Brazil Labor Law
Brazilian labor law defines an employee as the person who renders services on a regular
basis to, and under the direction of, an employer in return for a wage. We stress that
subordination is the essential requirement to characterize an employee, and, consequently,
an employment bond.
An autonomous worker is one who renders services on an independent basis, both as to
terms and performance. He/she acts for him/herself, determining his/her own activities,
developing his/her own business, as his/her own master, since there is no subordination
relationship, and he/she is not subject to the authority of any third party.
According to Brazilian law, an employer is a company, private or public, that takes the
risk for its economic activity, hires, pays salaries, and sets out the guidelines for the
services provided by the employee.
The rights and duties of employers and employees are set out in the Consolidated Labor
Laws - CLT and in collective bargainings and collective agreements. Certain classes of
employees, such as civil servants and employees of autarquias (autonomous
government entities), however, are excluded from the scope of the Consolidated Labor Laws,
as they are subject to special regulations.
13.1 Employment Contract
A formal written agreement is not necessarily required under Brazilian law for
employment of an employee. Oral employment is fully valid, provided that the respective
annotations are made in the employee's work card. The law sets forth various rights that
are inherent to an employment relationship without the need for these rights to be
repeated or specified in a written contract.
As a general rule, an employee is contracted for an undetermined period of time, and
contracts for a determined period of time constitute an exception to this rule. The latter
contract will be valid when (i) the nature of the services justifies establishment of a
predetermined period of time; (ii) the nature of the company's activity is temporary; or
(iii) if it is a probation contract. Probation contracts cannot exceed 90 days.
No indemnity is payable to an employee on termination of his/her employment after
expiration of a fixed-term contract. However, if during the contract the employee is
dismissed without good cause by the employer, he/she will be entitled to an indemnity of
half of the salary due him/her during the unexpired portion of the contract. If it is the
employee who terminates the contract, he/she must indemnify the employer for any loss
resulting from this breach of contract.
A contract for an undetermined period of time may be terminated by either party upon
prior notice to the other party. If the employer breaches the contract without good cause,
he/she should give the employee a 30-day prior notice. Noncompliance with the prior notice
by the employer entitles the employee to receive the unpaid wages for this period.
13.2 Basic Rights of Employees
(I) Salary and Remuneration
Under Brazilian labor law, any individual rendering any kind of service is entitled to
compensation, which is known as salário (wage or salary), and may be paid monthly,
fortnightly, weekly or even per piece or task, depending on the conditions established for
the hiring. The wage paid to an employee may never be less than the minimum wage or than
the lowest wage level (piso salarial) established in the collective bargaining for
each professional category.
For all legal effects and purposes, the term salary includes-- addition to cash--food,
housing, clothing and any other benefits the company provides habitually to employees by
express or tacit agreement.
As these benefits are considered part of the employee's employment contract for all
legal purposes, they cannot be abolished. This is because under Brazilian law any changes
in employment contracts that adversely affect the employee, even if with his/her consent,
are deemed to be legally null and void.
(II) Weekly Remunerated Rest Period (D.S.R)
All employees have a right to a one day's remunerated rest period, which should
preferably fall on a Sunday. In the case of employees who receive their salary monthly,
payment of the weekly remunerated rest period will already be included in the monthly
salary.
(III) Vacations
Every employee, upon completing one year's service with the same company (the
"acquisition period"), is entitled to 30 calendar days' vacation if he/she has
not been absent from work more than five unjustified times during the period. Salary in
relation to the vacation period must be paid at the latest 2 (two) days before the start
of the vacation period.
(IV) One-Third Bonus on Vacation
As from enactment of the 1988 Federal Constitution, workers acquired the right to
receive a one-third bonus in addition to the normal wage, at the time of annual vacations.
(v) 13th Salary
In December of each year, the employer will pay the employee a salary bonus, known as
the Christmas bonus, corresponding to the highest compensation paid to the employee during
the year. When taking a vacation, the employee may request a proportional advance on this
Christmas bonus.
