TerraLex Cross-Border Guide to Cross-Border Labor & Employment Guidance

Historically, Brazilian labor law has adopted provisions aiming primarily at the protection of employees’ rights. In November 2017, to give more comfort to foreign investors, the Brazilian government enacted Law number 13.467, named the Labor Reform, which softened traditional labor rights giving more effect to the collective and individual agreements negotiated between the parties. After six years of discussions in Brazilian courts, the said law has been amended, and some of its provisions have been adapted.

It is important to remark, however, that the cost of labor litigation in Brazil is considerable. Since the Law stipulates significant court fees for the employer to pay to file appeals to the Higher Labor Courts, a permanent internal preemptive effort to minimize the possibility of lawsuits is highly advisable.

Employment relationships in Brazil are ruled by both Constitutional and infra-constitutional level legislation, which set forth guidelines, principles, and specific rights to employees when providing services within the Brazilian territory.

On an infra-constitutional level, the Consolidation of Labor Laws (“CLT”) comprises the country’s basic employment laws and principles, and since its publication, scattered statutes were passed providing salary increases, social security and pension funds, strikes, and health and safety standards.

With the approval of Law no. 13.467/2017, named “ Labor Reform”, the labor unions started playing a much more significant role in employment relationships, as terms negotiated in collective bargaining agreements and conventions could, in certain cases, outweigh the legislation.

In Brazil, unions are organized according to the business activities, such as commerce, metallurgy, chemicals and others, as well as the territorial basis where the services are provided. The association representing a given company shall correspond to the core business activities explored by the company. Union membership is mandatory.

Brazilian Labor Law foresees the same treatment for foreign and national employees. Therefore, a foreign employee bearing a valid working visa will have the same rights as the local employee, including annual vacation, 13th salary, and monthly payment of salary, among others. With regards to the social security contribution, the regulations may vary depending on the existence of an international treaty regulating this matter. Brazil has effective Multilateral Agreements with Mercosur and bilateral Social Security Agreements with countries such as the United States, Canada, and Japan. These agreements, for instance, aim to avoid the double payment of social contributions.

Brazilian CLT provides that a company engaged in industrial or commercial activities, or that operates public services under concession, with more than three employees shall maintain a minimum of two Brazilian workers for every foreign one hired. This 2/3 proportion must be maintained also with respect to payroll. Portuguese citizens will be counted as Brazilian nationals for the assessment of such proportion.

Certain technicians performing specific functions may be exempt from the proportionality mentioned above by the Brazilian labor authorities in some specific situations.

Moreover, this requirement has been the subject of debate regarding its constitutionality, especially after the 1988 Federal Constitution, which values free enterprise and equality of treatment between Brazilians and foreign nationals residing in the country. In 2019, Bill 2456/19 was introduced, which proposes to eliminate the obligation of this ratio, granting favorable treatment to companies that voluntarily maintain at least two-thirds of Brazilians in their workforce. As of now, there is no updated information regarding the approval of this bill.

Therefore, although the two-thirds rule is still formally in effect in the CLT, its practical application may vary, especially considering questions about its constitutionality and ongoing legislative changes. It is recommended to consult updated sources or a legal expert to obtain accurate information regarding the current application of this rule.

The terms of employment are usually inserted in the labor card (CTPS). For high level employees, a labor agreement may be executed setting forth provisions related to the working hours, salary, bonus, and confidentiality, among others.

Wages can be freely negotiated between the parties. Brazil adopts a minimum wage for all employees, which is adjusted annually. For some specific categories, the collective agreement applicable to the employer and the employee may be greater than the minimum wage.

The Brazilian Federal Government is responsible for adjusting the minimum wage that will be observed throughout each calendar year. Some States, such as São Paulo and Rio de Janeiro, usually establish a minimum wage higher than the Federal Government. As of January 1st, 2025, the federal minimum wage is BRL 1,509.00 (one thousand and five hundred and nine Brazilian reais).

There are two types of collective agreements under Brazilian Labor Law. The agreements negotiated between the employee’s union and the employer’s union, and those negotiated between the employee’s union and the employer company. Pursuant to the new Brazilian Labor Law (Law 13.467/17, Article 8, §3º), the principle is that in the review and interpretation of said agreements the will of the parties shall be observed and there shall be minimum judicial intervention.

An employee’s pension will be paid by the Social Security Authority by virtue of retirement or during maternity leave and labor accident leave. The employees and employers pay a monthly contribution to the Social Security Authority for this purpose. The employers are also required to pay a monthly contribution to the Guarantee Fund for Length of Service (FGTS) and have also paid (until 1988) a contribution to the Social Integration Program (PIS). Employees have the right to receive such benefit from the Federal Government provided that certain conditions are fulfilled (age equal or greater than 60 years, or in the event of some types of illness such as cancer, or AIDS), death, and disablement. Employees also have the right to receive a governmental monthly compensation (insurance against unemployment) for a certain period after a dismissal without cause. Other benefits can be freely negotiated by the respective labor unions or by the labor union and the employer company, and shall be observed as compensation for the labor rights outlined in such collective agreements.

