- 1.May foreign employers hire employees directly in your jurisdiction or is it necessary to act through a local subsidiary?
If the foreign company has no local subsidiary, branch office or governmental authorisation to act in Brazil (a Brazilian Registration Number), it will have no capacity to hire employees. Even so, it may be responsible for personnel that have served in an informal way.
- 2.Is there a limit to the number (or ratio) of foreign employees an employer may have in your jurisdiction?
Yes, there is a ratio of foreign employees an employer may have in Brazilian jurisdiction. With a few exceptions, the general rule is that companies have to maintain at least two-thirds of Brazilian employees, or two-thirds of the total amount of salaries payments to Brazilian employees.
Beside this, there are several ways of contracting foreign employees and some previous formalities that have to be fulfilled in order to obtain authorisation to work in Brazil
- 3.May labour or employment agreements, and the termination of those agreements, be subject to any legislation other than that of your jurisdiction?
There is no possibility to subject labour or employment agreements, and the termination of those agreements – at Brazilian jurisdiction – to another countries’ legislation.
- 4.What are the requirements for an enforceable agreement? Are there any formalities that labour or employment agreements must adopt to be enforceable in your jurisdiction? Are fees, duties or taxes generated by any of them?
It is not necessary to have a formal agreement in order to prove a labour contract in Brazil. Its existence is based in reality. But it is better for the company if there is a specific agreement signed with each employee in order to define duties and rights of the parts.
If a company hires formal employees, there are several governmental formalities to be fulfilled, rights or duties to be respected, fees and taxes to be paid. If a company has informal workers, they may easily have their contract recognised at the Labour Justice. In this case, formalities, rights or duties, fees and taxes may be claimed with application of fines, interests, indexation, etc.
- 5.What are the implications of hiring personnel without a clear, written, employment agreement in place? May this have any effect in the event of litigation?
Hiring personnel without a clear written agreement about labour conditions may have effects in the event of litigation as it will give the employee the opportunity to claim about misunderstandings and agreements that did not exist. But even in case of a clear written employment agreement, the employee may claim about illegal clauses, about non-written clauses, or about any labour condition that has not been respected. He may prove it by testimonies. The reality and the legality have more power than the agreement in the Brazilian industrial relation system.
- 6.What are the employers’ obligations (social security and related benefits) regarding employees after contracting? Are any social benefits tax deductible?
Some of the main social security employers’ obligations and employees benefits are:
- monthly deposit of 8 per cent of employee remuneration (wage and other gains) in an individual guarantee fund account known as FGTS (Service Time Guarantee Fund);
- monthly transfer to governmental institution of the employee’s contribution to social welfare (from 8 to 11 per cent of the employee’s remuneration). This contribution is deducted from the employee’s remuneration.
- monthly payment to governmental institutions of employer’s contribution to social welfare and social programs (from 20 per cent to 25 per cent of employee’s remuneration);
- monthly transfer to governmental institution of the employee’s income tax values payment (from 7.5 to 27.5 per cent of the employee’s remuneration). These values are deducted from the employee’s remuneration.
- maternity licence for at least 120 days;
- paternity licence for five days;
- free assistance in nursery school and preschool to children and dependents since birth until five years old; and
- Workers’ Feeding Program (known as PAT). This benefit authorises deductions in employers’ taxes.
- 7.What benefits, other than cash remuneration are employees in your jurisdiction entitled to? What severance entitlements may employees claim?
There are several benefits that employees are entitled to in addition to contracted cash remuneration. Some examples are:
- at least the professional category minimum wage;
- limit of 44 hours of work per week, or reduced limit, according to each professional category;
- one day weekly rest time, preferably on Sundays;
- daily rest time and meal break during the work period (the daily limits vary according to the work period);
- 30 days annual rest time, paid with a monthly wage plus one-third of increment;
- a thirteenth annual wage, paid with a monthly wage, 50 per cent during the year until 30 November or at annual rest time (if required by the employee) and 50 per cent until 20 December;
- night work from 10pm in the evening until 5am in the morning, with a reduction of an hour duration and supplemental payment of 20 per cent of employee remuneration;
- overtime remuneration with at least 50 per cent of increment;
- insalubrious work compensation;
- hazardous work compensation;
- irreducibility of salary;
- prohibition of salary differences to employees with equal capacity and productivity in same activity;
- prohibition of groundless severance if the employee is elected to direct internal commission of accident prevention from the candidate registering until one year after end of mandate;
- prohibition of groundless severance if the employee is pregnant, from pregnancy until five months after childbirth
- recognition of conventions and category labour agreements;
- all benefits due to convention and category labour agreements, which have to be identified case by case, according to professional and economic categories of employee and employer.
