Hire in Brazil

Employment agreements in Brazil are usually for an indefinite term. Fixed-term employment agreements are only allowed:

• for up to two years when either the temporary nature of the service justifies a pre-established term, or the business activities have a temporary nature;
• during an initial 90-day probation employment period, after which the employment agreement will become for an indefinite term.

The fixed-term agreement will automatically become an indefinite term employment agreement, if the agreement:

• is for a fixed term, but the reason to justify it is not one of the reasons allowed by law;
• does not include a clause confirming the term and the legal justification for that;
• is extended more than one time;
• the maximum term of the agreement is exceeded;
• any renewal is not agreed by the parties in writing;
• if successive fixed-term employment agreements are used without observing the legislated 6-month break.

Brazilian law is restrictive on information that can be sought from employees and that can be checked during the recruitment process.

While it is acceptable for employers to undertake a background check on the employee’s identity, education and professional history, an employer cannot run a criminal/financial check on their potential candidates as it is considered discriminatory behaviour.

An applicant is obligated to submit to a medical examination and depending on the employee’s work activities, there could be other mandatory test requirements. If the test results are not satisfactory, the employer has the right to prevent future labour claims, e.g. by discontinuing the hiring process. However, companies must have justifiable reasons to prevent being sued for discrimination.

The trial period may be established within the terms of the Employment Contract. The trial period may be for a period up to 90 days. This period may also be split into two periods that together add up to 90 days and may be extended only once, at the discretion of the employer, to the total period.

The regular working period cannot exceed 8 hours per day and 44 hours per week. Employees who work more than six hours a day are entitled to at least one-hour break. There must be a minimum rest period of 11 hours between the end of a working day and the beginning of another. Employees are entitled to a paid weekly rest period preferably on Sundays. Some specific categories have a different work shift.

Employees who work outside the employer’s establishment (remotely) and those who occupy a management position are not subject to working time limitations.

In general overtime should be limited to two hours per day. Compensation for overtime work must be at least 50% greater than the compensation for regular work. If the overtime is performed on Sundays or holidays, the additional pay is 100 per cent of the standard rate.

Employees may negotiate with the employers and agreement may be made to bank hours to compensate any overtime worked instead of taking payment. In this sense, the overtime worked in one day may be compensated by the exact reduction of the work shift in another day or days, within a period of six months.

The following employees are not entitled to overtime payments and are not subject to the limits on working hours under the Labour Code:

• employees who perform activities outside of the company’s facilities and wherein those activities as such, are not compatible with defined working hours;
• employees (such as managers) who occupy trust positions; and
• employees who work in a remote work system.

It is quite common in Brazil to reward employees through the payment of bonuses. These may be contractual or discretionary, but they must be provided on an equal opportunity basis to all employees at similar levels.

Bonus term and conditions are generally agreed upon at will between the employer and employee. However, employers should note that if a bonus is paid regularly it could be considered as part of the employment contract therefore subject to its regulation and for example the regular payment of bonus established on not allowed to be altered to the detriment of the employee.

To ensure that the bonus received by the employee is not considered part of his or her remuneration, the following considerations must be met:

• The bonus payment must be made at the employer’s discretion.
• The bonus payment cannot be paid on a regular basis.
• The bonus payment must be related to the employee’s performance being “above the usual expected”.

Under Brazilian labour legislation, there are five distinct types of termination.

1. Termination without cause: the employer does not have the obligation to disclose the reason.

2. Resignation by the employee.

3. Indirect termination: a termination characterized by a serious misconduct that the employer commits against the employee.

