Employment and employee benefits in Brazil: overview

A Q&A guide to employment and employee benefits law in Brazil.

The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements and proposals for reform.

To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits: Country Q&A tool.

The Q&A is part of the global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.

Contents

Scope of employment regulation

1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Laws applicable to foreign nationals

The applicable law is that of the place where the employee renders the services. Therefore, if a foreign national works in Brazil, Brazilian labour law applies. In this case, Brazilian law is applied regardless of any choice of law governing the contract or the nationality of the parties.

The Brazilian labour law is set out in:

  • The Federal Constitution.

  • The Consolidation of Labour Laws (Consolidação das Leis do Trabalho) (CLT).

  • The Brazilian Social Security Law.

  • The Brazilian Government Severance Indemnity Fund Law (Fundo de Garantia por Tempo de Serviço) (FGTS).

  • Other special legislation and rules issued by the Ministry of Labour and Employment (Ministério do Trabalho e Emprego) (MTE).

  • Collective bargaining agreements.

The labour rules are considered inalienable rights and guarantee equal legal treatment for native and foreign workers.

Laws applicable to nationals working abroad

As a general rule, when a Brazilian national is hired abroad to work in a foreign country, his employment contract is governed by the rules applicable in the country where the services will be provided (Article 14, Law 7064/1982).

However, Brazilian labour law must apply, if it is more favourable to the employee, when (Law 7064/1982, supplemented by Law 11962/2009):

  • A Brazilian citizen or a foreign national is hired in Brazil to work abroad.

  • The employment contract was already being executed in Brazil before the transfer to another country.

  • The employee maintains an employment contract with a Brazilian company or its subsidiary.

In addition, the Brazilian Social Security Law and the FGTS also applies in those cases.

 

Employment status

2. Does the law distinguish between different categories of worker? If so, what are the requirements to fall into each category, the material differences in entitlement to statutory employment rights and are there any maximum time periods for which each category of worker can be engaged?

Categories of worker

In general terms, Brazilian workers can be classified into:

  • Employees. To be classified as an employee, the following elements must be present:

    • the worker is a natural person who works on a regular basis;

    • the worker works for payment; and

    • subordination is present and the work is undertaken personally. Subordination is present if the worker integrates into the company's organisational structure, is subject to direction in his work, and has limited or no autonomy.

    Employees can be:

    • farm or urban workers; and

    • domestic or company employees (including common employees, temporary workers, domestic workers, officers, apprentices, or part-time workers, among others).

Labour rights are largely the same for all these kinds of employees. However, there are certain specific laws, including Law 5889/1973 (farm employees), the Consolidation of Labour Laws (CLT) (urban employees), Law 5859/1972 and complimentary Law 150/2015 (domestic workers); the CLT and Law 6019/1974 (temporary workers), CLT and Law 10097/2000 (apprentices).

  • Independent contractors. These workers provide independent and autonomous services.

  • Directors, statutory officers and companies' legal representatives. These act according to the powers conferred in the company's bye-laws or articles of association/incorporation.

  • Interns. These are trainees who attend university courses and are not employees, but are subject to Law 11788/2008.

Entitlement to statutory employment rights

Employees have certain statutory rights that independent contractors do not have. The rights of independent contractors are usually contractually agreed between the parties (the Brazilian Civil Code establishes very few basic rules).

Time periods

The general rule is that employment contracts are open ended. It is only possible in a few specific cases to establish a limited period of time.

A seasonal employment contract is a specific type of temporary contract with the following main characteristics:

  • It must be justified. Seasonal work is typically justified by an increase in the company's demand during certain periods of the year.

  • It must have a maximum duration of two years.

Experience contracts are special contracts entered into for a specified period, with the purpose of verifying whether the employee has the ability to perform the activities he was hired to perform. These contracts are possible for a maximum period of 90 days.

Apprentice contracts can be entered for a maximum period of two years.

 

Recruitment

3. Are any grants or incentives available for employing people? Does any information/paperwork need to be filed with the authorities when employing people?

Grants or incentives

There are no grants or incentives for employing people.

However, there are certain quotas to be filled in relation to certain employees (for example, workers with disabilities and apprentices). In the case of apprentices, Brazilian Government Severance Indemnity Fund Law (FGTS) deposits are at the rate of 2% (instead of 8%) (see Question 19, Severance payments).

Filings

To hire an employee, the employer must:

  • Record the contract in the Work and Social Security Card (CTPS), including information on the job position, salary and admission date.

