April/2012

1. UNDERSTANDING BRAZILIAN LABOR AND EMPLOYMENT LAW April/2012

2. MAIN SUBJECTS • 1. BRAZILIAN LABOR LAW - PRINCIPLES • 1. Brazilian labor law – principles • 2. Employment labor law • 3. Employment contracts • 4. Outsourcing • 5. Applicable laws • 6. Structure of labor court and agencies

3. 1. BRAZILIAN LABOR LAW - PRINCIPLES • Main Principles: • Brazilian Labor Law is guided by the following main principles: • Protection of the employee: “unconscionability” defense; • Application of the most favorable rule  to the employee; • The inalienability of Brazilian labor rights;

4. 1. BRAZILIAN LABOR LAW - PRINCIPLES • Main Principles: • The right to maintain the most favorable condition and the impossibility to change the labor contract in detriment of the employee; • The impossibility to reduce the employee salary; • Intangibility of the employee´s salary; • Facts and evidence prevail over any formal agreement; • The job continuity principle.

5. Employment labor law - Features: Labor laws are complex and compliance with them is mandatory They are socially relevant Employers and employees are not allowed to waive or dispose of the labor rights provided in laws even when they agree to do so Courts can decide that an employment relationship exists even if the parties agree otherwise and if the requisites for the existence of such relationship are met 2. EMPLOYMENT LABOR LAW

6. Employment labor law - Features: Brazilian laws and Government stimulate hiring an employee Compliance with labor laws is essential Companies interested in investing in Brazil have to hire professionals: As employees As service providers 2. EMPLOYMENT LABOR LAW

7. Employment bond – Requirements: (common to all employment contracts) Individuality: only individuals can be employees; Onerosity: employee needs to receive monetary compensation; Subordination: employee provides services under subordination; Habituality: services provided on regular basis; Personality: employee cannot be replace by any other person. 2. EMPLOYMENT LABOR LAW

8. Different types of employment contracts (2 groups): Employment contract for a term or a set period (exception) Employment contract for an indefinite period (rule): The most important according to laws (the job continuity principle) and Used as a point of reference with regard to all other types of contracts 3. EMPLOYMENT CONTRACTS

9. Employment contracts - Features: A formal agreement is not a mandatory requirement for hiring an employee The employment contract can be made in writing, orally or implied from the relationship A written employment contract is always recommended All legal rights and duties involved in the employment relationship must be clearly stated in the contract Most provisions in an employment contract are already set by law or collective agreement 3. EMPLOYMENT CONTRACTS

10. Employment contracts - Features: Provisions are mandatory Employers already know, when hiring an employee, what they are required to pay Employer must not negotiate or change working conditions to the detriment of workers The risks inherent to the employer´s activities must be taken by the employer: The employer is not allowed to transfer such risks to the employees This makes the difference between an employment bond and outsourcing 3. EMPLOYMENT CONTRACTS

11. Outsourcing related labor laws No specific law regarding outsourcing Few laws outside the CLT related to this matter The law of temporary work in cases of: an extraordinary increase in the production need to replace an ordinary employee in temporary leave Difficulty in identifying whether outsourcing is complying with labor laws or not 4. OUTSOURCING

12. Precedent 331 – Superior Labor Court To be used when there is no legal provision Precedent 331 establishes: The labor bond will not be recognized in cases of hiring a service provider for 3 types of services: cleaning and maintenance services; surveillance services; specialized services not related to the main activity of the contracting party provided the requirements of personality and direct subordination are not present. 4. OUTSOURCING

13. Situations that represent risks of recognizing a labor bond: Outsourcing does not refer to cleaning and maintenance services or surveillance services The service provided is related directly to the main activity of the contracting party The service provider is subordinated to the contracting party (subordination and personality) 4. OUTSOURCING

14. Unlawful outsourcing – Consequences: The situation will be considered as illegal According to Brazilian labor law facts and evidence prevail over any formal agreement Documents and written contracts not valid if reality shows the relationship masks a real employment bond 4. OUTSOURCING

15. Unlawful outsourcing – Consequences: Employment bond will be recognized as such before the Labor Court Contracting party will be forced to pay to the service provider all benefits and rights owed in a labor bond Subsidiary responsibility Even in a licit outsourcing situation, contractor has subsidiary responsibility for rights and payment in case service provider fails to pay the employees 4. OUTSOURCING

16. 5. LAW THAT CAN BE APPLIED • Applicable laws that rule labor issues: • Brazilian Constitution: enacted in 1988 – main existing rules on article 7: • The protection of all employment relationship – dismissal is only allowed to dismiss an employment with the payment of indemnification; • The right to receive unemployment allowances; • The right to maintain a severance pay fund (FGTS); • The impossibility to reduce the employee´s salary; • The right to receive the 13th salary; • 30 day vacation period; • The statute of limitation o any labor claims; • The limit of the employee´s daily and weekly work hours which are 8 and 44.

17. 5. LAW THAT CAN BE APPLIED • Applicable laws that rule labor issues: • Brazilian Labor Law (CLT): enacted during a populist government in 1943 and since then has remained mostly unaltered • Decisions from the Superior Labor Court: súmulas and Jurisprudence Guidelines • Specific Federal Laws • Collective Bargaining Agreement and Health and Safety rules

18. 6. STRUCTURE OF LABOR COURT AND LABOR AGENCIES • Structure of Labor Court: • Specialized Federal Court: court structure only to rule on labor cases • 3 instances: • Trial Court: labor claims are filed at trial court; • Labor Court of Appeal: an appeal can be filed to the Labor Court of Appeal; • Superior Labor Court. • On some specific cases, Brazilian Supreme Court

19. 6. STRUCTURE OF LABOR COURT AND LABOR AGENCIES • Brazilian Labor Agencies: • Apart from the judicial system, there are other institutions responsible for enforcing Labor Laws: • Ministry of Labor: District Agencies responsible for auditing companies. Notices of Violation; • Labor Public Prosecutor: supervising companies – collective damages – Class Action - active and voluntarily audit companies; • Unions: related to the company´s main Activity- mandatory by law.

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