Today (July 13, 2017), the Labor Overhaul was signed into law by President Michel Temer. The Labor Overhaul will enter into effect 120 days after its publication and will bring significant changes to labor relations and labor law itself.

The Consolidated Labor Statutes (CLT) is said to be outdated in some aspects and no longer governing labor relations in a proper and adequate manner. The Labor Overhaul introduces and changes several articles of the CLT aiming to give more flexibility and legal certainty to labor relations thus meeting current demands of society.

Many of the proposed changes have already been adopted and claimed by companies through collective bargaining agreements, but have been blocked by the courts under the argument that they breach the law.

Of several issues addressed in the Labor Overhaul, the most relevant ones are the following:

  • restricts the concept of economic group, which members are joint and several liable to pay labor claims;
  • reduces the Labor Judiciary power to create obligations not provided in Law;
  • regulates telecommuting (home office), fixing rights and obligations to the parties;
  • provides that collective labor agreements will prevail over statutory law in certain circumstances, giving priority to what has been agreed over what has been legislated, providing greater autonomy to the parties;
  • approves new part-time work guidelines, increasing the applicable time limit;
  • changes wage and hour (overtime, breaks, time-off) and vacations rules;
  • allows employees earning more than R$11,063 (or US$3,445 as per today's exchange rate) to agree into binding arbitration as dispute resolution method;
  • allows employers and employees to enter into settlement agreements and submit them to the court for ratification;
  • makes voluntary once mandatory union dues, being companies and employees free to opt whether or not to pay them, without this affecting that all employees are covered by collective bargaining agreements;
  • sets guidelines and caps to certain types of damages; and
  • changes certain court procedure rules limiting free access to Labor Courts and providing attorneys' fees and penalties for litigating in bad-faith.

Please note that the above list is not exhaustive nor intends to detail the changes introduced. Furthermore, it is wise to wait for how Labor Courts will react to certain changes brought by the Labor Overhaul.

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.