not limited to the worker; the employer may benefit from experienced and trained labor, and therefore is interested in the continuity of the employment.

The preference for employment agreements of indefinite duration pursues from the ongoing aspect of the agreement, which is not extinguished upon the completion of a certain task.

The employment agreement may be amended, provided that observing the provisions of article 468 of the Labor Code, to assure to the employee evolution within the company and to keep it effective. Such amendments also authorize the transmutation of the legal nature of the agreement imputed by the parties, not being relevant the title of the amendment but rather the reality of the underlying fact.

The labor agreement may also be maintained despite the existence of a breach of obligations by one of the parties or nullities. The breach must be of a grave nature to lead to the termination of the agreement and such grave events are, by rule, described in articles 482 and 483 of the Labor Code, which address the events that constitute grave fault by the employee and by the employer, respectively, and authorize termination for just cause. As regards the void clauses (nullities), they will not produce effects after they are declared as such. On the other hand, a clause that is affected by a nullity will not render the entire document void.

The employment agreement is also maintained in the cases of replacement of the employment in the events established in articles 10 and 448 of the Labor Code given that the employee is bound to the company in the sense of economic activity, not to its legal structure. Not occurring interruption in the economic activity, the employment agreement continues effective. As may be noted, this principle of continuity of the employment relationship operates solely in favor of the worker.

12.2.7. The Principle of prevalence of the reality of the facts

Under this principle labor law is concerned with the aspect of the actual facts involving the performance of the agreement and not the merely formal aspects. The former prevails over the latter. The employment agreement and other documents on which the labor relationship is based are not ignored but rather valued jointly with the factual reality, which may prevail on other such documents. The contractual clauses thus generate merely a presumption of validity that may be contradicted by the factual reality.

The rule of the prevalence of the reality is adopted to avoid the disguise of employment agreements under several forms of contracting, such as independent contractors and the like.

This principle is widely used in court rulings to trans change relationships that are formally conceived as civil/commercial nature to employment relationships.

The characteristic presumption adopted by Labor Law scholars that labor agreements are presumably employment agreements, supported precisely by the inequality between the contracting parties is weakened by the evolution of other forms of labor, which is the gender of the species employment, in adaptation to the effects of globalization.

Such presumption must be applied to the cases in which the contractual clauses are adopted with the intention of damaging one of the parties, violate the law, though, for such purpose the evidence produced must reflect such reality. In the cases in which the voluntary manifestation issues from a legally capacitated party, financially, legally and technically independent its application is useless and the viewpoint defended by the traditional scholars that the plain supply of services presumes the labor agreement is dissociated from the factual reality. In these cases it is necessary to be free from these preconceptions and question all the daily routines of the relationship constituted by the formal, signed agreement.

In fact, this principle constitutes a tool to investigate the truth, which may be dissociated from the preconceptions constructed by the discipline to which we devote ourselves in this survey. Since it is a common presumption, it cannot prevail over any proof, which must be produced in order to prevail.

Consequently, in the applying of the principle of prevalence of the reality of the facts the parties' intention and the extent of the worker's dependence or autonomy in the contracting of the labor agreement must be thoroughly, so to deprive the operator of the law of the presumptions previously stated, since they no longer reflect the current reality in the field of labor.

Pursuant to these comments on the principles that apply to Labor Law, which are necessary to comprehend the following issues, we heretofore address the common labor law topics that we deem are important.

12.3. Company administrator - employee of service supplier

A common question concerns the definition of the legal nature of the relationship between an administrator of a company that will be organized in Brazil or of an already existing company that is acquired by a foreign investor.

Firstly, it is important to assert the legal structure of the company that will be organized or already existing one.

If one of the two is a limited liability company (Ltda.) civil law currently establishes that possibility of the administrator not being a partner thereof, which event in the past was questioned, especially by the INSS (Social Security).

If one of the two is a corporation (S/A), the Brazilian Corporation's Law expressly establishes the possibility of the administrator that is not an employee. If an employee is promoted to the position of a director, the employment agreement shall be suspended in accordance with Instruction (Enunciado) 269 of the Higher Labor Court of Appeals (TST), except if the legal subordination inherent to the labor relationship persists.

Attention should be drawn to the daily aspects of the relationship since, in deciding to contract the professional under the regime of service supplier in either of the two foregoing hypothesis, the administrator's autonomy and independence to perform the activities that were contracted must be considered. If no such freedom exists, this could convert the civil relationship into an employment relationship.

Hence, in making a decision thereof, the way the day-to-day relationship will be carried out must be evaluated so as to avoid a future contingency, which is not limited to the filing of a suit before the Labor Courts by the professional allegedly prejudiced, but also to labor assessments by the labor inspection authorities.

Electing to contract the professional as an employee the risks quoted in the foregoing paragraph do not exist, but without doubt the cost of labor is higher.
In the event of contracting an administrator under the regime of an independent service supplier the cost to the company shall correspond to 20% of the compensation paid to the administrator, corresponding to social security contribution.

