Following the procedure for conversion of Executive Order 936/20 into federal law, the Federal Senate approved the Conversion Bill (PLV) on June 16, contemplating various changes in the original text proposed by the Federal Government.

The proposed changes in the PLV directly impact on: (i) the new agreements to be entered into to reduce wages and hours or suspend contracts; (ii) obligations and guarantees to employees and employers during the period of public calamity; and (iii) various rights provided for in labor legislation.

The amendments are set out below and will enter into force only if they are ratified by the President of Brazil.

a. Agreements on reduction of work hours and salary and temporary suspension of employment contracts

One of the main objectives of MP 936 was to implement alternatives for confronting the crisis resulting from covid-19 in the area of labor relations, which were subject to targeted changes by the PLV:

  • In line with the understanding already defended even before the PLV, it was expressly ratified that both measures may be implemented in a sectoral or departmental manner, for part or all job positions;


  • Although the limitation on the maximum periods of reduction (90 days) and suspension of contracts (60 days) has been maintained, the PLV signals the possibility of extending these limits by an exclusive act of the Executive Branch;


  • The possibility was confirmed for pregnant employees to join agreements to reduce work hours and salary or suspend employment contracts, without prejudice to maternity leave;


  • The guarantee of employment for a pregnant worker who has been subject to a reduction in work hours and salary or suspension of her employment must be counted from the end of the period of her job stability due to pregnancy, that is, from the fifth month after birth;


  • Companies with annual gross revenues exceeding R$ 4.8 million in the 2019 calendar year may only enter into individual agreements to reduce salaries and working hours by more than 25% or suspend contracts with employees who are legally considered to have adequate bargaining power or have salaries equal to or under R$ 2,090.00 (the original wording provided for this possibility for salaries equal to or under R$ 3,135.00);


  • Individual agreements are authorized, regardless of the employee's salary, when the final amount to be received, already factoring in the Emergency Benefit and the Compensatory Aid, does not result in a reduction in the monthly amount received by the employee;


  • It is now authorized for retired employees to have their wages and working hours reduced or employment contract suspended in the manner set forth in MP 936, provided that the agreement meets specific requirements under the PLV;


  • The possibility for individual agreements to be entered into by any effective physical or electronic means is ratified;


  • Employees submitted to reduction in salary and work hours or suspension of employment may supplement monthly social security contributions in order to avoid losses in future benefits;


  • Compensatory aid paid by the employer as of April 2020 may be deducted from: (i) income from the individual's non-salaried work; (ii) taxable income received by in-home employer; and (iii) profits from rural activity, as an expense paid in the base year; and


  • The prevalence of collective bargaining agreements over individual agreements where they conflict is ratified, unless they are more favorable to employees.

In order to protect companies that have already entered into their individual or collective agreements for reduced work hours and salary or suspension of employment, the PLV expressly provides that the above rules apply exclusively to agreements signed after their conversion into law, except for the prevalence of collective agreements over individual agreements.

Although all the changes listed above have a significant impact on the new agreements to be entered into by employers, the possibility for the Executive Branch to extend the maximum time limits for reducing work hours and salaries and for suspending employment contracts deserves special mention.

This is because, although the crisis resulting from covid-19 is still felt in various sectors of the economy, it is a fact that companies first to pursue the execution of agreements have already reached the deadlines for their validity, which has been harming the employment rate.

In addition, it is also worth noting that the Brazilian Congress, with the changes proposed in the PLV, ratified the understanding that the payment of compensatory aid can be made at a percentage greater than 30% and as a mechanism for relieving payroll, a practice that had already been adopted by various employers.

b. Period of public calamity

The PLV has provided for some new rules to be observed by employers during the state of public calamity:

  • The provisions of collective agreements that have expired or are due to expire, except those that provide for salary adjustments and their repercussions on other provisions of an economic nature, shall remain valid as long as the state of public calamity persists, and may only be modified or suppressed by means of new collective bargaining; and


  • It is now forbidden for people with disabilities to be dismissed without cause.

Also with regard to the period of public calamity, employees shall be assured:

  • Opting for the renegotiation of loans, financing, credit cards, and leasing transactions granted by financial institutions and leasing companies contracted via payroll direct deposit or available remuneration; and


  • Payment of the emergency benefit, in the amount of R$ 600 per month, for a period of three months from the date of dismissal, in the event that the employee does not meet the requirements for qualification for unemployment insurance.

c. Changes in labor law

The PLV included some targeted changes in labor laws, some of which were reused from Executive Order No. 905/19, revoked by the President of Brazil on April 30, 2020. Among the changes by the PLV, we highlight  the amendment of the rules for entering into and paying the PLR, such as: (i) the validity of negotiation via employee committee without labor union participation, provided that, after notice, the labor union was silent for ten days; and (ii) the possibility of entering into an agreement at least 90 days before the date of payment of the single or final installment.

d. Act of state

Much has been discussed regarding the possibility of application of article 486 of the CLT, which supposedly authorized employers to pass on to the government the payment of severance pay for employment contracts terminated by reason of the stoppage or suspension of their activities.

In order to stave off this risk, the PLV expressly prohibits the application of article 486 of the CLT due to the public health emergency resulting from covid-19.

For further information regarding the alternatives provided for in Executive Order 936 and other measures to tackle covid-19, click below on our Special Bulletin and E-book regarding the topic: