Brazil: Brazilian Labor Reform: Reshaping The Employer–Employee Relationship

In Short

The Situation: High unemployment rates, combined with an outdated Brazilian protectionist labor regime that imposed high costs on employers, created the opportunity for a new approach to labor regulation.

The Result: Brazil recently passed a new labor law modernizing Brazil's outdated existing labor regime.

Looking Ahead: Employers need to implement Brazil's new labor law, and these reforms will need to be tested in Brazilian courts.

On November 11, 2017, major reforms to Brazil's labor laws took effect (Law No. 13,467/2017). Against the backdrop of high unemployment rates, Brazilian legislators passed a set of modernized laws that update the Consolidation of Labor Laws (Consolidação das Leis do Trabalho, in Portuguese), the governing framework for labor regulation in Brazil that has been in effect since shortly after World War II, and focused on protecting unskilled rural workers moving to urban areas.

The main purpose (from a legal perspective) was to establish that mutually agreed arrangements between an employer and employee in many circumstances prevail over general labor laws. In addition, Brazilian lawmakers hoped that modern labor laws would bring informal contracts out of the shadows and better protect employers and employees.

From an economic standpoint, Brazil's new labor reform was designed to incentivize employers to create new jobs and increase productivity by decreasing the burden of a restrictive labor regime. The labor reform reflects the federal government's public policy of fostering a more business-friendly environment in Brazil. In the first quarter of 2017, modern outsourcing laws in Brazil took effect and allowed employers and employees more freedom to determine the contours of the work relationship. Brazil's new labor outsourcing rules paved the way for this general labor reform.

Under the old labor regime, Brazilian labor courts were known for favoring employees' interests, and compliance with complicated labor laws imposed heavy costs on employers. While these new labor laws are intended to modernize the current labor environment, employers will need to take steps to implement these reforms, and most importantly, the new labor law will need to be tested in Brazilian courts.

Summary of Brazil's Labor Reform

Below is a summary of key aspects of this recent Brazilian labor reform:

  • Corporate liability. Companies in the same corporate group are jointly liable only if evidence of pooled operations/common interest exists.
  • Liability for labor debts. As a general rule, there is no joint and several liability for a selling company and a successor company in an M&A transaction. The successor company bears all the labor liabilities of the target company.
  • Secondary liability for former company and former shareholders. Former shareholders of a company sold in an M&A transaction are secondarily liable (i.e., after the company and its current shareholders) for labor claims filed within two years of the date the target company or related assets are sold.
  • Allowances. Provided certain requirements are met, bonuses, commissions, allowances, and travel benefits are not part of an employee's compensation package for labor and payroll tax and social security purposes. These bonuses can be modified (or terminated) at any time and do not become an acquired right of the employee.
  • Negotiation leeway for senior employees. An employee with a university degree and earning a monthly wage of at least approximately US$3,500 can negotiate most of the terms of his or her employment agreement and can consent to an arbitration clause to resolve disputes.
  • Home office. Employment agreements can include provisions allowing employees to work remotely. The agreement should set forth the party responsible for providing the necessary equipment and infrastructure for remote employment and payment of underlying expenses.
  • Union tax. Payment of the union tax—a Brazilian federal tax—is no longer mandatory.
  • Termination by mutual consent. In the event of termination by mutual consent, an employee is entitled to half of the statutory severance payment and 80 percent of the employee's federal severance fund savings (FGTS). Termination of employment no longer needs to be ratified (homologated) by the applicable union or the Ministry of Labor.
  • Defense against labor claims. A written release of claims from an employee must be recognized by Brazilian labor courts, and employers can use the written release as a valid defense against frivolous labor claims. Former employees who file frivolous labor lawsuits are liable for a penalty of up to 10 percent of the claimed value.
  • Court ratification of settlement agreements. An employer can enter into an out-of-court settlement agreement with an employee and file a motion requesting a Brazilian court to ratify its terms. An employer may seek a full and general release against any employment-related claims without facing actual labor litigation.
  • Large-scale termination. Mass layoffs or large-scale terminations (demissão coletiva) no longer require bargaining with the applicable union prior to implementing such terminations.
  • Severance pay. Statutory severance is reduced by half in cases of termination by mutual consent.
  • Collective bargaining. Collective bargaining agreements prevail, in certain circumstances, over labor laws, including in areas such as working hours, time banking, breaks, and vacation. An employer-specific collective bargaining agreement (acordo coletivo de trabalho) prevails over a general industry-wide collective bargaining agreement (convenção coletiva de trabalho).
  • Part-time employment (jornada intermitente). The new Brazilian labor law also enables an employer to retain employees alternating between periods of activity and inactivity and paid on an hourly basis.
  • Employees' committee. The new Brazilian labor law makes employees' committees mandatory for companies with more than 200 employees.

Two Key Takeaways

  • From a legal perspective, the reform's intent is that mutually agreed arrangements between an employer and employee often will take precedence over general labor laws.
  • From an economic perspective, the reform should incentivize employers to create new jobs and increase productivity by decreasing the burden of a restrictive labor regime.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
TozziniFreire Advogados
Jackson Lewis P.C.
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
TozziniFreire Advogados
Jackson Lewis P.C.
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions