Brazil: Blacklist of Slave Labor in Brazil - Renewal of Labor Regulation

The Ministry of Labor [MTE] in Brazil has an extraordinary mechanism to punish companies that subject employees to degrading work conditions or the so-called slave-like work conditions. Besides imposing fines because of the location of employees working in slavery-like conditions, the Ministry of Labor had been using since 2,004 Joint Ministerial Ordinance no. 540/2004, which had been revoked by Joint Ministerial Ordinance no. 2/2011. These Ordinances required that the companies' names be included in the so-called "Dirty List" or "Blacklist."

This list was the result of a joint effort developed by the labor inspection and by the Brazilian Federal Police Office. After a company's name was included in the "Blacklist," it could only be excluded 2 years after the date of inclusion and after the company proved that it no longer subjected its workers to degrading work conditions. As mentioned in the Ordinance, this is only proved after a new inspection is conducted to check whether the work conditions at the punished company have been remedied.

Those Ordinances of the Ministry of Labor were strongly criticized by the companies, mainly for the simplicity of the defense procedure, which did not ensure the presentation of all required defense arguments and appeals to challenge the allegations of labor inspection. Another issue raised in the discussions presented by the companies was the lack of a Law providing for the existence of the "Blacklist" and establishing rules that would include the penalties and foster procedures to ensure the right to a fair hearing.

In view of the controversies regarding the impossible enforcement of Ordinance 504/2004 of the Ministry of Labor and Joint Ministerial Ordinance no. 2/2011 of the Ministry of Labor, in December 2014, the Brazilian Association of Real Estate Developers [Associação Brasileira de Incorporadoras Imobiliárias - ABRAINC] filed a direct action for the declaration of unconstitutionality in the Federal Supreme Court [STF]. ABRAINC filed this action to request that the application of the "Blacklist" be suspended. Such request was accepted by Chief Justice Ricardo Lewandowski (Direct Action for the Declaration of Unconstitutionality no. 5209).

Three months after the Federal Supreme Court's decision ordering the suspension of the effects of the Ministry of Labor's Ordinance 2/2011, a "new" Joint Ministerial Ordinance recreates the registration of employers, considered engaged in slave-like labor practices. The "new" Ordinance that revoked Ordinance 2/2011 was clearly created in an attempt to undermine the efficacy of the decision rendered by the Federal Supreme Court.

However, in our opinion, all flaws of Ordinance 2/2011 — currently revoked — still remain in this "new" Ordinance.

In the first place, this Ordinance clearly does not ensure employers the adversary proceeding and the right to a fair hearing, neither does it foster the principle of presumption of innocence, in light of article 5, items LIV, LV and LVII of the Brazilian Federal Constitution. These prerogatives were highlighted in the direct action for the declaration of unconstitutionality filed by ABRAINC, also in view of the undesirable restrictions that the inclusion in the "Blacklist" had been causing to companies.

The "new" Ordinance generically refers to the possibility of right to a fair hearing in all stages of the administrative proceeding. However, there is no provision on the applicable evidence for the right to a fair hearing and on whether the labor tax agent will start a specific procedure (with a specific tax deficiency notice) for characterization of slave-like labor conditions. Moreover, the defenses and administrative appeals brought in the Ministry of Labor sphere, as a rule, have no effect, even if there is flagrant violation of a legal or constitutional provision.

This occurs both in the defenses and appeals filed, as the Tax Auditors themselves work as judges of such measures. Exceptions in which defenses are accepted to exclude the penalties imposed are extremely rare. In fact, labor authorities, as most bodies, praise organizational protectionism, thus hindering what the "new" Ordinance calls "adversary proceeding and right to a fair hearing."

For exemplification purposes, it it worth stating that the topic is treated differently in the tax sphere, as there are those representing the interest of Tax Authorities but also those representing taxpayers, what in the end confers isonomy, impartiality and balance on trials.

Another issue that seems to be neglected by the "new" Ordinance are the types of evidence admissible in the administrative proceeding. It would certainly be difficult to ensure the right to a fair hearing with production of oral evidence, because such option is vehemently disregarded by Tax Auditors in their decisions, on the grounds that there is no cause of action or interest motivating them, in a clear violation of the constitutional principles abovementioned.

That said, in order to ensure companies the faithful exercise of the "adversary proceeding and right to a fair hearing," it would only be possible to include their names after extensive changes in how to process and judge tax deficiency notices on the labor administrative level. The labor administrative proceeding currently effective is plain and simple and systematically confirms the grounds presented by labor authorities. It is difficult, though, to admit that someone, on the administrative level, will have at their disposal the tools for the right to a fair hearing and to a balanced trial.

However, Direct Action for the Declaration of Unconstitutionality no. 5209 filed by ABRAINC has not lost its purpose, despite the creation of a "new" Ordinance. The basis for the action, previously accepted in an injunction granted by the Federal Supreme Court, is the inexistence of a formal law to create such "blacklist." As declared by the Federal Supreme Court's Justice Lewandowski, "for the issuance of such acts, it is required the preexistence of a formal law able to establish the limits of exercise of regulatory power (...)"

Therefore, the lack of unequivocal right to a fair hearing contaminates the "new" Ordinance and, additionally, any Ordinance to be enacted will contain the defect of the principle of legality, that is, only the Law may create and govern the conditions for the existence of the "Blacklist," as well as the criteria to include a certain company in such list.

The "new" Ordinance of the " Blacklist," as noted, relies on a flawed root and, coherently, will also be restrained by means of possible applicable measures.

It seems that the Federal Government, without the support of the National Congress' coalition, insists on legislating on the topic — which is clearly important to society but cannot be handled in violation of the fundamental rights ensured to any citizen. Although the purpose of creating obstacles to those who actually contribute to malpractices or degrading work conditions is clearly relevant, one cannot, in a democratic process, deny effectiveness to the application of unquestionable constitutional principles.

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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