If the administrator is contracted as an employee the direct cost shall be the social security contribution at the rate of 20% of the administrator's compensation, insurance covering work accident (variable between 0.5% to 6%, a rate subject to changes by the application of factor towards - FAT - Fundo de Amparo ao Trabalhador), in addition to indemnity in the event the administrator incurs in voluntary misconduct or negligence, contribution to third parties - System S - (5.8%), FGTS - at the rate of 8% of the salary, vacation, the right to which accrues each twelve months period of employment, plus statutory 1/3, 13th salary (Christmas bonus), based on the full compensation, among other legal or contractually agreed rights.

12.4. Statute of limitations

The statute of limitations for the worker to file a labor claim is five years as of the damaging event to the right, reduced to two years in the case of termination of the employment agreement.

For example, an employee who has been working at a company for six years, works overtime and does not receive the payment thereof, is dismissed; a labor claim to claim such right must be filed in up to two years as of the termination date, under penalty of becoming totally extinguished such right by operation of the statute of limitations. Upon the filing of the labor claim, a five-year period retroacts. As an exception, the statute of limitations in regard to the Workers' Severance Fund (FGTS) is thirty years.

 

12.5. Registration of Employees and the Worker's Record of Employment and Social Security Booklet (CTPS)

The employee's employment must be recorded in his/her Record of Employment booklet, which is the proper document for the future purpose of counting work periods for retirement effects.

In addition to the Record of Employment booklet, the employer is required to register its employees in a proper book or card, which must be certified by the Regional Labor Inspection Office (DRT), authority responsible for the surveillance of compliance with the labor laws. The physical registration card may be replaced by a computer file, which eases the company's routines.

Other aspects of the employment relationship may be regulated by the employment agreement and also by collective labor agreements, which consist of contracts entered between the company and the workers' union or between the employers' union and the workers' union, the latter having, thus, a broader scope.

12.6. Work hours

The normal work hours period is eight hours per day and forty-four hours per week, except if another period is established.

Certain specific cases determine different periods, as in the case of the continuous relay shifts, and others establish shorter periods, as in the case of doctors and dentists (four hours) and telephone operators (six hours).

The normal period may accrue supplementary work hours by at maximum two hours, subject to a written agreement between the employee and employer or a collective labor agreement (entered with the worker's union).

The value of the overtime hour must be at least 50% higher than the value of the regular work hour. Overtime that is repeatedly labored integrate the employee's compensation for the effects of calculating vacation, 13th salary (Christmas bonus), prior notice of termination and severance fund (FGTS) payments, among others.

The non-payment of overtime is allowed provided that the overtime hours are offset with the work hours on another day, provided that the offset possibility is foreseen by a collective labor agreement.

This practice is known as a work hours bank and has rendered savings to the companies, under which system they no longer disburse amounts to pay overtime and which expenses thenceforth are no longer computed into the price of the product or service manufactured/supplied by the company, and a benefit to the employee, which uses the work hours that exceed the normal hours for purposes that because of unavailability of time pursuing to the worker's routine work hours, are not enjoyed, such as leisure, spend time with the family, training, studies, etc.

Employees that are engaged in external activities in which a work hours period is not established and those that occupy jobs based on trust, holding direction and managerial powers, at the higher ranks of the company's staff and receive compensation and benefits that differ from those of his/her subordinates are not entitled to overtime payment.

12.6.1. Intra and Inter work period rest

The rest periods are not computed in the work hours period.

In any continuous work period of more than six hours it is mandatory to grant a break for rest and meals of at least one hour. In a shorter work hours period of not more than four hours, a fifteen-minute break is mandatory. In some jobs there are special breaks, as in the case of data process, in which for each fifty minutes of continuous work corresponds a ten-minute rest period.

Between one daily work period and the next the employee is entitled to a rest period of at least eleven hours, which cannot coincide with the weekly one-day rest period. In other words, such period starts when the employee effectively ceases work activities, whether overtime or regular hours.

12.6.2. Paid weekly rest period

Every employee is entitled to a paid weekly rest period of twenty-four consecutive hours, which usually falls on a Sunday.

12.6.3. Work at night hours

Work labored between 10 p.m. and 5 a.m. of the next day is defined under Brazilian law as work at night hours. The hour of work at night corresponds to 52 minutes and 30 seconds, i.e. a seven-hour period of work at night hours is equal to eight hours of work in day hours. The hour of work at night accrues an additional 20% over the day hour.

12.7. Salary

Salary is the total of the amounts and benefits paid to the employees as compensation for the worker's labor.

A salary may be paid under several forms, currently resumed to fix and variable.

The fixed salary assures to the employee payment of the full amount, regardless of the employee's performance, while the variable salary depends on the employee's individual performance and results or collectively by a department or by the company as a whole.

Compensation may be fixed and paid on a per-unit of time or production/task basis and in cash or utilities.

The salary cannot be reduced (article 7, VI, of the Federal Constitution) - except in the case of a collective agreement, changed unilaterally by the employer and in detriment to the employee, pledged (article 649, IV of the Code of Civil Procedure - CPC) and is intangible (cannot be discounted - article 462 of the Labor Code - CLT and Instruction 342 of the Higher Labor Court of Appeals - TST).

