Newsletter

Since the arrival of the new coronavirus (Covid-19) in Brazil, the Federal Government has been issuing a series of measures to face the pandemic. Among the recent regulations is the Provisional Measure nº 936, of April 1st, 2020, which creates the Emergency Program for Maintenance of Employment and Income and introduces certain complementary employment measures to face the current state of public calamity.

Although certain measures have been subject to criticism, the Federal Government's actions provide alternatives and programs, aiming to reduce the economic impact for employers in all areas, in order to avoid massive dismissals and provide a minimum income to employees.

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Provisional Measure nº 936/2020 - Emergency Employment and Income Maintenance Program

The Emergency Employment and Income Maintenance Program establishes (i) the payment, by the Federal Government, of the Emergency Employment and Income Maintenance Benefit, as well as the possibility of (ii) proportional reduction of working hours and salaries; and (iii) temporary suspension of the employment contract.

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Possibility of proportionally reducing employees’ working hours and salaries

During the calamity period, employers may execute individual agreements, reducing its employees’ working hours and salaries proportionally, although in some cases rules established by collective agreement must prevail.

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Attention!‍

The following conditions must be observed:

• employee’s salary per hour must be maintained;
• a written agreement between employer and employee must be executed and such agreement must be presented to the employee with a minimum prior notice of 2 days. The Labor Union and the Ministry of Economy must be informed within 10 consecutive days (the communication to the Ministry of Economy also applies to collective agreements);
• the salary reduction may be applied for maximum period of 90-days; and
• reductions can only be applied in the following percentages: 25, 50 or 70 percent. By collective agreement, any percentage can be adopted.

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Which companies may apply the reduction? Any private employer, including small, medium and large companies, individual microentrepreneurs, domestic employer, individuals and non-profit legal entities are allowed to apply the reductions. The Provisional Measure does not apply to government agencies, government owned companies and subsidiaries and international organizations.

How is the reduction applied? The reduction must be agreed through an individual or collective agreement, made in writing, as applicable, as demonstrated in the chart below. The employees are entitled to receive a financial benefit granted by the government, provided that the deadline for communicating to the aforementioned agencies is respected, under penalty of the employer paying the period's remuneration.

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Possibility of temporarily suspending employment agreement

During the calamity period, employers may execute individual or collective agreements, setting forth a temporary suspension of the employment contracts.

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Attention!

The following conditions must be duly observed:

• the employee may not perform any work-related activities in the employers’ favor during the suspension period;
• a written agreement between employer and employee must be executed and such agreement must be presented to the employee with a minimum prior notice of 2 days. The Labor Union and the Ministry of Economy must be informed within 10 consecutive days (the communication to the Ministry of Economy also applies to collective agreements);
• the suspension may be applied for maximum period of a 60-days; and
• employees are entitled to receive all the benefits that were provided by the employer before the suspension, except the transportation voucher.

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During the suspension period, the company is not required to make the mandatory social security payment by the company but employees are able to make contributions to the General Social Welfare System as individual contributors during such period.

Which companies may apply the suspension? Any private employer, including small, medium and large companies, individual microentrepreneurs, domestic employer, individuals and non-profit legal entities. The Provisional Measure does not apply to government agencies, government owned companies and subsidiaries and international organizations.

How is the suspension applied? The suspension must be agreed through an individual or collective agreement, made in writing, as applicable, as demonstrated in the chart below. The employees are entitled to receive a financial benefit granted by the government, provided that the deadline for communicating to the aforementioned agencies is respected, under penalty of the employer paying the period's remuneration.

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Other Relevant Information – General Rules

The employment agreement must be reestablished in two days counted from (i) the end of the public calamity period; (ii) the date indicated in the individual agreement; or (iii) the employers’ notice communicating the end of the reduction period.

The use of electronic means is permitted to meet the formal communications and decision-making requirements.

If possible, applying the reduction through convention or collective agreement, rather than through individual agreements, gives more legal certainty to employees and employers.

In both cases, in addition to the benefits granted by the government, the agreement entered into between employer and employee may also provide for the payment of an additional compensation by the employer to the employee, without a salary nature and social security/tax charges, which can reduce considerably the company’s payroll, depending on the strategy adopted by the company.

Employees have job security (cannot be dismissed without just cause) during the suspension period and for an equivalent period after the program’s expire (e.g. employee subject to a 30-day suspension period have security for sixty days after the end of the program).

In any case, in the event of dismissal without cause during the employee stable period, the employer will be subject to the payment of dismissal fees, in addition to indemnity in the following proportions:

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Provisional Measure nº 927/2020 – Labor alternatives to face the current state of public calamity

It's important to highlight that the Provisional Measure nº 927/2020 was published on March 22nd and provided the following alternatives in order to minimize the economic impacts caused by this period of crises.

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