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back to index backGLOBALtalk July,  2014


Collective agreements in Brazil: One agreement, two purposes

In Brazil, collective agreements have two different purposes: (i) normative aspect, since the clauses of a Collective Bargaining Agreement may create an obligation for each party involved in the negotiation; and (ii) conflicts resolution, since the parties may use such instruments in trying to solve a conflict and, thus, avoid having to look to the Labor Court (in general related to health and safety, overtime, salary rise and other service conditions). The name usually given to a Collective agreement is Collective Bargaining Agreement (CBA”).

There are two different types of CBAs.

One type of CBA that is executed between the Labor Union that represents the economic activity of the company (employer) and the Labor Union that represents the professional category of the employees linked to such economic activity. In this case, it is important to highlight that the rules established in such Agreements should be observed by all companies represented by the employer’s Union and not just for a single company. It is also called Collective Ruling (Convenção Coletiva).

The second kind of Collective Agreement is the one executed between a Company directly, and the Labor Union representative of the employees, creating rules only for such company in relation to its employees.

In both cases, the rules established by the CBA will create an obligation between the parties who have signed the instrument, and such conditions will integrate the Employment Agreement for all legal effects for the period the agreement is in force. The labor Law establishes that a Collective agreement can only be executed for a maximum period of two years (any extension of this period provided in the Collective

Agreement is considered null and void), but it is generally executed to last for one year, counting from the date of its execution (Data Base).

As the date of the execution of the Collective Agreement varies according to each category, what we call Data Base and sometimes the negotiations, which can last for more than a month before an agreement is reached, the benefits granted in a given Collective Agreement sometimes expire before another agreement is duly-signed.

For this reason, there used to be a gap between the expiring date of the Collective Agreement and the date of the execution of a new one.

In such cases, the new agreement provided for a retroactive clause and some rules and benefits were considered not due for the period of negotiation. This exposed companies to a labor risk, such as payment of overtime when a Collective Working shift agreement expired, and a new one had not yet been executed.

To avoid further discussions in relation to benefits, rights and rules provided in an expired Collective Agreement,

in September 2012, the Superior Labor Court edited Precedent # 277, recognizing that the conditions established in the Collective Instrument should only be modified or suppressed through a new Collective Agreement between the same parties, under the penalty that such modification or suppression be considered null and void.

It is also important to highlight that although it is possible to negotiate new rights and benefits in the Collective Agreement executed only between the Company and the employee’s Union, in the event that the instrument creates an obligation that goes against another rule, related to the same nature (overtime, for example), established by the CBA executed between employee’s and Employer’s Union, the company must apply the rule that is more favorable to its employees.

Labor Unions (employers’ and employees’) periodically negotiate salary increases and other rights, and whenever an agreement is not reached, both parties can file a Collective Claim called Dissidio Coletivo in the

Labor Courts for a decision on the controversial terms. In this situation, the Court will issue a decision that will become part of the Collective Agreement.

In our experience, the Unions usually reach an agreement before submitting controversial terms to a labor Court since, in these cases, the decision takes too long to be issued, the Regional Courts tend to be more protective to employees and the decision issued does not usually represent the best alternative for the company.

Source: Baker & McKenzie - GAI




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