On July 11, 2017, the Brazilian Senate approved the Labor Reform Bill, which is now before the president for signing. The Labor Reform Bill is one of the current administration's main projects to reignite the economy and make the country more competitive. The law will take effect 120 days after the president signs the law and it is published in the official gazette.
Brazil's economic and political crisis continues to linger and the country might oust yet another president, so ordinarily changes to improve the economy would be welcome and seen as a political asset. However, the proposed change is not welcomed by everyone. There has been fierce opposition to the Labor Reform Bill from the Labor Party, unions and other pro-worker groups. The groups claim that the Bill will reduce workers' rights and benefits.
Other groups welcome the reforms in the Bill. In the past few years, the Brazilian labor courts have increased the rights of workers and unions, sometimes without relying on specific cases before the courts. During a speech last month at the Woodrow Wilson International Center for Scholars in Washington, D.C., the Chief Justice of the Brazilian Superior Labor Court, Justice Ives Gandra Martins Filho—a labor reform supporter—said the Labor Reform Bill was a direct reaction to the Brazilian labor courts' attempts to legislate from the bench. According to the Chief Justice, the labor reform would rein in this legislative activity and other controversial activities of the courts, something welcome by the business community..
In addition, employers are hopeful that the new law will reduce the uncertainties and the unpredictability of the labor courts' decisions. With an average of three million new cases per year, Brazil would benefit from a judicial system that reduced the number of cases and provided more consistent decisions. If the Labor Reform Bill becomes law, businesses, especially U.S. companies accustomed to flexibility in employment relations, may finally have a respite from restrictive judicial and other limitations on efforts to enhance productivity, making companies better able to structure their operations to compete in global markets.
The Labor Reform Bill is, nonetheless, not perfect, and there remains significant uncertainty about the final scope of the law. To convince the Brazilian Senate to approve the Labor Reform Bill, the president signaled that he would veto some provisions of the bill. In addition, the president has the right to issue executive orders that may further limit the effect of some changes in the Bill. Thus, the shape of the final reform is still to be determined.
To assist clients with understanding the changes and how they may impact their operations in Brazil, we will hold a series of webinars in July/August to address the following topics and changes that likely will be part of the new law:
- Definitions of Employer and Employee/Independent Contractor Status
- Labor Relations/Collective Bargaining
- Union Roles/Dues
- Working Hours
- Equal Pay
- Termination of Employment
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.