Brazilian Labor reform: turning the sprocket wheel out of the crisis

In the night before Wednesday, the Brazilian Senate approved, in a turbulent session, a bill that brings fresh air into Brazil’s somewhat dusty labor law.

Despite the demonstration by a small group of senators who occupied the chair of the session and delayed Senate’s proceedings for six hours, the bill was approved by 50 votes against 26. Once President Temer has approved the bill and its publication in the Official Gazette has taken place, the bill will come into force 120 days after.

The new rules aim to flexibilize work relationships, as it allows collective agreements negotiated between employers and unions to prevail over legislation.

The main new Brazilian labor law rules in a nutshell:

• Working hours and breaks can be adjusted by collective agreement;
• Public holidays can be exchanged with working days;
• Possibility to offset overtime;
• More modalities of part-time jobs;
• Home office is regulated and the work day has no maximum duration;
• The time of the transportation of employees who live in areas where there is no access to public transportation and whose transportation to the workplace is assured by the employer will not be counted as working time;
• Abolition of the union’s tax (formerly to be annually paid by every employee to the union).

Such changes certainly represent a significant step forward, as they offer more possibilities to reach working arrangements that better meet economic needs. Thus, the reform encourages foreigners to invest in Brazil. Surely, there is still room for improvement, particularly in relation to the concept of the economic group, whereby companies belonging to the same group are jointly and severally liable for labor debts. This concept runs counter to the principle of corporate limited liability and raises practical concerns which, to some degree, influence investment decisions.