COVID-19 and Employment contracts in Brazil

On an introductory note, Brazilian Congress approved a legislative decree that recognizes the state of public calamity in the country until Dec. 31, 2020. As a consequence, protection measures of formal jobs were announced, including, among others, remote work; anticipation of individual paid vacations; mandatory vacation leave; intensification of the compensatory time off; proportional reduction of wages and working hours; and anticipation of non-religious holidays. The government also authorized the reduction of working hours and wages, in return for the maintenance of jobs, and will pay aid to offset the cut while keeping the workload reduced.

In accordance with Provisional Measure 936, employees and employers can agree on (i) proportional reduction of wages and working hours, and (ii) temporary suspension of the employment contract. Both measures must be agreed upon and may be imposed, although there are critics of the employee’s ability to refuse. Unions do not need to participate in these agreements if the employee receives a monthly salary of up to R$3,135.00 or above R$12,202.12 and holds a higher education diploma.

The proportional reduction of wages and working hours may be agreed for up to 90 days, provided that the percentages of 25%, 50% or 75% are used both for wages and for working hours. Other percentages can only be adjusted through collective bargaining.

The temporary contract suspension, on the other hand, must have a maximum term of 60 days, which may be divided into two periods of 30 days. Companies that had an annual turnover over R$4,8 million in 2019 must pay a monthly compensatory allowance of 30% of the employee’s salary.

In both cases, in order to offset part of the wage loss, the employee may be entitled to the emergency employment and income benefit paid by the government, in case the respective requirements are met.

If a company has offered employment but that offer has not been accepted by the applicant, then the offer can be rescinded at any time. On the other hand, if the offer has been accepted, then the employer would need to follow usual termination procedures. There is no specific rule for COVID-19 pandemic.

According to Provisional Measure 927, during the state of public calamity companies can anticipate the employee’s vacation period, upon granting a 48-hour prior notice. The vacation period cannot be shorter than 5 calendar days and may be granted even though the acquisition period has not yet elapsed (in Brazil, employees are usually intitled to 30 vacation days acquired after a 12-month work period).

There are no specific benefits for employees that cannot go to work/provide work from home because of their children. For these situations both proportional reduction of wages and working hours or contract temporary suspension may be used.

Companies can operate if they carry out activities included among those defined as essentials. Each municipality and state have their own roll of essential activities, which differ from the federal enumeration. Therefore, companies that operate nationwide must comply with all these regulations.

The Social Service of Industry (“SESI”) launched a guide for the prevention of COVID-19 in companies. The manual, produced by occupational physicians and infectious disease specialists at SESI, aims to help companies combat the spread of the disease in the workplace. This guidance is available in Portuguese, English and Spanish and can be found here.

There is job security for the employee during the proportional reduction of wages/working hours and the temporary contract suspension, for the same time period after reestablishment of the previous work conditions. Violation of this guarantee subjects the employer to indemnify the employee in addition to severance payment.

In other cases, termination of employment contracts is allowed and all regular severance payments and procedures must be followed.