One year later: looking at the impact of Brazil’s Labor Reform
Article 3 minute read

One year later: looking at the impact of Brazil’s Labor Reform

16 November 2018

It has been one year since the implementation of Brazil’s labor reform, one of the deepest sets of labor laws in generations. While the expectation of changes in the country was high, the result has fallen short.

The law aimed to modernize the legal framework governing employee relations in order to help re-vitalize the economy. But there is a huge amount of instability in the judicial scenario regarding the application of the new rules. Companies have seen this and many have failed to implement the changes into their businesses. 

Intermittent work reforms

One of the more controversial parts of the law surrounding intermittent work has been relatively successful. Companies can hire workers with hourly wages and only call them when needed. The fear surrounding this change was that companies would replace full-time workers with on-call workers and only hire people when they didn’t want to pay overtime. Instead, companies that put this part of the reform into action actually helped employers with having a flexible workforce ready to go when needed. 

While the labor reform laws were supposed to bring new jobs to Brazil, it has not had the intended effect, there are still over 12 million unemployed people, according to IBGE ((Brazilian Institute of Geography and Statistics) recent research, but the laws did reduce the number of labor lawsuits, according to the Superior Labour Court (TST - Tribunal Superior do Trabalho). Labor lawsuits decreased approximately 70% in one year, from 289.7 thousand new claims in November 2017, to 89 thousand at the same month one year later.

Flexible working hours and vacations

Prior to the reform, the Bank of Hours were submitted for approval at the Workers Union. Now the Bank of Hours can be much more flexible with negotiations between employees and employers and be set forth by in an individual agreement. Some businesses have integrated a flexible working hours system for their employees.

The changes made to vacation policies from the reform is the chance to split the vacation period, to three periods, provided that the employee grants authorization and that one period corresponds, at least, to 14 business days. 

Employee agreement

Another part of the reform that has had some impact in Brazil over the past year is that employees can now negotiate terminations with their employers. In the past, workers only got severance pay if they were fired, which caused some employees to ask to be fired. The law now allows for the workers to terminate a labor agreement through mutual consent with severance.

Uncertainty

While the labor reforms have been enacted for a year, companies are reluctant to abide by all of the rules for a few reasons. There are over 20 filed claims in the Supreme Court (STF – Supremo Tribunal Federal) questioning the legality of some changes, such as setting a limit to the compensation for moral damage. With the political environment changing, Brazilians don’t trust that the labor reform will actually remain as law with new leadership.  But, by not adhering to the new laws, companies are missing out on opportunities.

TMF Group

TMF Brazil can help your company be compliant with these law reform laws so you don’t miss out on possible opportunities. TMF Group is prepared to support your company in understanding how to benefit from the changes and how to build new policies in the face of the new rules. Talk to our specialists to learn more. 

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Written by

Joyce Martinusso

Legal Supervisor Brazil

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