In case of groundless severance, when noticed by the employer, employee’s entitlements are, at least:
- 30 days previous notice of severance or 30 days indemnification;
- remuneration of worked and unpaid days;
- payment of past and unpaid annual rest time;
- payment of ratio of future annual rest time;
- payment of ratio of thirteenth annual wage;
- draw of 100 per cent of Service Time Guarantee Fund with increment of 40 per cent of the last account balance, which have to be deposited by employer and reflect other 10 per cent deposit as social contribution.
- 8.What is the role of the unions in the relationship with foreign employers?
Unions have no special role in relationship with foreign employers. These employers will have the same treatment and will be obliged to the same collective rules as the Brazilian ones.
- 9.Do employees have the right to form unions? Is it mandatory for employees to honour this?
Employees are free to form unions, but just one union represents each category at each territory base.
The employees are not obliged to associate the union. But, even so, the conventions and category labour agreements benefit all employees, associated or not.
- 10.May unions be an independent party to a labour controversy in your jurisdiction? What are their rights and duties towards the employer and unionised employees?
There are some situations in which law determines the participation of unions to solve labour controversy, as when employees and employer want to establish a profit and results participation program, a reduction of limit to work hours, or a reduction of wage.
- 11.May a union request bring about or cause a stoppage? If so, what remedies would be available to the employer?
Unions may bring about a stoppage, but under some conditions. The most important: the category employees assemble has to decide for stoppage; the union has to inform employer previously about stoppage; the union has to assure maintenance of essential activities when related to public interest. If the stoppage attends all legal conditions, it will be considered legal and may prevail for an undetermined time. In this case, the employer will have to negotiate labour conditions that justify the stoppage in order to have employees back to work. If this negotiation doesn’t come to an agreement, a judicial solution for the conflict may be requested, but the union has to agree with this way of negotiation.
- 12.Which legislation governs the enforcement of international relationships or labour agreements provided for in international business contracts, and in international commercial proceedings, to be performed within your jurisdiction?
An international relationship or labour agreement that is signed and paid in a foreign country to be performed in Brazilian jurisdiction, if related to CEOs, will not be submitted to Brazilian laws. In a different way, if related to general workers, its conditions will have to consider Brazilian employers obligations and employees benefits. And if the worker is a foreigner, the employer will also have to provide Brazilian government authorisation for him to work in the country.
- 13.Which international treaties or conventions are applicable to labour or employment relations in your jurisdiction? Has your country made any reservations to or denounced any treaties?
Brazil has ratified most of ILO Conventions (6, 11, 12, 14, 16, 19, 21, 22, 26, 29, 42, 45, 53, 80, 81, 88, 89, 92, 94, 95, 96, 97, 98, 99, 100, 104, 105, 107, 108, 111, 113, 115, 116, 117, 119, 120, 122, 124, 125, 127, 131, 132, 133, 135, 136, 137, 139, 140, 141, 142, 144, 145, 146, 147, 148, 152, 154, 155, 159, 161, 162, 163, 164, 166, 168, 169, 170, 171, 174, 182).
It has partially ratified six ILO Conventions (102, 103, 106, 109, 138, 160); has rejected two Conventions (90, 143); and has denounced some Conventions (3, 4, 5, 7, 41, 52, 58, 91, 93, 101, 110, 158).
