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           April 3rd, 2020

(information and measures available up to this date, subject to change as new measures are announced by the authorities)

 

Having regard the pandemic declaration by the World Health Organization (WHO) due to the new coronavirus (Covid-19) and guidelines to restrict mobility in the country, with effective restrictive measures and suspension of activities of several non-essential businesses in certain States, companies have faced difficult decisions on how to cope with the survival of their businesses and maintaining jobs.

 

Law No. 13,979 was published on 6th February 2020 providing for policies to confront Covid-19, but does not contain specific measures to protect workers and jobs. It limited itself to considering as valid justification an employee´s absence from work to investigate, care and treat the disease.

 

The Brazilian federal government announced lines of credit for companies and measures aimed at protecting jobs by Provisional Measures (“MP”). In the labour sphere, MPs No. 927 of 22nd March 2020, No. 928 of 23rd March 2020 and 936 of 1st April 2020 have been enacted and published this far .

 

In the light of the above, we set out below the current options provided by Brazilian legislation for business savings and job preservation purposes, contemplating the innovations introduced by the recently published MPs, highlighting that they are clear in determining that their provisions only apply during the state of public calamity recognized by Decree No. 6, of 20th March 2020.

 

In addition to the options presented below, it is important to note that:

 

  • MP No. 927/2020 confirms that the state of public calamity declared by the Brazilian federal government constitutes an Act of God pursuant to the provisions of Article 501 of the Brazilian Consolidation of Labour Laws (“CLT”);
  • MP No. 927/2020 expressly provides that cases of contamination by Covid-19 will not be considered occupational diseases, except if there is evidence to connect the same with the workplace;
  • The measures adopted by employers that do not contravene the provisions of MP No. 927/2020, taken in the 30 days prior to its publication, are valid;
  • There are specific measures for healthcare facilities – we are available to provide further details.

 

It should be noted, regardless of the measures chosen by the company, as long as employees remain in the workplace, that it is the employers’ responsibility and obligation to adopt the necessary and possible precautions to protect their employees and prevent the spread of the disease, such as informing employees about the topic and adequate hygiene care, provide washbasins with soap and water, provide sanitizers (70% alcohol gel or other suitable products), implement measures to change the work routine to make working hours more flexible and avoid crowds, work station spacing etc.

 

Current options provided by Brazilian legislation supplemented by MPs No. 927, No. 928 and No. 936 of 2020, which aim to preserving jobs and income, ensuring the continuity of professional activities and reducing the social impact of the public calamity and health emergency:

 

  1. a) Home office:
  • Written notice from the employer to the employee provided 48 hours in advance;
  • Not applicable to telemarketing/call centre workers;
  • Exemption of working hour controls;
  • The written agreement is waived but the provisions regarding the responsibility for the acquisition, maintenance or supply of technological equipment and the necessary infrastructure must be the subject of a written agreement signed within 30 days from the date of the change of the work regime;
  • Should the employee not have the technological equipment and necessary and adequate infrastructure, the employer may: (i) lend the equipment and pay for infrastructure services; or (ii) consider the employee under on-call conditions;
  • Also applicable to apprentices and interns.

 

2. b) Anticipation of individual vacation leave:

  • Written notice from the employer to the employee provided 48 hours in advance or by any electronic means of communication;
  • Minimum term of 5 (five) days;
  • May be granted unilaterally by the employer, even if the employee has not completed 12 months of service to the company (thus, enabling the anticipation of individual vacation by unilateral decision of the employer);
  • Possibility of individual negotiation to anticipate future vacation periods by written agreement;
  • Priority in the concession for employees belonging to the Covid-19 risk group;
  • Possibility of deferring vacation payment until the 5th business day of the month subsequent to that in which vacation is taken and the additional 1/3 bonus until the date on which the 13th salary is due (20th December);
  • The conversion of up to 1/3 of the vacation leave in cash allowance will depend on the employer’s consent;
  • Possible suspension of vacation or work leave of employees working in essential activities by prior communication of 48 hours, in writing or by any electronic means of communication
  • In the event of termination of the employee, in addition to the severance package, the amounts not yet paid relating to vacation must be paid.

 

3. c) Collective vacation leave:

  • Written notice from the employer to the employee given 48 hours in advance or by any electronic means of communication;
  • Mandatory prior communications to the local labour authority (Ministry of Economy) and unions representing employees are waived;
  • Although the wording is not clear in this regard, it is possible to argue the possibility of deferring payment of vacation leave up to the 5th business day of the month subsequent to that in which vacation is taken and the additional 1/3 bonus by the date on which the Christmas bonus (13th salary) is due (December 20th) also in the collective vacation.

