Following the procedure for approval of Executive Order 936/20 ("MP 936"), the Office of the President of Brazil sanctioned Federal Law No. 14,020/20. In spite of specific vetoes made to the text approved by Congress, President Jair Bolsonaro maintained the possibility for the Executive Branch to extend the maximum time limits for reduction of work hours and salary and suspension of employment contracts.

 

This had been one of the most relevant changes to the original wording of MP 936, especially since the first companies to enter into such agreements had already reached the deadlines for their validity, to the detriment of the employment level in Brazil.

 

Among the parts vetoed by the President of Brazil, the following stand out:

 

  • Expansion of the scenarios for deduction of compensatory aid paid by the employer starting in April of 2020. According to the text approved by the Brazilian Congress, it would be possible to deduct this amount from: (i) income from the individual's nonsalaried work; (ii) taxable income received by in-home employers; and (iii) profits from farm activity, as an expense paid in the base year; and
  • Integration into the employment contract of the provisions of collective bargaining agreements that have expired or are due to expire while the state of public calamity persists, a phenomenon known as "supervening activity of the collective bargaining rule";
  • Payment of the emergency benefit to dismissed employees who did not meet the requirements to qualify for unemployment insurance;
  • Payment of the emergency benefit to employees who, in March or April of 2020, had received the last installment of unemployment insurance;
  • All proposals from the Brazilian Congress to change the rules on entering into and paying the PLR. Among the amendments proposed and vetoed by the President, the following are noted: (i) the validity of negotiation via an employee committee without labor union participation, provided that, after receiving notice, the labor union has been silent for ten days; and (ii) the possibility of entering into an agreement at least 90 days before the date of payment of the sole or final installment; and
  • Change in the criteria for adjustment for inflation of labor claims and the percentage of interest applicable.

 

Regarding this last point, we warned in our Informative Bulletin No. 8 that the Federal Senate had made a mistake in putting together the final text sent to the Office of the President of Brazil, since, although it had withdrawn the new rule from the Consolidated Labor Laws, it maintained this amendment in Federal Law No. 8,177/91, which deals specifically with the issue.

 

With the presidential veto, the mistake by the Federal Senate was duly corrected, thus avoiding having the wording provided for in Federal Law No. 8,177 be out of line with the text provided for in the Consolidated Labor Laws, which would worsen legal uncertainty on an already sensitive issue.

 

For more information on the alternatives provided for in MP 936, the changes made by the Brazilian Congress and other measures to confront covid-19, please see our special bulletins and E-book on the subject:

 

EXECUTIVE ORDER NO. 936/20: UPDATE FROM JUNE 19, 2020 TEXT APPROVED BY THE FEDERAL SENATE

 

MP 936: NEW LABOR AND EMPLOYMENT MEASURES TO CONFRONT COVID-19

 

E-BOOK: ANALYSIS OF THE GENERAL IMPACTS OF COVID-19 AND MP NOS. 927 AND 928 ON LABOR RELATIONS