But Brazil hasn’t ratified many of ILO Conventions (1, 2, 8, 9, 10, 13, 15, 17, 18, 20, 23, 24, 25, 27, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 43, 44, 46, 47, 48, 49, 50, 51, 54, 55, 56, 57, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 82, 83, 84, 85, 86, 87, 112, 114, 121, 123, 128, 129, 130, 149, 150, 151, 153, 156, 157, 172, 173, 175, 177, 179, 180, 181, 183, 184, 185, 187, 188). The one that causes most of international questions is number 87, referring to union liberty and unionising right protection.
There are some international treaties applicable to labour employment relations, but the most significant is the one that assures labour reciprocity with MERCOSUL countries (Common Market of South America).
- 14.Are arbitration agreements to resolve labour or employment disputes valid and enforceable in your jurisdiction? Is there any legislation in your jurisdiction governing the private arbitrability of labour or employment disputes? May controversies in labour or employment matters in your jurisdiction be resolved through private arbitration (in your jurisdiction or abroad), or in foreign courts?
With a few exceptions, arbitration agreements and private arbitration (local or from abroad) – as far as private agreements – are not accepted by Brazilian judges as a way to resolve individual labour or employment disputes.
- 15.Does the law require that labour or employment proceedings be held in a specific jurisdiction or place or require that proceedings be carried out in a specific language?
Any labour and employment proceedings (which include all controversies derived from labour and employment relations) have to be held at the Labour Justice and carried out in Portuguese. If necessary to make use of documents written in a foreign language, they have to be translated by a sworn translator.
- 16.Do labour or employment proceedings generate or accrue taxes, duties or any kind of fees, including attorneys’ fees?
In case of proceedings, the condemnation may determine the payment of salary and indemnification titles, or oblige the employer to do something that is due to law. The salary titles will generate the concurrent payment of social contributions and taxes referred in question 6. The monetary condemnation will be increased with indexation and table of interest. Condemnation will also generate law costs and employees’ lawyers’/attorneys’ fees (15 per cent of the total amount of condemnation), certified accountant and other experts, as that needed to analyse insalubrious and hazardous conditions of work. The employee will never have to pay fees related to employer’s lawyer/attorney.
- 17.Is there a concept in your jurisdiction providing for class-lawsuit in labour or employment matters? Does your law allow the consolidation of multiple labour or employment proceedings?
Brazilian Unions and the Public Ministry of Labour have competence to provide specific class action lawsuit on behalf of employees. In some exceptional cases, employees may also consolidate multiple labour or employment proceedings. There are conditions that have to be fulfilled in all these cases.
- 18.Can foreign lawyers serve as counsel in labour or employment proceedings in your jurisdiction? If so, can they do so alone or must a local lawyer serve as co-counsel? Are their fees subject to local taxation?
No, foreign lawyers cannot serve as counsel in labour or employment proceedings in Brazil. Local lawyers must have inscription at the Brazilian Bar Association. Their fees depend on agreement between lawyer and client.
- 19.What are the rules on discovery in proceedings?
Brazilian labour and employment proceedings are based in celerity and orality. Therefore, there are short and specific periods to presentation of facts and documents by each party, so as to disclosure of facts or documents to the opposing party.
- 20.Are labour or employment awards issued by foreign courts or arbitration courts acknowledged, recognised and enforced in your jurisdiction?
In general, labour or employment awards issued by foreign courts or arbitration courts will not be recognised nor enforced in Brazilian jurisdiction.
- 21.May labour courts or boards grant interim relief? If so, how is that relief enforced? Does it apply to assets located abroad?
Brazilian Labour Justice may grant interim relief. It has legal authority and several covenants with Governmental Institutions in order to break employer’s bank secrecy, to pawn current accounts, vehicles, credits on goods or money, etc. With these covenants it may be possible, somehow, to apply assets located abroad.
- 22.Can labour courts or boards issue orders, subpoenas or use other legal processes to compel the production of evidence by a third party or compel a third-party witness to appear before them? If so, will a court of law lend its aid in enforcing such an order against a recalcitrant third party?
Brazilian labour courts have authority and freedom to compel the production of evidence by a third party or to compel a third-party witness to contribute with information, but this is not usual. Each judge adopts a different position about this matter. But if one judge determines this way of proof production, it may be obtained by force.
