Brazil: Rare Employment Judgment In Brazil

Last Updated: 1 February 2010
Article by Nelson Mannrich and Neil Montgomery

Felsberg e Associados has succeeded in securing seldom seen favourable employment awards for one of their US automotive clients with business interests in Brazil.

Felsberg e Associados' Employment and Automotive Groups, coordinated by partners Prof. Nelson Mannrich and Neil Montgomery, respectively, have won favourable judgments in two sets of connected employment proceedings filed by a former officer of the Brazilian subsidiary of a US automotive firm and one of his local sales managers.

The case was filed after the subsidiary terminated the officer's service agreement - entered into between his own corporate entity and the subsidiary - and the manager's employment agreement.

Unfair competition

This situation developed once US shareholders became aware of the individuals' involvement in unfair competition by having incorporated their own company into which they could then channel the subsidiary's business.

The case came to involve an aggregate amount of around R$1.5 million at the time of filing.

With a full understanding of what had been taking place, the Brazilian subsidiary not only challenged both sets of proceedings before the employment courts of São Bernardo do Campo, but also started criminal proceedings against such individuals for unfair competition.

The importance of the victory lies in the fact that Felsberg e Associados was able to demonstrate to the judge that the officer in question had full autonomy to the extent that he was capable of slyly deviating business from the Brazilian subsidiary into his and his accomplice's company.

Felsberg e Associados went on to demonstrate that the officer therefore lacked one of the principal requirements for establishing an employment relationship: legal subordination. As this factor is something very difficult to prove, Brazilian employment courts have traditionally been inclined to rule in favour of employees and have seldom recognized its absence.

Dismissal of claims

The recognition of the inexistence of subordination in this case led the judge to dismiss the principal claim of recognition of an employment relationship and all other claims that arose. It is however possible that the claimant will appeal against the decision.

The employment claims made by the sales manager working with the officer, including moral damages, were also dismissed, with the lower court judgment having been upheld by the Labour Court of Appeals of São Paulo.

Automotive heartland

The victory is especially interesting considering that it took place in São Bernardo do Campo, the heartland of Brazil's automotive industry. The extensive industrial presence in the region has meant that the labour unions have traditionally been extremely powerful, with their members' points of view being consistently supported in the labour courts.

São Bernardo's importance as an industrial labour stronghold is exemplified by the fact that Brazil's current President, Luiz Inácio Lula da Silva, rose to power as a metal workers' union leader in the region in the 1970s.

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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