(VI) Advance Notice
If an employer terminates an employment contract without just cause, it must give the
employee 30 days' advance notice, and during such period reduce the working day by two
hours or seven consecutive days, without prejudice to payment of the employee's full
salary. Lack of advance notice by the employer entitles the employee to a wage
corresponding to the advance notice period.
(VII) Health Hazard Allowance and Risk Premium
In the case of employment in activities considered by law to be hazardous, an
additional monthly allowance for the hazardous conditions will be paid by the employer.
Such allowance will be equivalent to 10%, 20% or 40% of the minimum wage, depending on the
hazard degree. In the case of dangerous activities, such as those involving contact with
explosives or flammable materials, an additional payment in compensation for the risks
involved will be paid by the employer at 30% of the employee's salary.
We note that the aspects and rights described herein are general and permit exceptions.
Moreover, collective bargaining agreements for different professional classes may grant
employees rights broader than those provided for by law.
13.3 Termination of Employment Contract
The termination of an employment contract may occur, as a general rule, either by
decision of the employer (dismissal of the employee) or by decision of the employee
(resignation). In the case of dismissal of an employee, it may be either for good cause or
by unfair dismissal.
Dismissal for Good Cause: The dismissal of an employee for just cause may only
occur where the dismissal results from one of the following acts of the employee:
(a) dishonesty;
(b) improper conduct or lack of self-restraint;
(c) regularly doing business on his/her own account or for the account of a third party
without the employer's permission, or when the activity is in competition with the
employer's business or adversely affects the quality of the employee's work;
(d) criminal sentencing of the employee, in final judgment, provided that execution of
the penalty has not been suspended;
(e) sloth in the execution of his/her duties;
(f) intoxication during working hours;
(g) violation of trade secrets;
(h) any act of indiscipline or insubordination;
(i) abandonment of employment;
(j) any act of violence or any act injurious to the honor or reputation of any person,
except in legitimate cases of self-defense, or defense of the interests of a third party;
(k) any act of violence or any act disparaging to the honor or reputation of the
employer or superiors, except in legitimate cases of self-defense, or in defense of the
interests of a third party; or
(l) constant gambling.
The practice of acts contrary to national security where these are duly proved in an
administrative hearing also constitutes good cause for dismissal.
If the employee is dismissed for good cause, he/she will be entitled only to the
outstanding salary, accrued vacation and the additional one-third bonus in respect of the
accrued vacation. Double accrued vacation remuneration is also due when the employer has
failed to allow the employee to take the annual vacation during the twelve months
following the acquisition period.
Dismissal without Good Cause (Unfair Dismissal): In the case of termination of
the employment contract by the employer, the employee shall have the following rights:
(a) outstanding salary for the days worked during the month;
(b) 30 days' prior notice;
(c) proportionate 13th salary (calculated based on the salary earned during the last
month of employment);
(d) one-third bonus in respect of vacation;
(e) double accrued vacation, if applicable; and
(f) release of the FGTS deposits, with a fine of 40% of the total amounts deposited in
the employee's FGTS account.
The employment contract and collective bargaining agreement may provide for other
benefits, which must also be considered.
Resignation: A resigning employee is entitled to all the severance pay listed
above, except for prior notice and release of the FGTS deposits. When an employee resigns
prior to completing one year's employment with one same employer, the employee will have
no rights to vacation.
Please note that in any of the above events it will always be necessary to provide for
homologation of termination of the employment contract at the employee's labor union. If
the employee is a manager or officer, there may be other steps to be taken outside the
labor area, such as cancellation of powers of attorney, and so on.
All severance pay must be made by the employer within ten days of the notice of
termination or resignation. In the case of unfair dismissal when the employee is kept on
the job during the 30-day notice period, the severance pay must be made available on the
first business day after the end of the notice period. Failure by the employer to respect
these deadlines will give rise to a fine for the employer, as well as an obligation to pay
an indemnity to the resigning employee.
13.4 Temporary Work
The purpose of temporary work is to replace a company's regular and permanent staff, or
to perform temporary additional services required by the company. Temporary work cannot
exceed 90 days.