  • Fill in the employee data in the employees' records book (an employers' file that must be available for the auditing authorities). This is a document containing all information relating to employment contracts.

  • Inform the government of the hiring, through the General Register of Employed and Unemployed (Cadastro Geral de Empregados e Desempregados) (CAGED). This is a register that provides information to governmental institutions.

  • Subscribe the employee to the Social Integrated Program (Programa de integração Social) (PIS).

  • Provide monthly information on the employee's remuneration in the Guia de Recolhimento do Fundo de Garantia por Tempo de Serviço e Informações à Previdência Social (SEFIP/GFIP) system (that is, a guide to government control of the Brazilian Government Severance Indemnity Fund Law (FGTS) and social security contributions).

  • Present annually information to the Annual Social Information register (Relação Anual de Informações Sociais) (RAIS). This is a register that provides information related to employment contracts to governmental institutions.

 

Background checks

4. Are there any restrictions or prohibitions on carrying out background checks in relation to applicants?

It is prohibited to adopt any discriminatory and restrictive practices for the purposes of hiring, dismissal or promotion, including discriminating by reasons of sex, origin, race, colour, marital status, family status or age (Law n. º 9.029/95).

The Labour Courts frequently decide that an employer or prospective employer cannot investigate pregnancy or fertility, unless the work conditions could be dangerous for a baby. Investigations relating to certain diseases are also forbidden.

There is no specific legislation regarding background checks, but this is a very sensitive issue. Therefore, it is recommended that the employer avoid unauthorised pre-employment investigations (such as checking criminal records and credit information), even if carried out by a third party, particularly if the applicant is not aware of the background check that is to be undertaken.

Conducting toxicological tests into alcohol and drug use is also a sensitive issue. There is no mandatory rule on this matter, apart from in the case of professional drivers (Law 12.619/2012) (for whom these tests can be carried out). There is a conflict between workers' rights of privacy and employers' rights to prevent alcohol or drug use interfere with work secureness and efficiency. Doctrine and the view of the labour courts is that these tests can be carried out if necessary to prevent accidents, as long as:

  • They are done in a non-discriminatory way.

  • The employee is aware of the procedure and it does not expose him to humiliation.

 

Permission to work

5. What prior approvals do foreign nationals require to work in your country? What information/paperwork needs to be kept or filed with the authorities when they start work?

Visa

Procedure for obtaining approval. To work in Brazil, a foreign national needs a working visa. The company must request this from an office of the General Co-ordination of Immigration of the Ministry of Labour and Employment (MTE). The most common types of visa are:

  • Permanent visa to represent a Brazilian company. This is for foreign nationals who will act as a director, manager or administrator of a Brazilian company. This visa is usually granted for the same period as the foreign national is appointed as an officer of the company, but it can be easily extended after a new appointment. If the foreign national is appointed for an indefinite period of time, the visa will be initially valid for five years.

    To obtain this visa, the Brazilian company must receive foreign investment equivalent to BRL600,000 or BRL150,000 per foreign worker. If the company receives BRL150,000, it must also create at least ten new job positions for Brazilian citizens within two years from the arrival of the foreign national as a permanent visa holder.

  • Temporary visa for employment contract. This is for foreign nationals who will work temporarily as an employee of a Brazilian company. It is valid for up to two years, extendable once for the same period or converted into a permanent visa. The employer must submit the employment contract to the General Co-ordination of Immigration and provide evidence that the employee has sufficient qualifications and experience to occupy the position for which he is hired.

  • Temporary visa for technical and specialised services. This is for foreign nationals who will work as technicians or other professionals to render specialised services in the name of the foreign company. There are different kinds of technical visa, which can be valid for 30 or 60 days, or one year. The company must provide the General Co-ordination of Immigration with a:

    • technical assistance agreement signed with a foreign company (for specific cases only);

    • plan stating how the knowledge and expertise of the foreign technicians will be transferred to Brazilian nationals; and

    • summary of the foreign national's educational and professional background.

Costs. The costs for obtaining the visas are fixed and periodically revised by the General Co-ordination of Immigration of the MTE.

Time frame.  The General Co-ordination of Immigration of the MTE usually takes from 30 to 45 days to analyse the documents and information.

