On April 1, 2020, the Federal Government published Executive Order No. 936/20 ("MP 936"), providing for two (2) mechanisms for confronting the coronavirus (covid-19): proportional reduction in work hours and salary and temporary suspension of employment contracts.

 

As a way to facilitate adoption of the measures, MP 936 expressly authorized negotiation of those measures directly with employees, therefore, without the labor union's intervention, except for suspension of employment contracts and reductions in salary and work hours of more than 25% for employees who receive salaries between R$ 3,135.01 and R$ 12,202.11, in which case collective bargaining should be adopted.

 

The Sustainability Network ("REDE") filed Direct Action of Unconstitutionality No. 6,363/DF ("ADI") with the Federal Supreme Court, requesting a declaration of unconstitutionality of MP 936, due to violation of, among others, article 7, VI, of the Federal Constitution, which allows for reduction of salary only through collective bargaining.

 

On the evening of April 6, the reporting judge for the ADI, Justice Ricardo Lewandowski, granted preliminary injunctive relief to REDE, ordering that, once the individual agreement for salary reduction or contractual suspension under MP 936 is signed, “it will only be co-validated, that is, it will only have full legal effects after a response by the employees' labor unions."

 

He also considered that, in the absence of a response by the labor union in the manner and within the time limits provided for in the laws and regulations, "it will be permissible for interested parties to proceed directly with the negotiation until its end."

 

So the consequences could be:

 

Position of the Labor Union

Practical Effect on Individual Agreements

Agreement

Individual agreement is co-validated and effects are retroactive to the date of signature.

Silence, after 4 days since the notice[1]

Individual agreement is co-validated and effects are retroactive to the date of signature.

Opposition

Collective bargaining will be triggered, in which

a.    In the event of a consensus, the terms of the individual adjustments may be ratified or their conditions renegotiated;

b.    In the event of a deadlock, the Judiciary may be called on to intervene.

 

As pointed out above, if the labor union expresses its agreement or remains silent, the Individual Agreement shall be co-validated and its effects will be retroactive to the date of signature of the document between the company and employee.

 

However, in the event of opposition from the labor union, we believe that if the employer maintains the effects of the Individual Agreement after the disagreement has been expressed, it will eventually be subject to:

 

a) Filing a collective or individual suit, seeking to have the company, including via in limine injunctive relief, reinstate the employment contracts and pay salaries;

b) Invalidation of individual agreements that are not ratified collectively, with full payment of salaries and any damages arising from cancellation of priority payments; and

c) Enrollment as outstanding debt of amounts unduly paid by the Ministry of Economy, as an Emergency Benefit for the Preservation of Employment and Income to employees submitted to reduction or suspension of contract.

 

The in limine injunctive relief granted by Justice Ricardo Lewandowski, although it may still be reviewed by the STF, not only deprived the issue of the urgency and agility that gave rise to the issuance of MP 936/20, but it will also require companies to review their strategy for implementing the alternatives provided for in the MP, especially in light of their financial conditions for dealing with the crisis and the track record of the labor union representing their employees.

 

 

[1] Article 617 of the CLT, with a reduction by half in light of article 17, III, of MP 936.