13.5 Foreign Workers - Job Opportunities
Like many other countries, Brazil has taken steps to preserve job opportunities for its
citizens, by means of the principle of proportionality, under which all industrial
or commercial firms with more than three employees are required to ensure that at least
two-thirds of their personnel are Brazilians. This proportion may only be reduced by
government decree, and does not apply to rural industries, industries in agricultural
areas that engage in processing local produce, or industries (other than mining) that
quarry, excavate, and carry out other related activities.
To obtain a reduction in this proportion, the shortage of Brazilian workers for the
jobs in question must be verified by the Department of Labor and the Statistical
Department of the Social Security Service. For the purposes of the two-thirds rule, aliens
in Brazil for more than ten years who have a Brazilian spouse or child are considered to
be Brazilians. Nevertheless, some businesses are restricted to native-born Brazilians or
Brazilian citizens in general (e.g. master of a Brazilian merchant vessel).
A Brazilian worker may not be paid a wage lower than an alien for performing the same
work, except in certain special circumstances established by law.
Whenever it is necessary to lay off workers, an alien must be laid off before a
Brazilian performing the same work.
Portuguese citizens in Brazil enjoy the same rights as Brazilians, with the exception
of those professions which are reserved exclusively for native-born Brazilians.
13.6 Unemployment Guarantee Fund - FGTS
Law 5107/66 instituted the Unemployment Guarantee Fund - FGTS, a welfare mechanism
devised as an alternative to the tenure system then in effect. This law was repealed by
Law 8036/90, which regulated the provisions of the 1988 Constitution. As a result, the
FGTS system became compulsory for all employees hired after October 5, 1988, in accordance
with a written agreement and the respective annotation on the employee's work card.
Under the FGTS system, every month the employer deposits the equivalent of 8% of each
employee's compensation for the previous month in a blocked bank account in the name of
the employee.
An employee unfairly dismissed under the FGTS system is entitled to withdraw the FGTS
deposit, together with interest, monetary correction and a further 40% figured on the
total. Collective bargaining can provide for an additional indemnity.
13.7 Workday
For employees working in private firms, the maximum work day is eight hours; the
maximum work week, 44 hours. For some specific professional categories, called categorias
profissionais diferenciadas, collective labor bargainings can establish a different
work day, or work week.
Work performed beyond these time limits is considered overtime. Up to two hours'
overtime a day may be rendered upon written agreement between employer and employee, or a
collective bargaining. The minimum compensation for overtime is 50% higher than the normal
hourly rate. Overtime payments do not apply to employees in positions, of trust, such as
management.
There must be a minimum rest period of eleven consecutive hours between working days.
In addition, each employee is entitled to a weekly rest of 24 hours, falling wholly or in
part on Sunday.
Night work is work performed between 10 p.m. and 5 a.m., and must be compensated at
least 20% more than the daily working hour.
13.8 Unions
Freedom of association is insured to professions and trade unions by the Federal
Constitution. The principal function of a union is to represent the general interests of
its members as a group or individually. Unions may also enter into collective bargainings
or agreements, and promote conciliation in Bargainings.
Collective bargainings or agreements are usually carried out through negotiation, as a
means of regulating specific labor relationships. After these instruments are signed by
the representative unions for the professional and economic categories, the employer must
comply with its clauses since they are enforceable thereon.
These instruments are binding on the company and on all the members of the union's
professional category. This applies even if the members are not unionized.
13.9 Social Security
Under Brazilian social security law, every employee must necessarily be covered by
social security insurance. Social security in Brazil is made up of monthly contributions
by employees, employers and the Government. These payments entitle the employee to receive
social security benefits.
Decree 89312 of January 23, 1984 governs all social security benefits in Brazil. It
sets out the various types of retirement pensions: disability, retirement, special and for
length of service.
The employer is obliged to take out work accident insurance for its employees from the
Brazilian Social Security Institute - INSS. The cost of this insurance is fixed by the
Ministry of Labor and Social Security. Directors and partners of firms who are not
employees, self-employed workers, and domestic servants are not covered by work accident
insurance legislation.
Please note that changes in the social security regulations are expected in light of
the several bills under way in Congress.
13.10 Employees' Participation in Corporate
Profits
Provisional Measure 794 of December 29, 1994 established the participation of employees
in corporate profits or results as a means