The visa to represent a Brazilian company remains valid for the same period as the foreign national is appointed as an officer of the company. The Federal Police Department will replace the ID card that is about to expire, upon proof that the foreign national is still in the function designated. To change to another company from the same economic group, an authorisation from the Ministry of Justice is required.

The renewal of a temporary visa must be made at least 90 days before its expiration date. The conversion to a permanent visa, after two years of residence on Brazil, must be made at least 30 days before the expiration date.

Sanctions. For a permanent visa to represent a Brazilian company, the request for replacement of an ID Card that has already expired will subject the applicant to a fine of two to five times the biggest reference value.

Where a foreign national enters into national territory without government authorisation they can be subject to deportation.

Where a foreign national stays on national territory after the visa expiration date they can be subject to the application of a fine for each day and deportation.

Where a foreign national does not deliver any document required by the government or communicate changes to their foreign national status they can be subject to the application of fine.

Where a foreign national makes false statements in any visa process they can be subject to one to five years' detention and expulsion.

Permits

Procedure for obtaining approval. As well as the specific working visa (see above, Visa), the foreign national must obtain a:

  • Brazilian ID card, issued by the Brazilian Federal Police.

  • Work and social security card, issued by the MTE.

Cost. The costs for obtaining the Brazilian ID card for foreign nationals are fixed and periodically revised by the Brazilian Federal Police.

There is no cost for obtaining the work and social security card.

Time frame. It usually takes:

  • 60 to 180 days to obtain the Brazilian ID card.

  • Seven to ten days to obtain the work and social security card.

Sanctions. In Brazil, it is illegal to employ employees without making the necessary appointments on the Work and Social Security Card. Otherwise, there is a risk of being fined by the Labor Inspection entities. In addition, the ID Card is essential for civil identification of the foreign national in Brazil.

Permanent visa for investors

Procedure for obtaining approval. There is a permanent visa for foreign investors. In this case, the Brazilian company must provide the General Co-ordination of Immigration of the MTE with the bye-laws as evidence that the foreign national has been appointed as an administrator, director or manager with management powers.

Cost and time frame. See above, Visa.

 

Restrictions on managers and directors

6. Are there any restrictions on who can be a manager or company director?

Age restrictions

As a general rule, it is forbidden to employ children aged under 16 years in any kind of position. Certain restrictions apply on employing children aged between 16 and 18 years.

Nationality restrictions

At least two-thirds of a Brazilian company's employees must be Brazilian, including managers and directors.

Other

There are no other restrictions in Brazil concerning who can occupy management or board positions.

 

Regulation of the employment relationship

7. How is the employment relationship governed and regulated?

Written employment contract

A written employment contract is not required if the employment relationship is governed by the Federal Constitution, Consolidation of Labour Laws (CLT), Brazilian Social Security Law, Brazilian Government Severance Indemnity Fund Law (FGTS) or other special legislation and rules issued by the Ministry of Labour and Employment, or collective bargaining agreements. A tacit or oral contract is acceptable. However, it is strongly recommended to execute a written contract, in Portuguese, to fix certain conditions such as:

  • Salary and benefits.

  • Procedure to offset extra working hours.

  • Probation periods.

  • Fixed terms.

  • Employee's duties (that is, confidentiality, non-disclosure and non-competition obligations, compensation duties for damages caused to the employer).

  • Company policies and standards practices, such as IT-related practices and reimbursement of expenses.

  • The possibility and conditions of travel and transfers.

Without a written contract, these conditions may not be considered valid and enforceable.

Implied terms

Certain terms are implied and do not need to be included in a written contract, such as:

  • The payment of a minimum wage.

  • Holiday entitlement. This is 30 remunerated days per year plus one-third of the amount of the monthly remuneration paid (for example, if the employee receives BRL900 for 30 days of holidays, he will also be entitled to receive one-third of that amount, BRL300).

  • 13th salary (one extra monthly salary per year).

  • FGTS.

  • A remunerated weekly day off.

  • Duties to pay Social Security.

  • Legal benefits provided for in collective bargaining agreements.

Collective agreements

Collective agreements with trade unions are automatically binding on all employment contracts. These instruments are valid for a maximum of two years, and are negotiated between the union that represents the employees and the union that represents the employer (or the company itself).

 
8. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?

All modifications of the terms and conditions of the employment contract that are harmful to the employees (even those made by mutual agreement between the parties) are forbidden and considered void. Reducing salaries is only allowed when expressly authorised by an agreement entered into with the employees' union.