4. Termination by mutual consent: whereby both parties mutually agree to terminate employment.

5. Termination for cause. this must be grounded in one of the situations:

• an act of dishonesty;
• intemperance of conduct (related to inappropriate sexual behavior) or misconduct;
• habitual trading on the employee’s own account without permission, or when it constitutes an act of -competition to the employer or is harmful to the business;
• criminal conviction of the employee, if there has been no suspension of the sentence;
• negligent performance of duties;
• habitual drunkenness in the workplace;
• breach of company’s secrecy;
• an act of indiscipline or insubordination;
• abandonment of employment;
• physical violence or acts against someone’s honor or name during work, except in the case of self-defense or defense of third parties; or
• customary practice of gambling in the workplace.

Notice of termination must be given prior to dismissal in the event of a termination without cause and at the employer’s initiative. In the event of termination of the employment agreement for an indefinite term the prior notice period is at least 30 days, with three days added per year of work, limited to 90 days in total. The employer may opt to provide a pay in lieu of notice and release the employee from working in this period. Dismissal without notice is accepted in terminations for cause, in which case the communication of the termination is immediate and no payment in lieu is due.

By Employee

In the case of a termination of employment agreement of an indefinite term, without cause and upon the employee’s initiative (resignation), the employee must provide a prior notice to the employer of 30 days or request to be released from working during the prior notice period.

In the event of termination by mutual consent, the prior notice period will be reduced by half.

1. Termination without cause by the employer: payment of salary balance, accrued vacation plus one-third bonus, proportional vacation plus one-third bonus, proportional 13th salary, 50 per cent severance fund (FGTS) fine over the balance of the employee’s individual account. The employee is also entitled to withdraw the FGTS balance and receive the unemployment insurance.

2. Resignation by the employee: payment of salary balance, proportional 13th salary, accrued vacation plus one-third bonus and proportional vacation plus one-third bonus;

3. Indirect termination: same payments due as in a termination without cause;

4.Termination by mutual consent: half the payment of the prior notice and the FGTS fine (employee’s part) and, in full, other labour allowances due in a termination without cause. In this type of termination, the employee will be able to withdraw up to 80 per cent of the FGTS balance and will not be entitled to receive the unemployment insurance.

5.Termination for cause: payment of salary balance and accrued vacation plus one-third.

There is no specific regulation in Brazil on restrictive covenants or the enforceability thereof following termination of employment agreements. However, the Brazilian Federal Constitution establishes an individual’s right and freedom of work.

Non-compete clauses

Based on case law, Brazilian Labour Courts tend to consider a non-compete agreement valid and enforceable after termination only provided the following components are in such agreement:

• Limitation in time – the period of restriction must be reasonable and, in all events, limited to 24 months maximum;
• Geographic limitation – a reasonable geographic limitation for the restriction must be established. It is possible to include that the restriction applies on a worldwide basis or in a specific region;
• Limitation of object – the obligation must not exceed the limits of what is considered reasonable to protect the former employer’s interests;
• Fair compensation – the parties may negotiate what is reasonable on a case-by-case basis based on the extension of the non-compete obligation, period and restrictions. For example, if the restriction is broad (i.e., the former employee cannot work for any company that is a competitor of the former employer) the general rule is that compensation, during the period of the non-compete obligation, should be equal to the amount the former employee would earn as his/ her ordinary compensation if he/she remained employed for such period. It is considered a fair compensation should correspond to the last compensation multiplied by the number of months for the non-compete obligation.

Customer & Employee non-solicit clause

Although there is no legislation in Brazilian Labour Law regarding non- solicitation provisions it is common for employers to include this restriction in employment agreements of management level employees. As there is also little in case law on this matter there are few decisions about its enforceability. However, current general legal opinion understands that non-solicitation clauses are valid as long as the parties agree on: (a) limitation in time; (b) limitation of geography and (c) limitation of object.

Unions can negotiate on behalf of the employers and employees and execute collective bargaining agreements. The terms and conditions negotiated by the unions are mandatory and cover the employers and employees of the category. An employer may also negotiate a specific collective bargaining agreement, applicable to its employees, directly with the employees ́ union. There are some matters that can only be implemented by means of a collective bargaining agreement such as an offsetting of a working hours system and profit/result sharing program.