12.7.1. Form of Establishing a Salary

12.7.1.1. Unit of Time basis

This form is based on the period of time in which the employee is at the employer's disposal. It does not depend on the employee's performance or the company's results. This means that, regardless of these aspects, the employee is entitled to a salary. The traditional form of salary is, under the viewpoint of many scholars, inconvenient, to the extent that it is imprecise (remunerates equally unequal employees), unfair (equal compensation to unequal employees and detrimental to the employee that is more productive) and does stimulate performance (the employee is not interested in the results).

12.7.1.2. Unit of Production or Task

What is important in this type of salary is the quantity resulting from the work performed by the employee. In other words, each unit produced by the employee constitutes compensation, not being considered the period of time in which the employee is at the disposal of the employer.

12.7.1.3. Mixed Basis

In this case a salary is paid considering not only the time devoted to the employer, but also the employee's productivity, as minimum requirements.

12.7.2. Payment

The salary must be paid in local currency being prohibited its payment in foreign currency. Some find that it is possible to establish a salary in foreign currency and convert it to local currency on the date of payment. The courts and inspection authorities have not been accepting such a clause.

The salary should be paid by the 5th business day subsequent to the month in which it accrued (article 459 of the Labor Code) based on the month labored, and it should not be delayed.

Commissions and bonuses may be paid in longer periods, depending on the provisions that establish such payments.

12.7.3. Utilities

The salary may also be paid in utilities (article 458 of the Labor Code - CLT), though not entirely; at least 30% of the salary must be paid to the employee in cash. The Labor Code - CLT merely exemplifies types of utilities, which must have fair and reasonable values. Not all utilities extended by the employer are salary: it must be gratuitous and regularly extended; in exchange for the work labored by the employee, extended pursuant to work labored and not for the labor.

12.7.3.1. Clothing, Equipment and other accessories

These items shall only be considered a utility salary when extended by the employer in exchange for the work labored and in substitution of the amount that would otherwise be used to acquire this item. The clothing, equipment and other items that are provided in order to perform work is not considered, in any event, a utility salary (paragraph 2, item I of article 458 of the Labor Code - CLT).

12.7.3.2. Transportation

This is one of the most controversial issues. If transportation is extended in order to perform the work, it cannot be considered a utility salary. If it is extended to fill a need of the employee, namely transportation from home to work and return, then it is a utility salary. The transportation coupon introduced by Law 7418/85 and regulated by Decree 95.247/87 is not considered salary.

The Summary No. 367 of the Supreme Labor Court excludes the vehicle as part of an employee salary, even if it is used by the employee for private personal purposes.

12.7.3.3. Meals

It has a salary nature when extended free of charge to the employee - Rule 241 issued by the TST.

It is not considered a salary if the company adopts the PAT (meals for workers program tax benefit) program established by Law 6321/76 and Decrees 5 and 349, both enacted in 1991.

12.7.3.4. Housing

For housing to be considered a utility salary it must be extended pursuant to an employment agreement. Main Exception: housing extended to a home keeper.

A controversial issue is the rent of a home for executives, whereby it is leased in the name of the company that hired the employee, as an indirect form of compensation. It is now quite common, particularly in cases of multinational companies, to enter a lease of a residence in its name as a means of indirectly compensating the employee, usually brought to Brazil from a foreign country.
Regardless of the lease being in the name of the company or employee, given that it is a benefit that is extended gratuitously pursuant to an employment agreement, regularly extended, it characterizes a utility salary and, as such, taxes and levies accrue thereon.

Cigarettes and alcoholic beverages, though extended regularly and free of charge by the employer, do not constitute in any event a salary, given that they are drugs. Article 458 of the Labor Code - CLT expressly prohibits such a possibility.

12.7.4. Bonuses

Essentially, bonuses constitute salary advancements.

12.7.5. Accretions

A salary accretion, whose purpose is to "indemnify" work performed in adverse conditions.

Mandatory accretions: overtime, work at night hours, unhealthy/hazardous environment, and relocation. They are cumulative, except for the salary accretions for unhealthy/hazardous environment. The salary accretion for suffering, a novelty introduced by the Federal Constitution of 1988, has not yet been regulated and, thus, it is not applied.

12.7.6. Allowance for Costs and Travel Expenses

Allowance for costs is the amount paid to the employee so that the employee is able to perform his/her duties. It does not comprise the salary, according to paragraphs 1 and 2 of article 457 of the Labor Code - CLT. Under the tax and social security laws, in order to be excluded from the employee's compensation it must be paid in a lump sum in pursuance of the employee's moving to a new home.

Travel allowance is the amount paid to the employee to reimburse expenses that were incurred in the performance of his/her work, such as transportation, hotel, meals, etc. If these expenses exceed 50% of the employee's salary the allowance shall be considered salary.

12.7.7. Commissions
Commissions consist of compensation on a percentage basis of results obtained by the employee or by the company. They are usually paid to employees engaged in trade and sales. Commissions may constitute the exclusive form of compensation, except that the employee is warranted a minimum salary or wage determined by the workers class in which the worker is classified.