 

4. d) Anticipation and use of public holidays:

  • Written notice from the employer to the employee must be provided 48 hours in advance;
  • Valid by unilateral decision of the employer, except for religious holidays, which depend on the employee’s written consent;
  • Holidays can be used to offset time bank balances.

 

5. e) Time Bank:

  • Authorizes a special working hour set-off regime, under a time bank, established by collective or individual formal agreement, for set-off within up to 18 months as from the date of the end of the state of public calamity.

 

6. f) Suspension of Administrative Requirements for Health and Safety at Work:

  • Suspension of the obligation to conduct occupational, clinical and complementary medical exams, except for termination medical exams (this may also be exempt if the most recent occupational medical exam was conducted within the last 180 days) – note that we do not recommend exemption of the admission medical exam, in order to avoid exposure to the risk of onboarding new hires with unidentified pre-existing diseases;
  • Exams must be conducted within 60 days from the cessation of the state of public calamity;
  • Suspension of periodic training and occasional training for current employees, as provided for in regulatory standards for health and safety at work, which must be conducted within 90 days of the end of the state of public calamity;
  • Maintenance of current CIPAs until the end of the state of public calamity and suspension of ongoing electoral processes.

 

7. g) Deferral of FGTS payment:

  • Suspension of the enforceability of FGTS payments by employers, in respect of March, April and May 2020, falling due in April, May and June 2020, respectively;
  • Such payments can be effected in up to six monthly instalments, maturing on the seventh day of each month, starting in July 2020, by declaring this information by 20th June 2020;
  • Upon termination of employees, payment must be immediate, without interest and fine.

 

8. h) Paid leave, which if exceeding 30 days precludes the employee’s right to vacation in that acquisition period.

 

9. i) Application of the provisions regarding Acts of God/Force Majeure, provided for in Articles 501-504 of the CLT, in particular the possibility of a general reduction in wages by up to 25%, limited to the regional minimum wage and provided the negotiation and execution of a Collective Bargaining Agreement (“CBA”), with a counterpart provision to guarantee job stability.

 

10. j) Suspension of employment agreements, for a period of 1 to 3 months, for the participation of the employee in professional qualification programs (necessarily remote) offered by the employer, provided the negotiation and execution of a CBA and the employee’s consent, maintaining the concession of benefits voluntarily conferred by the employer.

 

On April 1st, 2020 MP 936/2020 was issued to implement the Emergency Job and Income Preservation Program, providing for the additional measures outlined below, basically enabling working hour and salary reduction and the temporary suspension of the employment agreement.

 

11.  k) Emergency Job and Income Preservation Benefit (the “Benefit”):

  • The Federal Government will pay, on a monthly basis, the Benefit on behalf of employees who are impacted by working hour and salary reduction and/or the temporary suspension of their employment agreements, as from the date any of such measures are implemented.
  • As from the date on which the agreement between employer and employee/trade union is executed (please see below for additional details), the employer has 10 (ten) days to inform the contents of the same to the Ministry of Economy.
  • Additional information on how to proceed will be issued shortly, it being noted that the Federal Government has anticipated that the employer will notify the Federal Government by accessing the website empregador web (online system already in place and used by local companies), uploading/informing the details of the agreement executed and the employees’ bank account, after which moment the Federal Government will pay the Benefit directly into each employee´s bank account.
  • The first installment will be paid within 30 (thirty) days as from the execution of the agreement provided that the same is timely reported to the Ministry of Economy (within 10 days from its execution).
  • The Benefit will be paid exclusively throughout the duration of the working hour and salary reduction and/or the temporary suspension of the employment agreement.
  • The payment of the Benefit does not prevent or change the concession of unemployment insurance once and if this is ultimately due.
  • The amount of the Benefit will be calculated based on the amount the employee would be entitled to receive as unemployment insurance (which currently varies between BRL1,045.00 and BRL1,813.03), as follows:

 

Working hour and salary reduction Temporary suspension of employment agreement
The Benefit is calculated by applying the reduction  percentage to the calculation basis (more details below). Companies with gross revenue of up to BRL4.8MM in 2019: Benefit equivalent to 100% of the unemployment insurance amount
Companies with gross revenue higher than BRL4.8MM in 2019:  Benefit equivalent to 70% of the unemployment insurance amount

+

Company pays a mandatory aid allowance of 30% of the employee’s salary (allowance that does not have a salary nature)

 

  • The Benefit will not be paid to employees occupying public offices; receiving other benefits from the National Social Security Institute – INSS (except for death of work-related accident allowances); receiving unemployment insurance; and receiving professional qualification allowance paid by the INSS.

