For investors wishing to do business in Brazil, it is imperative to familiarise themselves with Brazilian labour law in order to minimise the risk of unexpected liabilities. This legislation defines the rights of employees, as well as rules for executing labour contracts and termination, topics that will be the focus of this article. To avoid unforeseen liabilities, investors should always make sure they have a robust employment contract with clauses capable of mitigating possible liabilities.
The rights and obligations of employees and employers are set out in the Brazilian Federal Constitution, in the Labour Law, in specific legislation (especially that relating to workers’ health) and in collective bargaining agreements. Article 5 of the Constitution ensures that foreigners and Brazilian citizens are treated equally. Therefore, foreigners are guaranteed the rights to life, liberty, equal treatment, security and property, including their labour rights.
The Brazilian Federal Constitution prohibits a distinction between manual, technical and intellectual labour among employees. This rule, however, must be interpreted in connection with other laws, especially those that legislate on regulated professions, including engineers, lawyers, doctors, among others.
Brazilian Labour Law requires companies to maintain a ratio of 2/3 Brazilian employees to 1/3 foreigners. Legislation is interpreted according to fundamental principles, such as the principle of worker protection, always guaranteeing the most favourable interpretation for the employee, to ensure the effectiveness of their rights.
Under the principle of harmful contractual inalterability, workers’ rights cannot be waived and changes to the contract that harm them, even voluntarily, are invalid. Labour contracts can be express or tacit. This means that the Labour Courts can consider an employment relationship to be characterised even without any express agreement between the parties, as long as there are requirements such as personal, continuous work, legal subordination and onerousness.
To formalise the employment relationship, when hiring a worker the company must sign the Employment and Social Security Card (CTPS), which includes the employee’s and employer’s identification, dates of admission and termination, position, remuneration and inflation adjustment criteria, holiday period and special observations.
For lower-paid employees, there are companies that only record the employment contract on the CTPS. For middle and high-level employees, it is advisable for the parties to conclude a formal employment contract, also covering other aspects of the employment relationship, such as working hours, additional benefits, intellectual property, exclusivity and confidentiality obligations.
Contracts can be for an indefinite or fixed term, depending on the nature of the work, or for up to 90 days in the case of a trial contract. Working hours are limited to 8 hours a day and 44 hours a week, with a maximum of 2 hours of overtime a day, which must be paid with an additional bonus of at least 50%, or another more favourable bonus provided for in a collective agreement. Other basic rights, which must be included in the employment contract, include the minimum wage or wage floor for a given category, weekly rest, 30 days’ holiday, 13th salary, hazard and unhealthy work bonuses, social security contributions, FGTS and night-time bonuses. Additional benefits are also possible, but they are part of the remuneration for calculating contributions.
The Labour Law also stipulates that there must be a minimum rest break of 11 hours between the employee’s shifts. Daily working hours must be recorded by the employee and the records kept by the employer, so that they can be used as evidence in the event of administrative or legal disputes.
This rule, however, does not apply to:
(i) employees who work externally in activities considered incompatible with the control of working hours; and
(ii) employees who hold positions of trust, such as company directors, provided they receive additional compensation equivalent to at least 40 per cent of their regular salary.
There are other exceptions, generally providing for reduced working shifts for employees working in dangerous conditions or in specific activities, as well as, among others, differentiated working shifts for employees working in relay shifts.
Brazilian legislation stipulates that wages must be paid in national currency. Therefore, establishing or paying wages in foreign currency, as well as paying them abroad, is considered null and void.
It is essential that investors have the proper legal support to observe the applicable law, anticipate any weaknesses and carefully evaluate the total cost of the employee, which can represent up to 75 per cent of the monthly remuneration.