12.7.8. Gratifications

In labor law, the gratification paid to an employee consists in an act of free will of the employer, in recognition of an accomplishment of the employee. It depends on an external element (the employer's will).

Under the current legislation, any gratifications convened between the parties are afforded the nature of salary in accordance with paragraph 1 of article 457 of the Labor Code - CLT. The court rulings, however, find that if it is regularly paid, then it will have the nature of salary, comprising the compensation for all effects.

Hence, if a gratification is regularly paid: 1) it constitutes a salary and comprises the compensation for all effects, 2) it cannot be eliminated or reduced, 3) it must be paid proportionally, in the event of termination, 4) it cannot constitute a single form of compensation.

 

12.7.9. Prizes (bonus)

There is no legal provision that regulates the grant of such a payment. As a general rule, it is paid for personal reasons regarding the employee or several employees, such as assiduity, production, quality, efficiency, etc. It depends on an internal factor, i.e. the employee itself.

In order to be entitled to the payment of the prize, the employee must fulfill the conditions established by the employer. If they are fulfilled the employee shall be entitled to the payment thereof, and the employer cannot evade this obligation.

The prize may be individual or collective and may pursue from the law, employment agreement, conventions/collective labor agreement, costumes, etc.

If it is regularly paid, it acquires the nature of salary 1) integrating the compensation for all effects, 2) cannot be cancelled unilaterally by the employer, 3) cannot be incorporated to the salary, except upon the employee's express consent and provided that it is not prejudicial to the employee, 4) may be claimed by the employee, provided that the condition for which it was established is attained, 5) cannot be established as the sole form of compensation, 6) its amount cannot be reduced.

Similar to prizes, bonuses are not foreseen under current Brazilian labor law. They also are intended to award the employee for personal or collective reasons, depending, as a general rule, on the conditions established by the employer.

A critical issue is the detailed definition of the criteria and conditions to implement prizes/bonuses, as it is very common to face in labor suits claims for prizes that were not paid to employees that were dismissed in the course of the period to acquire the right thereto, and to lack elements that suffice to prove in court the non-attainment or fulfillment of the conditions for its payment to the former employee (claimant).

The company must possess documents that support the conditions and criteria that was established for the payment of the prize and that demonstrate, on the other hand, that the employee to whom the prize was not paid, failed to fulfill the requirements.

12.7.10. Profit sharing and participation in results

The previous Federal Constitutions warranted this right, but did not launch the institution by the employer of this variable form of compensation.

The Federal Constitution of 1988 was the instrument that effectively launched the adoption of the profit sharing and participation in results program, providing to it the express nature of indemnity granted to both rural and urban workers.

Although the Federal Constitution expressly refers to its definition by law, the Government did so thru Provisory Acts ("Medidas Provisórias") that were subsequently re-issued, and finally converted into Law 10.101 of December 2000.
Profit sharing consists of the payment to the employee pursuant to the distribution of positive results (profit being equal to gain) achieved by the employer, which was obtained with the collaboration of the employee, who attained the goals that were established.

The Federal Constitution and the law that address the matter did not define or distinguish profit and result. It is important to emphasize that there are companies that are not aimed at obtaining a profit, but instead results, as is the case of equalized employers (article 2, paragraph 1 of the Labor Code - CLT). The majority of scholars consider profit as the real profit, i.e. the actual profit earned by the company after deducting the operational expenses reserves. Results are goals related to factors of several natures, such as productivity, quality and quantity of products, etc.

Company: company or corporate group, engaged in an organized business with the purpose of achieving a profit or result, with the collaboration of employees. Excluded types that do not fall under the definition of company: individual, public utility associations, workers unions, purely residential condominiums and the estate, since they are not engaged in an economical activity and
Non-profitable entities.

Collective organization (cooperatives) are covered thereby.

Employee is a specimen of the worker gender, as defined in the Constitution. Who is entitled to profit and results sharing? The employee is defined in article 3 of the Labor Code (CLT) as the sporadic worker (equalized thereto), governmental employees contracted under and governed by the Labor Code (currently non-longer existent), employees of government agencies and public foundations (participation in results), employees of public companies, of joint capital companies and other entities engaged in an economical activity, employees retained by liberal and independent professionals.

Temporary, housekeeping and government employees are not entitled to participation in profits and results.

In order to participate in profits the workers' committed shall be comprised by workers in general, whereas only the employees of the departments that are directly interested in the accomplishment of the goal are entitled to participation in the results.

The legal nature of profit sharing is of an indemnity for participation and it is conditioned to the occurrence of a profit. If such condition is not fulfilled no profit sharing will be paid. However, in the event of loss the employee does not participate therein inasmuch that the employee is not the owner of the business and, thus, cannot be held for losses. If the employee assumes losses, he/she is not an employee, but rather a partner.