 

Minimum wage

9. Is there a national (or regional) minimum wage?

There is a national minimum wage that applies to all employees, regardless of their age, industry and experience. Some states have a regional minimum wage that must be observed if it is higher than the national minimum wage.

Some collective agreements also establish minimum wages for certain professional categories and positions.

 

Restrictions on working time

10. Are there restrictions on working hours? Can an employee opt out on either an individual or collective basis?

Working hours

As general rule, the Federal Constitution restricts working hours to eight hours a day and 44 hours a week.

Some types of worker have specific restrictions on working hours, such as:

  • People who work in continuous rotating shifts.

  • Telephone operators.

  • Bank workers.

  • Artists.

  • Air service employees.

  • Some apprentices.

  • Lawyers.

  • Physiotherapists.

  • Journalists.

  • Dentists.

  • Radio broadcasters.

  • Teachers.

Some collective agreements also provide for special maximum working hours.

Employees who work outside the employer's establishment and those who occupy a management position are not subject to working time limitations.

Rest breaks

Employees who work more than six hours a day are entitled to one to two hours' break. Employees who work from four to six hours are entitled to at least a 15 minute break.

Some special rules and collective agreements provide for special rest breaks for certain professional categories.

There must be a minimum rest period of 11 hours between the end of a working day and the beginning of another.

Employees are entitled to 24 hours paid weekly rest, preferably on Sundays.

Shift workers

The same working time rules apply as for other workers (see above, Working hours).

 

Holiday entitlement

11. Is there a minimum paid holiday entitlement?

Minimum holiday entitlement

Employees are entitled to a minimum holiday period of 30 days during each 12 months of work (Federal Constitution).

Public holidays

There are national and municipal holidays that are fixed by the public authorities. On these days, work is forbidden without the Ministry of Labour and Employment's (MTE) authorisation.

 

Illness and injury of employees

12. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of the cost from the government?

Entitlement to time off

In the case of illness or injury, employees have the right to take time off if they present a doctor's certificate stating the number of days that they must be absent from work.

Entitlement to paid time off

Employees are entitled to paid time off in the event of illness or injury at their usual salary rate.

Recovery of sick pay from the state

The first 15 days of time off are paid by the employer. Any further days off are paid through the National Institute of Social Security (INSS) (governmental institution), at fixed rates.

When the INSS pension is lower than the employee's last salary, some collective agreements establish an additional payment by the employer during the time off.

If the illness or injury is caused by bad work conditions, the employer must:

  • Pay an indemnification for moral and material damages to the employee.

  • In some circumstances, reimburse the National Social Security.

 

Statutory rights of parents and carers

13. What are the statutory rights of employees who are:
  • Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?

  • Carers (including those of disabled children and adult dependants)?

Maternity rights

A pregnant employee is entitled to 120 days of paid maternity leave. This payment is made by the employer and reimbursed by the National Social Security.

An employer can grant an additional 60 days of paid maternity leave and recover that payment from tax benefits granted by the federal government.

The pregnant employee also has job stability (that is, they cannot be made redundant) from confirmation of pregnancy up to five months after the delivery.

Paternity rights

Fathers are entitled to up to five days' paid parental leave.

Surrogacy rights

Brazilian legislation does not provide for surrogacy rights.

Adoption rights

The employee is entitled to the same maternity and paternity rights of a natural parent.

Parental rights

There are no other applicable parental rights.

Carers' rights

There are no rights related to emergency care of family members. However, collective agreements commonly grant time off for this purpose.

 

Continuous periods of employment

14. Does a period of continuous employment create any statutory rights for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?

Statutory rights created

A period of continuous employment does not create any statutory rights for employees (although it is relevant to certain calculations (see below, Consequences of a transfer of employee)).

Consequences of a transfer of employee

The transfer of an employee can happen between companies from the same economic group, in an M&A transaction or asset purchase.

The transfer does not allow modifications of the employment conditions not formally authorised by the employee. Further, even if the employee authorises it, modifications to the employment conditions that damage the employee are void for all purposes.

On transfers, employees retain their period of continuous work. This is relevant to:

  • Holiday rights. The period worked before the transfer is included for the purposes of holiday rights.

  • Additional days on advance notice. To every year worked for the same employer, the employee is entitled to three extra days of advance notice, limited to 90 days.

  • The calculation of the Brazilian Government Severance Indemnity Fund Law (FGTS) 40% penalty in the case of termination of the contract without cause (see Question 19, Severance payments).

