Regulating work in the gig economy in Brazil

Brazilian labor law defines employee as the individual working under an employer`s directions in return for compensation. Strict employment regulations that impose non-negotiable rights and payments increase employment-related costs by up to 70%.

Whereas this may be advantageous for workers desiring a minimum level of certainty, traditional employment relationship has been increasingly losing space to alternative types of work based on looser arrangements in Brazil, as in many other countries.

In the so-called “gig economy”, self-employed workers, in many case service providers, are connected to customers by means of internet and digital platforms, typically entering into short-term work arrangements. The gig economy normally offers work on-demand, in which the execution of traditional activities such as transportation and delivery are organized by technology companies that select and manage the workforce, setting forth quality standards of service.

The rendering of services by self-employed workers is not new in Brazil – freelancers and independent contractors that take the risk of their own activity have been around for some time. However, the significant increase in the number of individuals working on-demand and connected by apps - without specific regulations applicable to their activities - has caused the gig economy to be under scrutiny.

According to Brazilian labor law, the essential requirement to characterize an employment relationship is the subordination of an individual.  If an individual works under the direction of a service provider, controlled by technology, following orders and devoid of independence, employment legislation necessarily applies.

On the other hand, it is possible to establish a non-employment relationship with rules and directives requiring a certain degree of commitment on the part of the self-employed worker and implications on the payment due to him. Such rules add value to the service by creating an incentive to workers and ensuring a minimum level of quality to services offered to customers.

The distinction between employment and non-employment relationships depends on factual analysis and in many situations is controversial. The fact that employment authorities in Brazil have historically adopted a worker-protective approach and labor courts usually decide based on equity principles increases the uncertainty for both workers and service platforms.

Case-law shows certain characteristics that make strict employment rules applicable. Among those, two situations to be avoided by service platforms are:

  1. the use of so-called gamification strategies, in which incentives to worker behavior are given in a way that is detrimental to their safety or health, for example in the form of prizes and awards leading to careless driving or excessive working hours; and
  2. a remuneration for the platform that is higher than the remuneration for the worker performing the tasks.

Specific regulations governing the work on-demand through technology media would contribute to boost investments and increase working opportunities, while at the same time ensuring the dignity of individuals engaged in the gig-economy. A suggested content of such regulation would be:

  1. limit the total remuneration received by the platform to the value received by the worker;
  2. prohibition of gamification leading to deleterious worker behavior;
  3. limit of work per day, algorithmically imposed when possible;
  4. requirement of justifiable cause for exclusion from the platform, such as poor quality service;
  5. non imposition of indemnity obligations to the worker in case of damage to customers unconnected to fraud or gross negligence; and
  6. insurance provided by the platform benefitting the worker or his family in case of accident in risky activities.

Until regulations along these lines are adopted, risks for platforms could be reduced by the execution of detailed agreements containing provisions similar to those suggested above.

Photo credits: Mototurbo Goiânia

L&S Authors

Eduardo Salomão Neto

Eduardo Salomão Neto

Partner
Silvia Fidalgo Lira

Silvia Fidalgo Lira

Associate

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