The rules for implementation of the program must be clear and objective as to the establishing of the substantial right and procedural rules. According to the Provisory Act (MP), it is also required to establish the mechanism to check the information regarding the accomplishment of the agreement, periodicity of distribution, term of validity and terms for reviewing the agreement.

The program shall be implemented as agreed between the employer and employees, negotiated thru a committee appointed by the employees, also comprised by a representative of the workers union. The union's participation is intended for implementing collective negotiation.

The participation in profits is unrelated to compensation and does not replace or supplement it.

Being unrelated to the workers' compensation, it has a nature of indemnity, not being subject to severance fund (FGTS) and social security contributions and not reflecting on the other contractual payments, being however subject to income tax.

In the event of disagreement the parties shall resort to mediation and arbitration, not to Labor Courts, which may only be sought for a decision when all the previous attempts have been made.

12.7.11. Miscellaneous Benefits: school allowance, medical and dental plans, life insurance and supplementary pension plans, scholarships, etc.

Article 458 of the Labor Code (CLT), as amended in June 2001, excluded the following benefits from salary:

- education, at a self-owned or third party teaching facility, covering admittance fee, monthly and yearly tuition, books and literature materials,
- transportation used to go and return from work in a route followed or not by public transportation,
- medical, hospital and dental assistance provided directly or thru health insurance,
- life insurance and insurance covering personal accidents;
- private pension plan.

12.8. Salary equalization and replacement

Employees of a same company that work at the same site and have the same job (identical quality and volume of work) and that have been doing so with a difference in their periods of employment of not more than two years must necessarily receive the same salary.

In the cases of replacement the employee that replaced another is also entitled to the salary that was paid to the replaced employee while the replacement subsists. This does not consist in salary equalization, but rather an assurance for an equal salary for equal work.

 

12.9. 13th Salary

It consists in a Christmas bonus that is paid until December 20th, irrespective of the salary that is paid to the employee and corresponds to 1/12 of the salary per month of employment or 15-day fraction.

12.10. Relocation

Relocation is the transfer of the employee to a site different than the originally agreed work site.
According to article 469 of the Labor Code, which regulates the matter, the employer cannot relocate the employee without the employee's consent. If the transfer does not lead to a necessary relocation of the employee to a new home, i.e. if the transfer to another location does not require the employee to move to a new home then it is not a case of relocation.

Another controversial issue is the clause establishing the employer's right to relocate its employees. Existing such a clause the employees may be transferred. In the lack of such a clause the employment agreement may be amended to provide so. Some scholars find that such an amendment may be implemented at any time, inclusively when the employee is relocated.

However, it is important to stress that the existence of a clause authorizing relocation (consent of the employee) is an important point, but Brazilian courts have been ruling that the clause, per se, does not validate the relocation, for that the employer may use its authority to compel the employee to accept the imposition, under risk of being dismissed.

Another important aspect is that the relocation must pursue from a real work necessity, which consists of the company's impossibility to carry out its business if the employee is not relocated to work at a place other than the place that was originally contracted.

Employees that hold jobs based on trust are not covered by the legal protection and thus cannot oppose the employer's decision (paragraph 1 of article 469 of the Labor Code - CLT):

The closing of the facility where the employee works is a cause that is acceptable to justify the employee's relocation without the occurrence of the cause quoted above (real work necessity).

That is, in the event the facility where the employee was contracted to work is closed the company is authorized to relocate the employee so that the employee continues to work. This is what the law establishes: "The relocation is lawful when the facility where the employee works is closed".

An aspect that is quite difficult to quantify concerns the provisory relocation. It has been understood that a temporary relocation is the relocation in which the employer temporarily transfers the employee to work at a place other than the original work place due for an important reason (to cover another worker's absence, assemble equipment, etc.) that requires a relocation.

The employer does not intend to fulfill the position on a definitive basis, only temporarily. The temporary aspect of the relocation determines that the employee will not remain definitively at the place to where he/she was relocated. Thus, there exists an estimate for a return to the original work site.

In the definitive relocation the employer's intention is that the employee will remain at the new work site until the employment agreement expires. The employee moves with the certainty that, while his/her employment with such company persists, he/she must reorganize his/her personal and professional life.

The employee is entitled to an additional sum for relocation (which shall be specifically agreed) only in the case of temporary relocation. The employee is not entitled to such right in the case of permanent relocation.

In the case of temporary relocation the employee is entitled to an additional payment for relocation, payable be the employer, equal to 25% of the salary that was paid while the employee was working at the original work site. The additional payment for relocation shall be due while the relocation persists. The right thereto is extinguished upon the employee's return to the original work site (paragraph 3 of article 469 of the Labor Code - CLT).

All the expenses incurred in the relocation (temporary or definitive) by the employee and his/her family (moving, transportation, rent, etc.) shall be borne by the employer. The additional expenses related to the relocation in which the employee does not move from home will also be borne by the employer, as determines article 470 of the CLT: "The expenses incurred in the relocation shall be borne by the employer".

12.11. Vacation

Every employee has a right to a yearly vacation, without prejudice to salary and counting of period of employment for retirement purposes, and it is usually thirty continuous days. The employee has the option to convert 1/3 (one third) of the vacation period to which he/she is entitled into a cash payment, which amount shall correspond to the number of days that are being converted into cash.