 

Fixed term, part-time and agency workers

15. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? To what extent are part-time workers entitled to the same rights and benefits as full-time workers?

Temporary workers

Temporary work is provided by an individual, through a temporary employment agency, to a hiring company (Law nº 6.019/74):

  • To meet a transient need to replace regular and permanent staff (for example, where a permanent employee is ill and needs to be absent from work for a certain period of time).

  • In the event of an extraordinary increase in work (for example, the hiring company receives an extraordinary demand for production).

A temporary employment agency must be registered with the Ministry of Labour and Employment (MTE). Certain conditions must be satisfied, such as:

  • The temporary work is not allowed if increases in work are common to the hiring company, and the increase is due to the hiring company's growth, expansion of its business or the opening of branches.

  • There must be a written contract between the temporary employment agency and the hiring company for each temporary employment contract.

  • The term of the contract cannot exceed three months, except when expressly authorised by the MTE. In this case, the term of the contract cannot exceed nine months.

Further, temporary workers are entitled to rights and funds similar to permanent employees in the same professional category (that is, the same wage and benefits, the same working hours and rest breaks, and proportional vacation time, among others).

Agency workers

It is illegal to contract workers using a conduit company (Brazilian Superior Labour Court (Precedent 331)), unless in case of:

  • Temporary work (Law 6019/1964) (see above, Temporary workers).

  • Specialised services not related to the core business of the hiring company, such as security (Law 7102/1983), maintenance, conservation and cleaning services, as long as there is no direct subordination.

Part-time workers

Part-time workers are employees who work up to 25 hours per week. They are entitled to compensation proportional to the number of working hours. This type of contract can only be entered with the union's authorisation, and the employee cannot work extra hours.

 

Data protection

16. Are there any requirements protecting employee privacy or personal data? If so, what are an employer's obligations?

There is no specific personal data protection for employees. However, the Federal Constitution ensures the protection of intimacy and privacy of all citizens. Therefore, employers cannot access employees' personal e-mails, for example.

 

Discrimination and harassment

17. What protection do employees have from discrimination or harassment, and on what grounds?

Protection from discrimination

It is prohibited to adopt any discriminatory and restrictive practices for the purposes of hiring and during an employment relationship, including discriminating by reasons of sex, origin, race, colour, marital status, family status or age (Federal Constitution and Law n. º 9.029/95).

There is no qualifying period of continuous employment to file a claim on the grounds of discrimination. The employee can seek indemnification for moral and material damages.

Protection from harassment

There are no specific employment laws protecting employees from harassment. However, the rules on protection against discrimination can be applied.

 

Whistleblowers

18. Do whistleblowers have any protection?

There are no specific protections for whistleblowers.

 

Termination of employment

19. What rights do employees have when their employment contract is terminated?

Notice periods

In case of resignation or dismissal without cause, employees and employers respectively should provide the other with 30 days' notice. Employees are entitled to an additional three days' notice for every year worked for the company (the employer can pay in lieu of notice).

Severance payments

Termination without cause or constructive dismissal. Employees are entitled to receive:

  • The balance of their wages.

  • A proportional payment for untaken holidays, plus one-third of the holiday remuneration.

  • A proportional 13th month salary (Christmas bonus).

  • Access to the funds deposited in a severance fund called the Brazilian Government Severance Indemnity Fund Law (FGTS). The FGTS contains monthly deposits of 8% of an employee's gross compensation. Deposits are made by the employer into an escrow account with a governmental bank, in the name of the employee. The employer must also pay a 40% penalty on the balance in the account.

  • Any payments due under collective agreements.

  • Any other benefit provided under the employer's policies or the employment contract.

Termination with cause. Employees are only entitled to receive the balance of their wages, an unused holiday payment and a proportional 13th month salary.

Resignation. Employees are entitled to all funds that are due in the case of a termination without cause (see above), except for the FGTS penalty and the indemnification for not having received the advance notice period.

Procedural requirements for dismissal

Termination without cause. Employees can be dismissed without cause at any time, subject to notice periods and severance pay.

Constructive dismissal. Employees are entitled to resign on the basis of constructive dismissal if:

  • They are assigned to tasks outside the scope of the services for which they were hired or that are immoral or illegal.

  • They are treated immorally or without respect by the employer.

  • The employer does not respect their main employment rights.

  • They suffer physical abuse or damage to their (or their family members') honour or reputation, among others circumstances.