Upon the completion of every twelve months of uninterrupted services to the same employer, employees are entitled to a paid vacation of 30 consecutive calendar days to be taken during the next twelve month period. This annual vacation must be paid with an increase of 1/3 of the related pay and the payment must be made at least two days before the outset of the vacation period. If a vacation is not granted within this period, the employee must be compensated at double the remuneration, including the additional 1/3. It is important to emphasize that it is not possible to compensate vacations from one period to the other, the limit of one year for granting of vacation time should be respected. Besides that, the Brazilian Labor law foresees the possibility of sale of ten days of vacation per year.

Additionally, employees are entitled to receive payment for an annual Christmas bonus known as “13th salary”, in an amount equivalent to the remuneration received in December, or the proportional fraction if said employee was admitted within the given year (e.g. employees admitted on July 1st are entitled to receive 7/12 of the remuneration received in December).

Said payment must be made in two installments: the first one being by November 30th, or, upon an employee’s express request, when he/she leaves for the annual vacation; and the second one early in December.

Employees are represented by employee's labor unions. In Brazil, unions are organized according to the business activities, such as commerce, metallurgy, chemicals and others, as well as the territorial basis where the services are provided. The association representing a given company shall correspond to the core business activities explored by the company. Union membership is mandatory.

Brazilian legislation (Article 74, §2º, CLT) states that companies and establishments with more than twenty employees are required to have a formal mechanism for controlling the working hours performed by their employees.

The normal working time is eight hours per day and 44 hours per week. Work during holidays is permitted and, depending on the negotiations with labor unions, shall be compensated as another day or paid in double.

Employees performing external activities or those who occupy positions of trust are exempt from the working hours control, provided that some criteria are met.

All employees have the right to receive the FGTS plus a fine of 40% in the case of termination of the labor contract without cause. If an employer unilaterally terminates an employee for cause, or if an employee unilaterally terminates an employment relationship without cause, the employer will not be liable for any severance indemnity payment to the employee.

If termination is a consequence of the employer’s and the employee’s mutual fault or force majeure, and provided a labor court recognizes either of these two causes for termination, the employer must pay to the employee severance indemnity in an amount equal to 20% (rather than 40%) of the total amount deposited in the employee's FGTS account. A notice of termination must be sent to the employee. The termination without just cause of an employment agreement must be preceded by a 30-day written prior notice if the termination is processed before the agreement completes its first anniversary. As of the second year, the employee will be entitled to three additional days for each completed year worked, up to a 90-day maximum prior notice.

The proportional prior notice is not applied should the termination is initiated upon the employee’s request (resignation). In said situations, the employer may dismiss the employee from the necessity of working without prior notice. The employee may either fulfill the 30-day prior notice period or refuse to work during that period, in which case the missing days from the notice period shall be counted as unjustified absences, and will therefore be deducted from the employee’s severance payment.

Pregnant women, members elected for the labor commission to prevent labor accidents – CIPA, and employees who have suffered labor accidents or have acquired an illness in the course of working are protected from dismissal for a certain period.

In the event of restructuring of the legal entity, the new employer will be jointly responsible for the payment of labor rights and contingencies. There is no need to dismiss the employees due to the restructuring. Conducting due diligence prior to the restructuring process is highly advisable. Historically, Brazilian Labor Law was silent on redundancy. After many discussions after the 'Labor Reform" in 2017, the Brazilian Supreme Court ("STF") established the Theme 638/2023, which states that prior intervention of the union is an essential procedural requirement for the mass dismissal of workers, which cannot be confused with prior authorization by the union or the execution of a collective agreement.

The new employer may be considered jointly liable with the former one for the payment of labor rights and contingencies in the event succession is recognized. The conduction of a due diligence prior to the acquisition of a business, or to a restructuring process, is highly advisable.

The resolution of employment disputes is usually conducted by the Labor Courts. Law 13.467/17 established in its Article 507-A that in labor agreements where the wage is more than two times the maximum amount established by the Social Contribution Authority for payment of benefits, the parties can agree to submit disputes to arbitration. The arbitration proceeding will be initiated only by the employee’s initiative or in the event the employee expressly agrees with such proceeding. On the other hand, Article 507-B of Law 13.467/17 provides that employees and employers can execute annually, before the employee’s labor union, an acquittance relative to the obligations of the previous year.

Certain employee’s rights are foreseen in the Brazilian Federal Constitution (Article 7) and in the Brazilian Labor Law. Some of them, especially those stipulated in the Brazilian Federal Constitution, cannot be waived by the employee. As an example, we can mention the FGTS, the labor insurance paid due to dismissal without cause, the right to minimum wage and the right to one day for rest during the week.

Employment of children and adolescents below the age of 16 years is forbidden, except as apprentices. In this case, adolescents can work from the age of 14 years, under supervision.

Discrimination due to age, race, gender, and sexual orientation is forbidden by Brazilian laws.

The main purpose of all Brazilian labor laws is to protect the employee, who has been historically considered to be the weaker party in the labor relationship. Such concept, sometimes, may be softened in court, especially when the employee is well-educated.