In the vent of vacation granted after the period of 12 months following the acquisition of such right by the employee, the employer shall pay the respective amount in double as provided in article 137 of CLT.

http://media.tumblr.com/tumblr_lmpap6ChLN1qgdsdb.gif
Job stability protects the employee from unfair dismissal or dismissal without cause while the situation that entitles stability to the employee persists and impedes the employer from terminating the employment agreement.

Among the several cases of job stability, stand out: the employee appointed to direct internal fire prevention teams, which commences with the registration of such employee's candidacy and persists up to the expiration of the appointment; the job stability of the pregnant employee, as of the confirmation of her pregnancy up to five months after she gives birth; the job stability of the union leader, as of his/her candidacy up to one year following expiration of his/her appointment; the job stability of the employee that suffered a work accident, up to one year following the expiration of the accident leave.

Further to these cases, some collective labor conventions and agreement establish job stability in other cases, such as the minor-aged employee that is drafted to military service; the employee that suffers an accident at the work site or those that suffer a professional illness, during a certain period to the workers of a certain company, etc.

12.13. Workers' Severance Fund (FGTS) and Unemployment Insurance

The employer deposits on a monthly basis an amount equal to 8% of the employee's salary to a specific account that each employee holds. The deposited amount may only be drawn in the express cases established by law, such as dismissal without cause, termination of an employment agreement that had an indefinite term of duration, retirement, purchase of a home, death, among others.

Unemployment insurance is the benefit that is paid on a limited basis to the employee that was dismissed without just cause and corresponds to 3 or 5 payments that are calculated based on the average of the last salaries, varying according to the period of employment, and it is paid by the Social Security.

12.14. Safety and health at the work site

Brazilian Labor Law also establishes safety and health measures that the employer must abide by to assure to the employee minimum work conditions.

Labor health rules aim to study ways to protect the worker's health, indicating preventive and corrective measures for the work site (conditions at the place of work) and the worker (personal aspects).

Labor safety rules aim at assurances to the employee in regard to the risks associated with the professional activity and it is directly related to the protection of the conditions of the facilities' installations and of the machines that the employee routinely operates.

12.14.1. Salary Accretion for Unhealthy and Hazardous Work Conditions

Unhealthy work is defined as the activities that, due to their nature, condition or method of work expose the worker to elements that are hazardous to health (noise, warmth, coldness, vibrations, ionized and non-ionized radiation, aerosols, gases and vapors, chemical and biological agents, etc.) above the established tolerance limits due to the nature and levels of the agent and period of exposure to the effects thereof.

The unhealthy work entitles the employee to a salary accretion, according to the level of unhealthiness, which is determined by the Ministry of Labor, ranging from 10, 20 or 40% of the minimum monthly salary, currently corresponding to approximately US$270.00, in addition to being entitled to a special retirement.

Work activities or operations that, due to their nature or work methods imply in permanent contact with inflammables or explosives under extreme risk conditions are considered dangerous (hazardous).

The hazardous activity entitles the employee to a salary accretion for hazardous work conditions, in an amount equal to 30% of the employee's base salary.

These salary accretions are not cumulative, that is, the employee that receives a salary accretion for unhealthy work conditions is not entitled to the accretion for hazardous work conditions.

12.15. Female employees

Women are entitled to special protection in regard to men, mainly in regard to pregnancy. The pregnant employee has job stability as of the confirmation of her pregnancy up to five months following birth and is entitled to a maternity leave of 120 days. The father is assured a fatherhood leave of only 5 days.

However, in accordance with Law No. 11,770/09, which will be in force from January 1, 2010 on, it will be possible to extend the maternity leave from 120 days to 180 days, by the granting of a tax incentive for the companies that adhere to such extension.

Therefore, the adhesion by the employer to such program is not mandatory, but rather optional.

But, in the event of adhesion, the company taxed by the pretax profit will be entitled to deduct from the income tax the full amount of the remuneration paid to the employee during the sixty days of her maternity leave, being forbidden the deduction as operating expense.

The employee who adopts a child is also entitled to the maternity leave and extension, which period will depend on the age of the adopted child.

12.16. Minor-aged employees

It is prohibited have employees aged less than 16, except in the case of apprentices, whose minimum age is 14.

The minor-aged cannot work at night hours or engaged in hazardous or unhealthy work, as established in article 7, item XXXIII of the Federal Constitution.

Likewise, the minor-aged are not allowed to work at places that are prejudicial to their education and physical, psychic, moral and social development.
Work performed at hours and places that do not enable 14 to 18 year olds to attend school is also prohibited.

On the other hand, all companies, irrespective of their line of business, are required to employ and enroll apprentices in the National Courses of Apprentice, in a number equal to at least 5% and at maximum 15% of their employees, being allowed to resort to, in the lack of the official schools, technical education schools or non-profit organizations whose purposes are to assist the young aged and provide education.

