It is a common mistake to believe that officers in Brazil cannot be engaged or kept as employees during their office.
Differently from this common first impression, in Brazil a statutory officer can during his/her office hold the condition of employee as well.
Thus, in Brazil companies may have employed or non-employed officers.
Here is an explanation of the definition we are using here: a statutory officer is someone who occupies a management position and is duly appointed as such under a company's articles of association, or someone elected for a position provided for in a corporation's bylaws. Notwithstanding this, nothing in Brazilian laws prevents an employee from holding this kind of position.
Making clear whether an officer is an employee or not requires considering the range or powers this officer will have over the company's management.
Accordingly, it is important to highlight that Labor Laws in Brazil are subjected to a principle known as "primazia da realidade" (supremacy of reality), which means that the relationship developed in practice between the parties prevails over any title or document they execute.
Therefore, if the powers granted to an officer mandate that he/she will not report to the company but will rather act as if he/she were an actual body in the company, then it does not make sense treating such officer as an employee.
From a different standpoint, if despite of his/her statutory position an officer is given orders, this subordination - the core element of an employment relationship - will make executing an employment contract with that officer mandatory.
Further to subordination, the difference between engaging an employed and non-employed officer also lies in the engagement instruments and the remuneration payable.
In case the statutory officer is hired under an employment relationship, he/she will be paid salary and entitled to all the rights provided for in Brazilian Labor laws, in the Collective Bargaining Agreement applicable to company's employees (including salary adjustment), in company's internal policies, and any other rights agreed with the officer under the employment agreement.
On the other hand, a non-employed statutory officer is engaged through a private agreement or by simple appointment or election. A non-employed officer is remunerated usually through pro-labore and will be entitled only to the rights agreed between the parties.
The absence of the requisites constituting a non-employment relationship is generally very costly to the company because labor rights will be retroactively applied to the relationship, and it is very difficult to offset amounts paid to an officer against unpaid labor rights.
In view of the above, companies must be aware that simply engaging someone in a statutory position is not enough to ensure employees' rights in Brazil will not apply, and a previous and cautious analysis on a case-by-case basis is recommended. In the event a person is designated officer during the term of his/her employment contract, a careful analysis must also be made to evaluate the effects of designating/electing such employee as an officer in relation to his/her employment contract itself and the conditions of such contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.