Publicado em 29/04/2021

New Brazilian Emergency Program for Maintenance of Employment Agreements and Income

On April 27th, 2021, Executive Orders No. 1,045/21 and No. 1,046/21 were enacted and provided for new measurers for promoting employment.

The Executive Order No. 1,045/21 renewed the possibility of temporary suspension of employment (i.e., furloughs), a reduction of wages and working hours, as well as the Emergency Benefit granting rules. Executive Order No. 1,046/21 established other alternative measures for employees and employers to adjust employment agreements and procedures to the economic crisis resulting from the Coronavirus pandemic.

Executive Order No. 1,045/21 – Suspension of employment and reduction of wages

  • Suspension of employment agreements

The temporary suspension of employment was renewed. The affected employee will be entitled to all benefits provided to active employees and the employee shall not carry out any activities for the company during the suspension. Otherwise, the suspension is considered null and void and the employer is required to pay all suppressed wages, as well as an additional indemnification to the employee.

  • Proportional reduction of wages and working hours

If negotiated through individual agreements, the reduction of hours and wages may be formalized observing the percentages of 25%, 50% or 70% of reduction. In case it is established through collective bargaining agreements, the parties may freely establish the reduction percentages.

  • Implementing procedures

Employment suspensions and salary reductions may be negotiated collectively (collective bargaining agreement) for all or employees, or through individual agreements for employees:

i. who receive salaries equal to or less than R$ 3,300; or,

ii. who fall under the concept of employees with broad negotiation autonomy as set forth by article 444, sole paragraph, of the Brazilian Consolidation of Labor Laws; or,

iii. regardless of the employees’ salary case of a 25%; reduction of wages and working hours; or

iv. in any salary range, if the reduction of salary or suspension does not result reduce the total amount received by the employee from the employer.

  • Term of the measures

These measures may be established for a period of up to 120 days (considering all the agreements signed in this sense as of the issuance of MP 1,045/21) and may affect the totality or only part of company’s departments or sectors.

  • Emergency Benefit

In order to be eligible to the Emergency Benefit, the employer shall inform the Ministry of Economy any exceptional measures implemented. The amount of the Emergency Benefit will be calculated considering of the amount of the unemployment insurance pay the employee would be entitled in case of a dismissal, and the following criteria:

i. in the event of a reduction in working hours and wages, it will be calculated by applying the percentage of reduction on the calculation basis; and

ii. in the event of temporary suspension of the employment contract, it will have a monthly amount equivalent to one hundred percent of the amount of unemployment insurance to which the employee would be entitled (except if the company that applied the measure has earned, during 2019, a gross revenue greater than R$ 4,800,000 – in which case, the company must pay a monthly compensatory allowance to the affected employee in the amount of thirty percent of the employee’s salary, during the suspension period.

The Emergency Benefit may be cumulated with the payment, by the employer, of a monthly compensatory allowance. Such compensatory allowance will be considered as an indemnification for all tax and social security purposes. Hence, it will not be included in the calculation i. of the income tax withheld or of the annual adjustment statement of the employee’s personal income tax; ii. the social security contribution and other taxes levied on the payroll; iii. the amounts of deposits in the Severance Pay Fund – FGTS.

  • General provisions

Employees affected by such measures will be entitled to a temporary job tenures for the term of the reduction/suspension and, for an additional term equivalent to the term under which the reduction or suspension remained in force (in the case of pregnant employees, the second period will become effective after expiration of the corresponding maternity job tenure).

If the employee is dismissed without cause during the tenures period, he/she will be entitled to receive an additional compensation.

The deadlines for filing the defense and appeals in administrative proceedings arising from labor infraction notices or FGTS debit notifications, and the respective statutes of limitations, are suspended for a period of 180 days.

Executive Order No. 1,046/21 – Other measures to face the crisis

As occurred during 2020, the Executive Order No. 1.046/21 renewed the possibility for employers and employees to enter into individual written agreements to provide for seven measures during the next 120 days:

 1)   Remote working

This work regime may be determined by unilaterally determined by the employer, upon a 48-hour notice to the employee and may be applied to interns and apprentices.

In case the employer cannot provide equipment and infrastructure services to the employees, the regular working hours will be considered as time at the employer’s disposal and paid under the regular wages.

 2)   Vacation

Employees’ vacations may be advanced upon a 48-hour notice (instead of the regular 30-day notice) and may be granted prior to the end of the corresponding vesting period. The advancement of future vacations may be negotiated individually, and employees who are considered part of the Coronavirus risk group, must be granted priority. The payment in cash of up to 1/3 of employees’ vacation is conditioned to the employer´s acceptance.

The vacation pay shall be deposited to the employee until the fifth business day of the month following the beginning of the vacation.

 3)   Collective Vacation

Employees’ collective vacations may be scheduled, with 48-hour notice (instead of the regular 15-day notice) to the affected employees. Such collective vacations are allowed to be implemented to departments or sectors of the company. The employer is not required to comply with the maximum and minimum period limits provided for in the CLT (concession granted for a period exceeding thirty days) or communicate to labor unions or the Labor Bureau of such collective vacations.

 4)   Granting and advancement of holidays

Employers will be able to advance federal, state, district and municipal religious holidays upon a 48-hour notification to such to the employees (regardless of their consent), indicating the holidays that will be advanced. These holidays may be used to offset the employees’ pending overtime in overtime compensation schemes (time bank).

 5)   Overtime compensation schemes (time bank)

Employers are authorized to interrupt activities and establish a time bank scheme, through formal collective or individual agreements. Such time banks may compensation leaves or overtime within up to eighteen months, as from the end of the 120-day term of the extraordinary measures established by Executive Order No. 1,046/21. The compensation of leaves by the employees may be carried out by extending the employees’ working hours by up to two hours per day (limited to 10 hours of work per day) and can be carried out on weekends.

 6)   Suspension of administrative health and safety requirements at work

With regards to employees’s working remotely, the obligation to carry out occupational, clinical and complementary medical examinations is suspended during the 120-day period, except for dismissal examinations. Such exams must be carried out up to 120 days after the end of the term of the extraordinary measures, provided for in article 1, of Executive Order No. 1,046/21. The obligation to carry out periodic training provided for in Normas Regulamentadoras is also suspended. It is authorized to hold CIPA meetings, including those for electoral processes, entirely remotely.

 7)   Postponement of FGTS deposits payment terms

The mandatory monthly payment of FGTS by employers, regarding the competencies of April, May, June and July 2021, with due date in May, June, July and August 2021, is suspended. Such payment may be performed in up to four monthly installments, with a due date beginning on September 2021.

Upon the enactment of such Executive Orders they were sent to the Brazilian Congress for confirmation. Such confirmation process shall occur within a maximum of 120 days, otherwise such Executive Orders ceases to be enforceable.

We will continue to follow the legislative progress related to Executive Orders Nos. 1,045/21 and 1,046/21 reporting its developments