Resignation. Employees can resign at any time and for any reason, by giving a 30-day notice period in advance.

Termination with cause. An employer can dismiss an employee with cause in the flowing circumstances:

  • Gross misconduct.

  • Improper act or lack of self-restraint.

  • Direct or indirect competition with the employer or with its activities.

  • Definitive prosecution of the employee.

  • Dereliction of duties.

  • Ongoing drunkenness or drug abuse.

  • Breach of a trade secret.

  • Failure to obey the orders of the employer, or non-compliance with the employer's general policies.

  • Abandonment of job.

  • Acts that damage any colleague's or superior's honour or reputation, or cause physical injury, unless in the employee's or someone else's legitimate defence.

  • Constant gambling.

  • Acts detrimental to national security.

 
20. What protection do employees have against dismissal? Are there any specific categories of protected employees?

Protection against dismissal

Employees can be dismissed without cause at any time, subject to notice periods and severance pay. The employer is not required to formally justify the dismissal, except in the case of termination with cause.

Protected employees

Brazilian legislation and some collective agreements provide that in certain circumstances, employees cannot be dismissed without cause within a defined period of time. For example:

  • Pregnant employees have job stability from confirmation of pregnancy up to five months after the delivery.

  • Employees who suffered a work-related accident or illness and were kept away from work for more than 15 days, receiving social security benefit, have job stability for one year from their recovery.

  • Union leaders have job stability for up to one year after they are no longer officers in the particular union.

  • Employees elected as members of the In-House Accident Prevention Commission have job stability for one year after they are no longer officers in the Commission.

 

Redundancy/layoff

21. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are there special rules relating to collective redundancies?

Definition of redundancy/layoff

There is no legal distinction between dismissal, redundancy and collective dismissals.

Procedural requirements

The procedural requirements for redundancy dismissals are the same as those applied for termination without cause. However, Brazilian Labour Courts have recently held that before any collective redundancy, the employer should inform and negotiate its conditions with the employees' union.

Redundancy/layoff pay

In general, in the case of collective redundancy, dismissals are treated as terminations without cause. However, due to the fact that employers should negotiate with the employee's union, it is possible that employers will be obliged to pay other severance payments in these situations.

Collective redundancies

See above.

 

Employee representation and consultation

22. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?

Management representation

Employees are not entitled to management representation.

Consultation

Employees are not entitled to be consulted about their employer's decisions.

Major transactions

Employee consultation or consent is not required for the completion of major transactions (such as acquisitions, mergers or joint ventures).

 
23. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?

Remedies

Not applicable.

Employee action

Not applicable.

 

Consequences of a business transfer

24. Is there any statutory protection of employees on a business transfer?

Automatic transfer of employees

Employees are protected on a transfer of an establishment. "Establishment" includes intangible elements, such as market share, goodwill and workforce. The law considers employment agreements to be personal agreements concerning the employee only. This means that the employer may change in the course of the employment relationship without interfering with the agreement's effectiveness in relation to the employee. Therefore, if a company acquires another company's establishment or corporate control of a company, the acquiring company becomes responsible for complying with the labour obligations of the previous employer.

A company's new owner/controller may also become responsible in situations in which the workforce is not maintained by the company's new owners/controllers (for example, if a company acquires another company's establishment or corporate control of a company).

A business transfer does not usually trigger employment termination. Theoretically, it is not necessary to dismiss and re-hire the employees, since continuing the business activity justifies an automatic transfer of employees without terminating the prior employment status.

Protection against dismissal

There is no protection against dismissal on a business transfer.

Harmonisation of employment terms

Changes of employment conditions are contingent on the employees' consent. Further, regardless of whether the employee has authorised them, changes that are disadvantageous to employee are deemed void for all purposes.

 

Employer and parent company liability

25. Are there any circumstances in which:
  • An employer can be liable for the acts of its employees?

  • A parent company can be liable for the acts of a subsidiary company's employees?

Employer liability

The employer is liable for the acts of its employees committed while carrying out the employer's tasks (Civil Code).

Parent company liability

The parent company of a business group can be held responsible for acts of employees of its subsidiaries (Article 932, Civil Code and Article 2, § 2, Consolidation of Labour Laws (CLT)).

 

Employer insolvency

26. What rights do employees have on the insolvency of their employer? Is there a state fund which guarantees repayment of certain employment debts?