12.17 Hiring of employees rehabilitated by the Social Security or bearer of deficiency

According to article 36 of the Law No. 8,213/91, the company with 100 or more employees is bound to fulfill from 2% to 5% of its positions with rehabilitated individuals beneficiary of the Social Security or with individuals bearing habilitated deficiency, in the following proportion:

I - up to two hundred (200) employees, 2%;
II -from two hundred and one (201) to five hundred (500) employees, 3%;
III - from five hundred and one (501) to one thousand (1,000) employees, 4%;
IV - more than one thousand (1,000) employees, 5%.

For the purposes of calculation of the above percentages, it shall be considered the number of employees of all the establishments of the company (head-office and branches), who may be distributed among the establishments or concentrated in one of them.

The non-compliance with such minimum quota demanded by the Law will imply the application of administrative fine, in the event of an inspection in the company.

12.18. Termination of the employment agreement

The employment agreement may be terminated by either the employer or the employee and, also, by common decision of both parties.

Employment is terminated by an act of the employer dismissing the employee, with or without cause. When with cause, the employee loses his/her right to severance payments assured by law (due to practicing grave fault), which payments are assured in the case of termination without cause.

The employment relationship shall be terminated by act of the employee thru a voluntary dismissal request or indirect termination. In the first case, the employee is not entitled to any severance payments; in the second case the employee is entitled thereto, especially since it is a penalty to the employer for having practiced a fault.

The employment relationship may be terminated by the parties' mutual agreement, when both agree on the terms of the dismissal.

12.19. Prior notice

Prior notice is the expression of intention by the parties that intends to terminate the employment.

It usually corresponds to one month of work. The employer that no longer desires the presence of the worker at its facilities as of the delivery of the notice of termination may indemnify the prior notice period, which shall be computed in the employment agreement for all effects, i.e. calculation of vacation, 13th salary (Christmas bonus), Severance Fund (FGTS), etc.

Certain collective labor agreements establish different periods to the prior notice, taking into consideration the period of employment at the company, among other aspects.

In case the employment agreement is terminated by a dismissal request made by the employee, he shall give the previous notice to the employer, under pain of having discounted the respective amount from the severance payments.

12.20. Damages pursuing from the employment relationship

The employer cannot make any deductions from the worker's salary, except cash advancements, legal requirements or collective agreement provisions.

In the case of damages caused by the employee, the deduction is legal, provided that this possibility has been agreed or in the occurrence of the employee's voluntary misconduct.
On the other hand, the employer shall be liable for any damages caused to the employee, whether physical or moral.

According to the Federal Constitution, it is up to the Labor Courts to analyze and judge the claims for damages to the employees.

In these cases the right to indemnity is not controversial, falling upon the employer that practiced the act, directly or thru an agent that caused the damages, liability for the payment, irrespective of the court where the matter will be discussed.

12.21. Confidentiality Clause

Due to the high competitiveness in the market, the employers have been requesting more and more their employees and even service providers to sign a confidentiality agreement.

Such agreement can be unilateral or bilateral, this is, its clauses can be imposed by one of the parties or upon mutual consent.

Its contents brings everything that must be considered as confidential by the employee, since the simplest up to the most complex act, among which, it can be highlighted the confidentiality of any and all technical, industrial, commercial and administrative information, during the validity of the agreement and after its termination, under the penalty of the employee being liable both in the civil and in the criminal grounds, in addition to the possibility of the imposition of the penalties provided for in the labor rules, especially the just cause applicable to the subject, as set forth in item "g" of Article 482 of CLT (company's secrecy violation).

The so-called "company's secrets" are considered, among those assets and rights of the employer's property, the employee's material and/or intellectual activity and the technical improvement which have been acquired during the validity of the contract, whether by means of practice or by means of studies.

Therefore, the confidentiality clause, in principle, would only be valid while the agreement relationship is in force, whether related to labor or to rendering services, as the rescission terminates any previously existing relationship.

In this sense, if termination occurs, nothing prevents the employee from being hired by another employer in order to perform similar tasks to the previous one, what is very common.

However, it is said "in principle", as the new contracting must respect confidentiality and the terms which have been agreed upon in the previous contract, exactly in order not to violate the other's right.

As a consequence, one may conclude that the confidentiality clause does not restrict the job and the new contracting, but it must respect, with no doubts, the terms agreed in the previous job or in the previous contracting in order not to incur in violation of rights.

12.22. Use of the company's e-mail and employee's privacy

Lots of discussions have been occurring lately with regard to the use of corporate e-mails and the violation of employee's privacy.

However, the fact is that the employer grants an e-mail account to its employees so that they may use it as an additional work tool.

For this reason, the employers have the right to oblige their employees to abstain themselves from using computers to access sites which are not related to the professional activity and they also have the right to prohibit the use of corporate e-mails for private matters.

This is because it is evident that the monitoring of the employee' activity represents an exercise of the the employer's property right over the computer, the server and the electronic mail itself.

Therefore, if the employer grants an e-mail account and provides access to internet to its employees, as long as those employees had been expressly communicated that there will be control in relation to its use, there is no violation to the employee's dignity.

