Brazil: Superior Labor Court's Precedent (TST) Change The Direction Of The Collective Bargaining Agreements

Last Updated: 13 March 2013
Article by Mariá Guitti and Carolina Benedet Barreiros Spada

Recently, the Judges of the Superior Labor Court ("TST") met to review some controversial legal understandings. Among the discussed matters, the possibility that the benefits set forth in collective bargaining agreements could remain effective even after the validity period of the collective instruments has expired.

In accordance with the majority opinion of the TST until then, expressed in Precedent No. 277, the benefits set forth in collective bargaining agreements and normative rulings would definitely not extend to the work contracts of employees. This means that after the end of the validity period of the collective instruments the benefits and conditions set forth therein would not be due any longer, and the parties would have to negotiate a new collective bargaining agreement.

However, with the review of Precedent No. 277, the TST substantially changed the understanding it followed until then, setting forth that the normative clauses of the collective bargaining agreements are part of the individual work contracts and could only be modified or suppressed by means of collective bargaining.

From now one, therefore, the benefits previously negotiated shall, in the event companies or their trade associations and the labor unions cannot reach an agreement to install a new collective bargaining agreement, remain valid until a new agreement substitutes the previous one, expressly amending the previously agreed conditions.

Already based on such understanding, the TST published, on December 3, 2012, a decision that determined the payment of shared profits and revenues for some retired employees of Telemar (nowadays Brasil Telecom) as set forth in a Collective Bargaining Agreement negotiated in 1969 the content of which was not suppressed or amended in the later bargaining agreements.

Such decision shows the tendency of the TST to exclude the normative power of the Labor Justice of interfering in the collective bargaining in the cases in which a collective labor dispute is filed and will grant the parties freedom to covenant future collective bargaining agreements.

A similar understanding is also found in the judgment of the collective labor dispute of a strike filed before the Regional Labor Court of São Paulo involving the National Trade Association of Liquefied Petrol Gas Distributing Companies (claimant) and the Labor Union of the Workers in the Iron Ore and Petrol Derivatives Trade of São Paulo and Others (respondents). As the parties failed to reach a collective agreement, the reporting judge determined that the collective bargaining agreement valid for 2011 be maintained until a new collective bargaining agreement between the parties is made, including the percentages payable on grounds of profit and revenue sharing. The sole benefit judged in the dispute was the annual salary adjustment.

This new tendency of the Labor Justice might cause a significant impact in the form with which the companies and trade associations negotiate changes to the collective bargaining agreements because once a certain benefit or payment is included it may continue effective even after the end of the validity period of the respective normative instrument in the event no new collective bargaining has been made otherwise.

Thus, the companies and trade associations may become much more resistant towards improving the working conditions of their employees, under the penalty that they will not manage to keep such same conditions up after the end of the validity period of the normative instrument that granted them. On the other hand, labor union may also create obstacles to accept any possible reductions in benefits set forth in previous collective bargaining agreements in such a way as to adjust them to the financial reality of the companies.

Thus, the companies should be aware of future union negotiations to negotiate the suppression of clauses existing in previous collective bargaining agreements and to avoid possible discussions on the integration of benefits in the work contracts.

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.

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