Federal Decree No. 10,470/20, published on August 25, extended the time limits for employers to suspend their employees' employment contracts or to reduce, proportionally, working hours and salaries.
Created by Executive Order No. 936/2020 (later converted into Law No. 14,020/20), these two labor instruments are part of a range of emergency measures promulgated by the federal government still during the beginning of the crisis caused by the covid-19 pandemic to confront the state of public calamity.
The authorization to negotiate individually the reduction of salary and working hours or to suspend employment contracts was well received by employers throughout Brazil, in the face of the abrupt stoppage of the national productive sector caused by the social distancing measures decreed by states and municipalities. With the extension of the time needed for social distancing, the time limit for implementing these measures has recently also had to be extended.
On April 1, the date of the publication of MP 936/2020, the Executive Branch had believed it sufficient to provide for the possibility of proportional reduction of working hours and salary for 90 days and suspension of employment contracts for 60 days. Soon, however, a need was found to extend the measure in order to combat the crisis and the sudden rise in unemployment. Thus, on July 13, Decree No. 10,422/20 increased by 30 days the possibility of reducing working hours and salaries and by another 60 days the possibility of suspending employment contracts, equalizing the terms of the two instruments, each of which became effective for 120 days in total.
However, the Executive Branch made it clear that if the employer chose to implement both measures for the same employee, their total duration could not exceed 120 days. In other words, the employee could only be affected by changes in salary and working hours or suspension of contract for a maximum period of 120 days.
However, faced with the maintenance of the state of public calamity, the different stages of the pandemic throughout Brazil and, especially, the low median business activity, the federal government decided to issue a new decree (10,470/20), extending the time limits of these instruments for another 60 days. Thus, employers are now allowed to use such legal tools for up to 180 days, subject to the decreed deadline of the public calamity.
Decree 10,470/20 also provides for the payment of the Emergency Benefit for a further two months to employees with an intermittent employment contract. Considering the four months already granted, this group of workers will be covered by the Emergency Benefit for a total period of six months.
The mechanisms in question are combined with the payment of the Emergency Benefit to employees who have had their employment contracts changed. In other words, employees who have had their salaries reduced and contracts suspended continue to receive the benefit as long as the change in the employment contract persists.