Hire in Brazil

Employment agreements in Brazil are usually set 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 intended for a fixed term, but the reason to justify it is not one of the reasons permitted by law; 
• does not include a clause confirming the duration of the term and the legal justification for having a fixed-term; 
• is extended more than once; 
• the maximum term of the fixed-term agreement is exceeded; 
• any renewal is not agreed upon by both parties in writing;
• if successive fixed-term employment agreements are used without observing the legally mandated 6-month break.

Brazilian law restricts what type of information can be asked from employees by employers and checked during the recruitment process.

It is acceptable for employers to conduct a background check on the employee’s identity, education and professional history. However, an employer is not permitted to run a criminal or financial check on a prospective candidate. Doing so is considered discriminatory behavior.

An applicant is obligated to submit to a medical examination. Depending on the employee’s line of work, there can be other mandatory test requirements. If the test results are not satisfactory, the employer has the right to prevent future labor claims. This means they can terminate the recruitment process following the test. However, companies must have justifiable reasons in order to prevent being sued for discrimination.

A trial period may be established as a provision of the employment contract. The trial period can last for a period of up to 90 days. This period may also be split into two periods, adding up to 90 days. The probation period may be renewed once if the limit of 90 days is observed (e.g. at 45 days renewable for 45 days or 30 days renewable for 60 days).

The regular working period cannot exceed eight 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 completion of a working day and the beginning of another. Employees are entitled to a paid rest period each week, preferably on Sundays. Some specific categories allow for a different work shift.

Employees who work outside the employer’s workplace (remotely) and those who serve in a management position are exempt from working time limitations.

Overtime, in general, should be limited to no more than two hours per day. Compensation for overtime work must be offered at a rate at least 50% higher than the compensation for regular work. If overtime work is performed on Sundays or a holiday period, the additional rate of pay is 100% over the standard rate.

Employees and employers may agree to bank hours to offset any overtime worked instead of taking payment. In this case, the overtime worked in one day may be compensated by the exact reduction of the work shift in another day or days. This must be taken within a period of six months.

The following categories of employees are not entitled to receive overtime payments and are not subject to the established limits on working hours under the Labor Code: 

• employees who perform activities outside of the company’s established facilities without defined working hours
• high-level employees (such as managers) who occupy trust positions
• employees who work remotely

Employers are liable for protecting the health and safety of their workforce. Thus, they must ensure a healthy and safe workplace for employees and comply with all mandatory regulations regarding healthy and safety matters. These regulations cover mandatory periodical medical examinations, medical examinations upon admission and termination, medical records, provision of specific task related training, maintenance of an Internal Commission for Accident Prevention (CIPA) as well as other requirements.

Most employees are entitled to receive a statutory Christmas bonus each year, equivalent to one monthly salary. Typically, 50% of the Christmas bonus must be paid by November 30 and the remaining 50% on or before December 20. 

It is common practice in Brazil to reward employees through bonus payments, which may be contractual or discretionary. All bonuses must be provided on an equal opportunity basis to all employees at similar levels.

Bonus terms and conditions are generally agreed upon at will between the employer and the employee. However, employers should note that if a bonus is paid regularly it might be considered as part of the employment contract. In this case, it becomes subject to regulations. For example, after establishing the regular payment of a bonus, it may not be altered to the detriment of the employee. 

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

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

Grounds

Under Brazil’s labor legislation, there are five distinct types of termination.

1. Termination without cause: the employer is not required to disclose the reason
2. Resignation by the employee
3. Indirect termination: this type of termination is characterized by a serious misconduct the employer commits against the employee
4. Termination by mutual consent: both parties mutually agree to terminate employment
5. Termination for cause: 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 from the employer or when such an act constitutes as 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 secrets
• 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)
• customary practice of gambling in the workplace

By Employer

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

By Employee

When an employee initiates the termination of an indefinite term without cause, it is called a resignation. The employee must offer 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 a termination by mutual consent, the required prior notice period will be cut in half.

Under the five distinct types of termination, severance pay guidelines are as follows:

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 month salary, 50% 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 unemployment insurance.
2. Resignation by the employee: payment of salary balance, proportional 13th month 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 of the payment of the prior notice and the FGTS fine (employee’s part) and, in full, other labor allowances due in a termination without cause. In this type of termination, the employee will be able to withdraw up to 80%t of the FGTS balance and will not be entitled to receive unemployment insurance.
5. Termination for cause: payment of salary balance and accrued vacation plus one-third.

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

Non-compete clauses

Based on case law, Brazilian labor courts tend to consider a non-compete agreement valid and enforceable after termination only when the following components are included in such an 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 conclude the restriction applies on a worldwide basis or in a specific region.  
• Limitation of object: The obligations set out by the non-compete must not exceed the limits of what is considered reasonable to protect the 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 (e.g. 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 or her ordinary compensation if he or she remained employed for such period. As a rule of thumb, fair compensation corresponds 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 Brazil regarding non- solicitation provisions, it is common for employers to include this type of restriction in the employment agreements of employees at the management level. As there is also little history in case law on this matter, there are few conclusions about its enforceability. However, the current legal perspective generally understands that non-solicitation clauses are valid so long as the parties agree on: (a) limitations in time; (b) limitations of geography and (c) limitations of objective.

Unions may negotiate on behalf of employers and employees and execute CBAs. The terms and conditions negotiated by the unions are mandatory, covering employers and employees within the specific category. An employer may also negotiate a specific CBA with the employees’ union, determining how it will apply to its employees. There are some matters that can only be implemented by means of a CBA, such as the offsetting of a working hours system or a profit sharing program.