 

13. l) Working hour and salary reduction:

  • Maximum duration of 90 (ninety) days.
  • The hourly salary must be preserved.
  • A written agreement is necessary and must be executed at least 2 days in advance.
  • Reduction of working hours and salary exclusively at levels of 25%, 50% or 70% (different rates may apply through collective negotiation with the competent union).
  • Reinstatement of regular working hours and salary within 2 days from the cessation of the public calamity, the term provided for in the agreement or the employer’s communication of the anticipated cessation of the reduction.

 

 14. m)  Temporary suspension of the employment agreement:

  • Maximum duration of 60 (sixty) days (which may be divided into 2 periods of 30 days).
  • A written agreement is necessary and must be executed at least 2 days in advance.
  • Employer must continue to pay all current fringe benefits (except for transportation related benefits, i.e. mileage, fuel, transportation allowance etc.).
  • If the employee is required to work during the suspension, the same will be deemed null and void and the employer will be subject to the applicable full payments and penalties.
  • Companies with gross revenue higher than BRL4.8MM in 2019 must pay a mandatory allowance of 30% of the employee’s salary (allowance that does not have a salary nature), the amount of which shall be provided for in the agreement.
  • Reinstatement of the employment agreement within 2 days from the cessation of the public calamity, the term provided for in the agreement or the employer’s communication.

 

15. n) General terms and conditions of the Emergency Job and Income Preservation Program:

  • The Benefit may be accrued with the employer’s monthly aid allowance.
  • The aid allowance must be agreed upon in the written agreement, will not have a salary nature and will not be considered in the basis for calculating social security contribution, FGTS and income tax.
  • Employees receiving the Benefit will be entitled to job stability for the duration of the working hour and salary reduction and/or the temporary suspension of the employment agreement plus an equivalent period following the cessation of such measures (e.: if the working hour/salary reduction or the suspension of employment lasted for 2 months, the employee will have job stability for these 2 months plus an additional 2 month period).
  • Any termination without cause effected during the term of the job stability will subject the employer to penalties in addition to the payment of the full severance package due (not valid for resignations or terminations for cause).
  • The Benefit paid during working hour and salary reduction will be calculated and can be negotiated/executed (individually or collectively) as follows:

 

Reduction Amount of the Benefit Individual Agreement Collective Bargaining Agreement
Less than 25% 0 Not possible Possible
25% 25% of the amount of unemployment insurance the employee would be entitled to Possible Possible
50% 50% of the amount of unemployment insurance the employee would be entitled to Possible only for employees earning up to BRL3,135.00 OR employees with a college degree and earning at least BRL12,202.12 Possible for all employees. Required for employees not comprised in the before mentioned group.
70% 70% of the amount of unemployment insurance the employee would be entitled to Possible only for employees earning up to BRL3,135.00 OR employees with a college degree and earning at least BRL12,202.12 Possible for all employees. Required for employees not comprised in the before mentioned group.

16. o)  Individual agreements must be informed to the employees’ representative Union within 10 days from the date of their execution.

  • Measures brought by MP 936/2020 are also valid for part-time employees and apprentices.
  • The maximum period for implementing the measures, even if combined/successive, cannot exceed the total of 90 (ninety) days.
  • The possibility of suspending the employment agreement for professional qualification purposes provided for Article 476-A of the CLT can only be implemented for remote courses, with a duration of at least 1 month and maximum of 3 months.
  • The necessary meetings and voting for the collective bargaining agreements can be conducted by electronic means.
  • Employees under intermittent employment agreements (“zero hour agreements”) are eligible for the emergency benefit of BRL600.00 per month, for 3 (three) months, which is non-cumulative.
  • Ongoing collective agreements may be renegotiated for compliance with the provisions of MP 936/2020 within 10 days (as from April 1st, 2020).
  • The measures enabled by MP 936/2020 must safeguard the continuance of public services and essential activities.

 

  •  Montgomery’s additional comments:
  • MP 936/2020 enables that the company mix and implement the measures it deems fit for each of its departments or group of employees. It does not provide for any obligation that the same measure be implemented for an entire department, commercial establishment or business unit.
  • The reduction of working hours is flexible, can be implemented in shifts, days of the week, hours per day, etc.
  • The employee must inform his/her bank account into which the Benefit must be paid in the individual or collective agreement to be executed with the employer – hence, the money from the Benefit does not go through the company, but directly to the employee impacted by salary reduction or suspension of his/her employment agreement.
  • It is expected that additional information on how to process the application for the Benefit be issued by April 3rd, 2020.
  • It is still uncertain as to what salary is to be considered as the basis for calculation the reduction/aid allowance, whether only the base salary or the full compensation comprising variable remuneration (i.e. commission, gratuities etc.). The Employment Secretariat (from the Ministry of Economy) verbally confirmed that only the base salary should be considered, however, this issue may trigger judicial discussions since the CLT provides that commission and gratuities form part of an employees’ salary.