- 23.Can a party to a labour proceeding seek relief from the court or board? What is the scope of such relief?
Brazilian Labour courts may grant active relief, such as an award of unpaid remunerations, or passive relief defining the existence of a employment relation that has not been recognised by the employee.
- 24.Are the resolutions issued by a labour court or board final? What are the remedies available for the parties?
There are instances of judgment: the first instance has an individual judge at each jurisdiction (Labour Justice); the second instance has groups of judges at each region of the country (Regional Labour Courts); the superior instance has groups of judges at two Courts (Superior Labour Court and Federal Court of Appeal). There are many kinds of remedies available for the parties against each award, and there are also many conditions in order to use them.
- 25.What are the grounds for challenging an award and what is the period of time a party has to challenge that award?
It is impossible to list in brief all grounds for challenging an award in Brazil. There are different conditions and periods of time to lodge each kind of appeal. The time varies from 48 hours to eight days, according to the situation. There are costs involved that vary from case to case.
After final judgment, the parties have two years to vacate the award, but under rigorous conditions and against cash deposit of 20 per cent of claims’ value.
- 26.If a party files a lawsuit in violation of an agreement to arbitrate, will a petition by the defendant to remit the lawsuit to arbitration be granted by the labour courts or boards in normal circumstances or is the right to sue unwaiveable? If so, will that petition be treated as a threshold matter or will it be rolled into the merits of the litigation such that the defendant will also need to defend the merits of the lawsuit in court?
Brazilian labour courts usually do not consider arbitration agreements in individual labour matters. If a party files a lawsuit in violation of an agreement to arbitrate, a petition by the defendant to remit the lawsuit to arbitration will be treated as a preliminary matter, but will not be granted.
- 27.Does the law provide that post-award interest accrues on an unpaid award?
According to Brazilian law, the labour proceeding credits are accrued by indexation since they should have been paid and by interest post-award or, in some cases, since the claim has been brought before court.
- 28.Is a labour court or board empowered to award attorneys’ fees to the prevailing party?
Labour court may award fees to prevailing party, but just in benefit of employee’s attorney. There are some conditions that have to be fulfilled for that, as financial incapacity of the employee to support the law costs and fees and presentation of union credentials of attorney. These conditions are usually fulfilled.
- 29.Please describe the standard used by the courts in deciding whether to vacate an award.
Labour Courts will accept to vacate an award just if the situation fulfils exactly and entirely one of the hypotheses due to law. And it is not usual to vacate a Labour award in Brazil because there are just eight legal hypotheses for that and most of them are very rare to occur and difficult to be proved.
- 30.Can a foreign award be enforced if the award has been set aside by the courts?
No, foreign award cannot be enforced if it has been set aside by the courts.
- 31.In brief, what advice do you have with respect to labour or employment relationships and agreements for a foreign lawyer advising a foreign client contemplating entering into a business deal with a company from your jurisdiction? What are the red flags?
Answers given to this questionnaire are limited and general, because it is impossible to inform in few words about labour and employment duties and rights in Brazil.
Brazilian labour and employment law is complex, dynamic, based on rigorous principles of employee’s protection, contractual reality and impossibility to renounce rights, besides others. Parties’ agreements, even when formal, have no power against contractual reality and law. General rules have always an exception that may be identified only after analysis case by case, region by region of the Country. Multiple rules may be applied to the same matter. One employee may have different professional categories under his responsibility, each of them submitted to different rules. Interpretation of law may change according to position of each judge or court. Rights (not only values) that have been given to an employee, even by mistake, may be considered incorporated to the contract. That’s why labour risk management is so important in Brazil.
It is not easy to decide about rules that have to be considered to each situation and about advice that has to be given to each client. The key answer to any question about labour and employment in Brazil is: “it depends on”. Therefore, even Brazilian lawyers are not able to advise about this matter if they have no practice in this speciality. For these reasons and remembering the high costs of labour and employment relationships in Brazil, foreign lawyers should consider having local specialists as partners to advise foreign clients.
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