Transactional Labor Law as a tool to maintain job opportunities

Silvia Fidalgo Lira 23/04/2020

Brazil’s labor legislation has been traditionally protectionist and based on rigid regulations that impose high costs on employers. It is ill-fit to meet the needs of modern society, and as such has been gradually giving way to much needed flexibility designed to preserve jobs and regulate very diverse labor relations. Such flexibility may be very helpful during the current global crisis.

A reform of labor law that entered into force in November 2017 updated existing legislation, bringing it in line with current labor relationships, which depart markedly from those prevailing in the early forties, when the Consolidation of Brazilian Labor Laws (CLT) was edited.

Among the most relevant amendments, the reform sets forth the principle that agreements reached by employers and employees shall prevail over labor regulations in many circumstances.

Besides statutory sources, an employment contract may be governed by labor collective conventions executed by the unions representing employers and employees; by labor bargaining agreements between employers and the union representing its employees; or by individual agreements negotiated directly by employers and employees.

According to the labor reform law, collective conventions and bargaining agreements prevail over the law when their subject-matter relates to working hours, work breaks, careers and salary plans, compensation, incentive awards, profit sharing and termination, among other matters.

Bargaining agreements prevail over collective conventions and both are effective only for the periods set forth in their texts. Before the reform, labor courts used to hold that rights granted by these agreements and conventions were automatically part of individual employment contracts, and would remain valid until the execution of a subsequent collective agreement.

Brazilian labor courts are now bound to the principle of minimum intervention in the review of collective conventions and bargaining agreements. This means that courts may control whether formal validity rules have been complied with, but they cannot revise the merits of the rights and obligations set forth in the deal, since the parties have autonomy to define the characteristics of the employment relationship.

Given that employers and employees usually do not negotiate in equal conditions, individual agreements are subject to more limitations than union-negotiated agreements. According to labor law, employers and employees are only free to negotiate provisions that do not contravene regulations protecting employees, collective instruments and the decisions of the competent authorities.

However, individual agreements with employees who hold a university degree and earn a monthly salary equal or higher than twice the maximum benefit paid by Brazilian Social Security (approximately USD 2,400) have the status of a collective agreement, likewise prevailing over the law.

Brazil’s labor legislation remains worker-protective; it also remains unchanged when it comes to minimum rights granted to employees, which employees cannot waive through negotiations with employers. Nevertheless, it has gradually been adapted to a new reality, in which transactional labor law becomes an accepted tool for the development of businesses and maintenance of employment opportunities among senior level employees.

L&S Authors

Silvia Fidalgo Lira

Silvia Fidalgo Lira

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