Employee rights on insolvency

On an employer's insolvency, credits arising from the employment relationship have priority in the liquidation of the employer's assets. In some cases, other companies from the same economic group or the company's owners/shareholders can assume the labour debts.

State guarantee fund

There is no state fund which guarantees repayment of employment debts.

 

Health and safety obligations

27. What are an employer's obligations regarding the health and safety of its employees?

Employers are responsible for the health and safety of their employees, and must take measures to prevent diseases arising out of work conditions or job-related accidents. These measures include:

  • Supplying individual and/or collective protection equipment.

  • Carrying out medical examinations.

  • Providing specific training.

  • Advising the employees about the risk of injury and safety methods.

The main rules concerning health and safety obligations are issued by the Ministry of Labour and Employment (MTE) and can vary depending on the type of activity performed by the company, its size, and so on. The main rules are established under regulatory acts of the MTE for specific situations, industries and/or worker categories.

 

Taxation of employment income

28. What is the basis of taxation of employment income for:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Foreign nationals

If a foreign national's income is paid in Brazil, it is taxed by the Internal Revenue Service (IRS) at a rate of 25%. The Brazilian employer is responsible for withholding the income tax.

Nationals working abroad

The IRS taxes the income paid by a foreign source to a Brazilian national at a rate that ranges from 7.5% to 27.5%. The Brazilian national is responsible for paying the income tax.

 
29. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?

Rate of taxation on employment income

For the year 2015, employees must pay income tax on their salaries at the following monthly rates:

  • 7.5% minus BRL140.12 on earnings from BRL1,868.23 to BRL2.799,86.

  • 15% minus BRL350.11 on earnings from BRL2,799.87 to BRL3.733,19.

  • 22.5% minus BRL630.10 on earnings from BRL3,733.20 to BRL4,664.68.

  • 27.5% minus BRL863.33 on earnings above BRL4,664.68.

Social security contributions

For the year 2015, employees must pay contributions to social security at the following monthly rates:

  • 8% on earnings up to BRL1,399.12.

  • 9% on earnings from BRL1,399.13 to BRL2,331.88.

  • 11% on earnings from BRL2,331,89 to BRL4,663.75.

The employer withholds these contributions at source. There is a cap of BRL482.93 (reviewed on a yearly basis).

The employer must also pay contributions to the National Social Security on its entire payroll at rates that vary from 26.8% up to 28.8% depending on the company's core business.

 

Bonuses

30. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded?

Rewarding employees through the payment of bonuses is very common. There are no specific legal rules on this matter, so employers can grant any sort of bonus, contractual or discretionary, as long as they provide equal opportunities to employees at the same level.

The bonuses agreed between employer and employee, or paid on a regular basis in consideration for services rendered, are considered as part of the employees' remuneration for the purposes of calculating labour rights, income tax, National Social Security contributions and Brazilian Government Severance Indemnity Fund Law (FGTS) contributions.

 

Intellectual property (IP)

31. If employees create IP rights in the course of their employment, who owns the rights?

If the invention arises under an employment contract executed in Brazil, as a result of creative activities that the employee was hired to perform, the employer exclusively owns the rights over it.

If the invention arises from the employee's personal efforts, while using premises or equipment supplied by the employer, both employer and employee own the invention equally, unless the employment contract provides otherwise. If the employer economically exploits the invention, the employee is entitled to fair compensation (there is no clear rule about how to calculate this compensation).

If the invention has no relation with the employment contract and was created without using the employer's premises or equipment, the employee exclusively owns the rights over it. The employer has no right to exploit the invention, unless the employee has previously authorised it.

It is strongly recommended that intellectual property is protected in the employment contract.

 

Restraint of trade

32. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

Restriction of activities

The duties of confidentiality and non-disclosure of information are inherent to the employment relationship, not only during the contract but also after its term.

Employees can also be subject to non-compete obligations during the employment contract, simply as a result of receiving salary from the employer.

Breach of these duties authorises the employer to terminate the employment contract with cause. The employee could also be liable for damages caused to the employer.

Legislation does not provide expressly for these obligations or consequences, so it is advisable to put them in writing.

Post-employment restrictive covenants

The law does not prevent an employee from working for a competitor after the termination of his employment contract. In addition, the right to work freely is a fundamental right under Brazilian law (Articles 1º, III and IV, and 5º, XIII, Constitution/88).

