Brazil's President Approves Labor Reform Bill

On July 14, 2017, Brazil's Labor Reform Bill (Law No. 13.467) (the "Bill") was published after it was approved by President Michel Temer. The new law will go into effect on November 11, 2017.

The Labor Reform Bill will make extensive changes to several provisions of the Brazilian Labor Code. The Bill is significant because it represents the country's first attempt to modernize and overhaul labor rules that date back to the 1940s.

Most significantly, the Bill offers more leeway to collective bargaining and provides that agreements negotiated between employers and workers on a range of issues override labor legislation unless such agreements extinguish basic labor rights foreseen in the Federal Constitution (such as, for example, minimum wage, prior notice and FGTS). A collective bargaining agreement will prevail even if there is no express consideration. In doing so, the Bill prioritizes direct negotiations between workers and employers over existing labor regulations, thereby reducing employer costs by allowing companies to negotiate contracts freely with employees.

In addition, the Labor Reform Bill provides for the following noteworthy changes:

Union's Contribution: Union's contribution, currently mandatory, will be voluntary and employees' authorization will be required. Employers' union contribution also will be voluntary. Terminating the Employment Contract by Mutual Agreement: Employees may negotiate resignations with employers and, upon mutual agreement, the parties may terminate the employment contract. In such case, employees may be entitled to: a 50% payment in lieu of notice; a 20% fine on the existing balance in the FGTS account; and a withdrawal of 80% of the existing balance in the FGTS. Although employees will be entitled to other labor funds (e.g., Christmas bonus, vacation, etc.), they will not receive unemployment insurance. Vacation Period: Vacation periods will receive more flexibility, as the vacation period may be split in three periods, one of which must be for a minimum period of 14 calendar days, and no vacation may be shorter than five calendar days. This provision applies to all employees, regardless of age. Home Office: For the first time, working at a home office will be legally regulated, as employees may work from a home office if agreed to in a written employment...