Labor Reform in Brazil: Differences with Argentina

On July 13, 2017, the Brazilian Senate approved, a so-called "Labor Reform" that modifies more than 100 points referring to labor relationships in Brazil. The original law dated from 1943.

We detail the changes introduced with the reform and provide a brief comparison with the Argentine system:
 

1- The possibility of negotiation between the employers and the employees is extended. Agreements per company and individual agreements will prevail over collective bargaining agreements and business agreements. It will be possible to negotiate a change in almost all working conditions, among which it expressly foresees: the length of the working day; provision of statutory breaks; overtime; the splitting of vacations in up to three periods; the implementation of salary for productivity; and payment for remote work (known as home office). The Labor Reform does not affect in any way rights such as bonus, the number of vacation days, resting hours, minimum wage, or the Guarantee Fund (FGTS).

2- The new Brazilian labor law will allow individual agreements to be made between the employee and employer, in order to legally negotiate vacation breakdowns, patterns and working hours, and other working conditions. In Argentina, the worker cannot negotiate any situation that suppresses or reduces employee’s rights individually with the employer, since this is expressly forbidden by the inalienable rights of the worker provided for in Section 12 of the Labor Contract Law.

3- This figure is created for the case of an autonomous or self-employed worker who can provide services to a single employer but without permanent employment relationship. In Argentina, such a situation would be considered null and void, and the relationship would fall within the rules of the Labor Contract Law, considering the "self-employed" as an employee of the company to which same issued bills for the Services provided.

4 - Regarding the working day, the reform allows it to be negotiated between the employee and the employer, provided that the constitutional limits of maximum working time of 44 hours per week and 220 hours per month are respected; a situation that is quite different from the one in Argentina. In our country, the negotiation is not allowed for a reduction, nor for the extension of the working hours. Likewise, a change made unilaterally by the employer would result in the employee demanding that previous working conditions be reinstated or employee could be considered injured and dismissed, provided same could demonstrate that the change has caused a material or moral damage.

5- In terms of salaries, the Brazilian Labor Reform allows the employer to pay wages on a daily basis or on an hourly basis. This avoids the monthly measurement that presented conflicts due to its difficulty in divisibility.

6- Regarding the unions, the Labor Reform introduces a voluntary contribution. The previous scheme from 1943 contemplated a compulsory union contribution, paid once a year, whose amount was equivalent to one day of the annual salary of each worker. The Reform allows for the creation of a non-union commission of workers' representatives to negotiate directly with the company, which could not be done before the reform. It also eliminates the obligation to negotiate mass dismissals with the unions. In Argentina, mass dismissals must be processed with the Ministry of Labor, prior to the commencement of a special procedure (Preventive Crisis Procedure) provided by Law No. 24.013.

7- The Labor Reform introduces new types of employment agreements, among which we highlight the arrangement by period, whereby the worker receives a salary per working hour. The contracting of domiciliary work was also formalized; and changes were made to the part-time work contract, with a scheme similar to the one in Argentina, whereby work can be extended up to 30 hours per week, with no possibility of overtime, or a maximum of 26 hours per week, with the possibility to perform up to 6 extra hours. In addition, outsourcing is extended to the main activity of the establishment.

8- Regarding severance payments, it is established that the severance will not be determined by the employee's salary. Also, agreed upon resignation is created with reduced compensation costs (FGTS fine of 40% to 20% and 30 to 15 days' prior notice).

9- The Reform also introduced changes to procedural rules that make it difficult to access and increase the costs of labor justice. Appearance at judicial hearings is mandatory, as well as the payment of judicial costs for the losing party. Fines are established for bad faith, ranging from 1% to 10% of the amount of the claim. It also modifies the amount of sentence for moral damages, establishing maximum amounts of sentence for this item.

10- The Reform establishes that women who are pregnant or are nursing infants will be able to perform unhealthy jobs (to a medium or minimum degree) upon presentation of a medical certificate.

The Reform has had a strong impact in Brazil, and is also new legal framework in the region, motivating countries like Argentina to bring forward the discussion of reform projects in labor legislation in the Senate.