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backLATINtalk July, 2012
Brazil: New rules on collective terminations
Even though there are no laws in Brazil regarding specific procedures to be followed in the event of collective terminations, the Brazilian Superior Labor Court has adopted the position that collective union negotiations are required for such terminations.
This decision and precedent was issued in a case where a large Brazilian aircraft manufacturer terminated over 4,000 of its 22,000 employees, without any union negotiations relating to the terminations. As a consequence, the union filed a lawsuit before the Brazilian Labor Court asking for the annulment of the terminations, alleging that they were abusive and concluded without previous union negotiation.
The first level of the Labor Court agreed with the union, and also granted individual compensation for the terminations, as well as the maintenance of the employees' health assistance plan for up to one year after the terminations. The Court also determined that where any eliminated positions were reinstated, terminated employees should have preference.
Both the company and union appealed the decision. The Superior Labor Court came to a different conclusion. It said that the terminations, in this specific case, were not abusive but that collective negotiation is, in fact, required for such mass terminations.
We are also seeing a trend in other cases of mass terminations where the Labor Courts have also required payment of additional financial compensation to the terminated employees, the maintenance of the employees' health assistance plan for twelve months after the terminations, and that the terminated employees, during a period of two years after termination, are given preference in reinstatement of job positions.
These decisions are very important and ground-breaking because, as mentioned above, there are no laws in Brazil that require union involvement for collective terminations. And since the decisions were issued by the final instance court (Brazilian Superior Labor Court), we expect the decisions to be followed in similar cases.
As an alternative to the mass terminations, court decisions have also set forth the possibility of suspension of employment agreements, for two to five months, for the employees' participation in courses or professional qualification programs offered by the employer with duration equivalent to the labor agreement suspension.
As a result of this new approach, if any Brazilian subsidiaries plan to conduct collective / mass terminations, the recent Brazilian Superior Labor Court decisions should be used as a reference for severance and benefits, and it is important to review the terms of the applicable Collective Bargaining Agreement and consider consulting the union.
Source: Baker & McKenzie - GAI
For more information or to contact Baker & McKenzie, please click here.
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