The prohibition of accessing sites which are not related to the professional activity, as well as the prohibition of the use of e-mails granted by the company for purposes not related to professional issues, do not offend the employee's privacy; on the contrary, it represents the due and licit right of the employer.

 

 

12.23. Employees' Inspections

In some cases, due to the company's activity, the employer usually establishes that, after the working hours, the employees should be submitted to personal inspection, before they leave the company.

Said measure aims to prevent the removal of materials, parts, drugs, among others, which are the target of illegal activities.

As per the current majority's jurisprudence understanding, close inspection offends the employee's fundamental rights, which are guaranteed by the Federal Constitution, such as the person's dignity, the prohibition of inhumane and humiliating treatment and the inviolability of intimacy and honor.

In addition, it must be highlighted that there is the understanding that the employer may inspect its employees as it is the employers' right to care for its properties, but said conduct must be made with respect and discretion and the inspection shall be made by a person of the same gender and as long as it is not intimate (that one in which one demands the employee to show his/her body just wearing underwear or even being nude).

In this regard, article 373-A of CLT, added by Law nr. 9.799/99 rules that: "the employer or representative is prohibited to make intimate inspections in female workers or female employees."

Therefore, the company that makes intimate inspections to its female employees may be subject to a possible inquiry at the Labor Court.

In view of the aforementioned, despite the inspection procedure which is performed by the employer to the employee can be justified in order to prevent the removal of materials, parts, drugs and other objects that may cause the illicit act to happen, it is certain that in the performance of said inspection the companies must respect some measures in order to avoid possible penalties.

However, in this case, the employer should make use of electronic equipment, which may detect or prevent said deviations, because, even though the intimate inspection is one of the most used forms by companies as a safety measure, it is considered by the Labor Courts as a practice that offends the employee's integrity and intimacy.

12.24. Retirement and termination of the labor contract

Discussions have occurred for so long as to whether the employee's spontaneous retirement would imply or not in the rescission of the working agreement and, consequently, due to this, a new work contract would be initiated.

The importance of the issue was related to the penalty due to the employee when he is fired with no reason, since it was understood that, as retirement was the cause for the extinction of work contract, the employee would lose the right to such fund.

However, the referred to discussion was ended due to the Federal Supreme Court's decision which, when judging ADin 1.721-3, declared that the 2nd paragraph of article 453 of CLT was unconstitutional, thus resulting in the cancellation of the Jurisprudence Guidance nr. 177 of the Superior Labor Court, which understood the contractual rescission to be pertinent in this situation.

This way, whether or not the employee retires during the validity of the labor contract, by the time of the contract rescission for no due reason, the employee, as provided for in 1st paragraph of article 18th of Law No. 8.036/1990, will necessarily have the right to a 40% indemnity on the entire existing balance in the blocked account.

12.25. Moral damage

This is a recurrent discussion in the scope of the Labor Court.

It is characterized by the violation of one of the employee's personality rights, such as intimacy, privacy, honor, image, freedom, etc.

Moral damage may occur in the event of a punctual fact. However, for its configuration, one requires complete and convincing evidence of the employer's action or omission, negligence or malice, causality connection between this one and the damage experienced by the employee.
It must be clarified that there is not a parameter in the legislation to set values for the corresponding indemnification and it is, therefore, arbitrated by the judge.

It must be emphasized that it is unquestionable that to quantify the amount that aims to compensate the person's pain requires common sense from the judge. And the setting of this amount should be grounded on the reasonable logics so as to avoid extreme amounts (insignificant or big ones).

Thus, indemnity due to moral damage is grounded on the recovery of the attacked employee's morale and in the employer's punishment so that he will not commit this illicit act anymore.

12.26. Material damage

Material damage, including loss of profits, results from the damage to physical integrity, the decrease of labor capacity, decrease of life capital - useful life - and reimbursement of expenses incurred from those.

It regards, therefore, to the obligation to indemnify the employee for damages caused to him due to an illicit act motivated by the employer and which brought damages of pecuniary nature to the employee.

In fact, for the granting of indemnification, in addition to convincing and complete evidence of the employer's action or omission, negligence or malice, causuality connection between this one and the damage experienced by the employee, it must also be demonstrated by the employee which damages have been effectively experienced by him.

Therefore, once the material damage is proven, in other words, when the harm to physical integrity has been proven, the decrease of labor capacity or the decrease of life capital, the Labor Court will fix the amount to be paid by the employer to the employee as a material damage, which is simply the reimbursement of the amounts paid by the employee (even in future) due to the illicit act made
by the employer.

12.27. Conclusion

This paper was intended solely to draw up a simplified overview of the main rules that govern employment relationships in Brazil.

Evidently, each case must be reviewed, observing the general and specific legal rules that apply individually in order to make the best business decision and so to avoid a contingency for having adopted procedures that are not in line with the current labor laws.

 

Copyright © SWISSCAM Brasil - Câmara de Comércio Suíço-Brasileira
+55 11 5683 7447 - swisscam@swisscam.com.br