However, the labour courts admit post-employment restrictive covenants that meet certain requirements, such as:

  • Payment of a fair indemnification in consideration for the non-compete obligation.

  • Specification of the scope of restrictions on competition (for example, a reasonable duration (no longer than two years) and clear territory limits).

 

Proposals for reform

33. Are there any proposals to reform employment law in your jurisdiction?

One of the most discussed labour matters is the legality of outsourcing. On an outsourcing, a company specialised in a particular business or service (outsourcing company) offers its activity to other companies (hiring companies). Outsourcing is allowed under Brazilian labour law, despite the absence of express legislation on the matter. No licence is required to provide outsourcing services, which can be provided to the same hiring company for an unlimited period of time.

The Brazilian Supreme Labour Court issued docket nº. 331 (a precedent) determining that workforce outsourcing is only allowed for ancillary activities (such as cleaning, security, and so on) and never for the hiring company's core business. Under the docket, outsourcing core business activities automatically establishes a direct employment relationship between the hiring company and the workers, regardless of whether there is an outsourcing company acting as a middleman.

Given the huge number of labour lawsuits regarding the regularity and limits of outsourcing in Brazil, it is expected that the Supreme Labour Court will state a final position on the matter (although it is unclear when this may be).

 

Online resources

Brazilian President's Office

W www2.planalto.gov.br/presidencia/legislacao

Description. Official and updated source of law maintained by the government, only available in Portuguese.

Ministry of Labour and Employment

W http://portal.mte.gov.br/legislacao

Description. Source of labour and employment related legislation, only available in Portuguese.



Contributor profiles

Maria Fernanda de Medeiros Redi

Lilla, Huck, Otranto, Camargo Advogados

T +55 11 3038 1010
F +55 11 3038 1100
E mariafernanda.redi@lhm.com.br
W www.lhm.com.br

Professional qualifications. Brazil, Lawyer.

Areas of practice. Labour and social security law; corporate social security and payroll charges.

Non-professional qualifications. Law, Universidade de São Paulo, 1998; specialised in Social Security Law at the Social Security Attorneys' National Association (ANPREV), 1998; specialised in Stock Market Law, Law School of Universidade de São Paulo (USP), 2002; Doctorate in Economic and Financial Law, Universidade de São Paulo, 2004.

Languages. Portuguese, English, French

Professional associations/memberships. Member of the Brazilian Bar Association since 1999; Member of the Attorney's Association of São Paulo; Member of the Labor Attorney's Association of São Paulo; ranked in Chambers Latin America – Labour – 2013; Awarded the LTr Award (1996) for best academic performance in Labour Law.

Célia Mara Peres

Lilla, Huck, Otranto, Camargo Advogados

T +55 11 3038 1066
F +55 11 3038 1100
E celia.peres@lhm.com.br
W www.lhm.com.br

Professional qualifications. Brazil, Lawyer.

Areas of practice. Labour and social security law; corporate social security and payroll charges.

Non-professional qualifications. Law, Universidade Presbiteriana Mackenzie, 1997; Master's Degree in Comparative Civil Law, Pontifícia Universidade Católica de São Paulo, 2006; Doctorate in Labor Law, Pontifícia Universidade Católica de São Paulo, 2012; Professor and Lecturer for graduate and specialisation courses at Pontifícia Universidade Católica de São Paulo, Universidade Nove de Julho, Universidade de Mogi das Cruzes and Fundação Instituto de Administração.

Languages. Portuguese, English

Professional associations/memberships. Award for teacher merit, received from the Brazilian Bar Association, São Paulo, 2013; Member of the Brazilian Bar Association since 1998; Member of the Labour Attorney's Association of São Paulo; Member of the Iberoamericana Association of Labour Law and Social Security.

Julia Leitão Benozatti

Lilla, Huck, Otranto, Camargo Advogados

T +55 11 3038 1010
F +55 11 3038 1100
E Julia.benozatti@lhm.com.br
W www.lhm.com.br

Professional qualifications. Brazil, Lawyer.

Areas of practice. Labour and social security law; corporate social security and payroll charges.

Non-professional qualifications. Law, Pontifícia Universidade Católica de São Paulo, 2009; specialised in Corporate Labour Law, Faculdade Getúlio Vargas (FGV), 2011.

Languages. Portuguese, English

Professional associations/memberships. Member of the Brazilian Bar Association since 2010; Member of the Lawyers Association of São Paulo; Member of the Labour Lawyers Association of São Paulo.


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