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Labour/Employment in Brazil

Editor’s note: Mattos Filho, Veiga Filho, Marrey Jr. and Quiroga Advogados’ Sólon Cunha has featured in Chambers’ Labour & Employment rankings since 2009 and has been placed in Band 1 since 2013. He has had a 35-year career and is widely recognised for leading landmark cases. For example, Cunha represented Uber in a series of labour claims from drivers seeking employment status. In the face of the Covid pandemic, he has helped prominent retail companies comply with regulations and sanitary measures. Cunha is a member of Mattos Filho’s Band 1 labour department, which also houses three other partners. The Covid pandemic hit just as Brazil was coming to terms with a comprehensive legislative reform, which altered its Labour Code in a significant way, leading to more flexibilisation in the labour arena. In the following article, Cunha takes us through key moments within the development of employment relations in Brazil to shed light on a key issue of our times: the clash between a new generation immersed in the digital world and past generations who struggled for job protection and stability. As companies juggle the demands of different generations, Cunha advises, “Much more than merely complying with former legal requirements, organisations must foresee the increasingly frequent demands imposed by technology.”

Labour in Brazil: A new generation leaps into the future 

For the last 35 years, I have been studying labour relations in Brazil. When I started, the picture was very different. Today, a new generation of workers seeks for independence, entrepreneurship and social responsibility in an increasingly digitalised market. Their expectations clash with laws and employment structures designed to address the desires and anxieties of an older generation that was much more concerned with securing long-term stability. In order to understand the challenges surrounding the current employment environment in Brazil, I suggest we delve a bit into the past.

The final years of the military government in the early 1980’s were marked by the intense activity of labour unions pushing for necessary legal protection for employees. High inflation rates depreciated the value of salaries and diverted investment from the manufacturing sector towards the financial market, making workers’ lives unstable. The struggle for collective agreements so as to generate more stability and protection intensified and agitation resumed at the factories. Authorities put down several strikes. The situation was such that many a skilled worker turned down jobs within the private sector and sought out the career stability guaranteed by the public service, where rigorous entrance exams represented a meritocratic recognition of talent by means of competition.

With the rising power of the labour unions and growing civic consciousness around the process of re-democratisation, the tide changed and started to bring more protection to workers. Attempts to win protection for employees led to an intense debate concerning the outsourcing of services, which was eventually prohibited by the Brazilian Superior Labour Court (TST) in 1986. The 1988 Federal Constitution set forth labour guarantees for employees, ensured by the independence of the Public Prosecutor’s Office and the freedom of trade unions to operate without restriction. Employees started to contribute the equivalent of one full working day’s salary to their trade unions, providing the trade unions with a solid financial foundation based on a structure not dissimilar to feudal guilds.

The re-democratisation era of the 1990’s opened Brazil up to private enterprise, stimulating investment and competition. The privatisation of public companies was the landmark feature of this new era, marked by lower state interference and the demise of governmental monopolies, resulting in increased competition. Industries underwent modernisation, and foreign investment ballooned. The Brazilian TST modified their previous interpretation and authorised third-party outsourcing in 1993, except in relation to companies’ core business, where it remained prohibited.

In February 1994, the Real Plan (Plano Real) was implemented to promote financial stability in Brazil, which significantly reduced inflation while giving the economy space to recover and expand. The plan also promoted Brazilian agribusiness, which, together with increasing stabilisation in the national currency, resulted in a positive environment for agribusiness investments. Subsequently, Brazil established independent regulatory agencies, promoted consumer protection and increased the negotiations with trade unions.

The Workers’ Party (PT) emerged victorious in democratic elections at the end of 2002, taking office in 2003 and remaining in power until 2016 after securing successive election victories. Unsurprisingly, the Workers’ Party did not prioritise labour and union reform – on the contrary, they promoted the growth of labour trade unions, increased the state’s direct participation in the economy and implemented a social welfare plan directed towards low-income Brazilians, resulting in a rise in consumption. The expansion of the Brazilian service sector was also prominent during this period.

When the Workers’ Party left government, there was an outcry by business leaders to modernise labour laws and make them more flexible. In 2017, the Brazilian Congress developed a variety of labour reforms, which authorised broad outsourcing and prioritised negotiations (with labour unions) regarding new legislation in that it would bring about significant legal restrictions. They also recognised self-employed workers, established regulations on working from home and ended compulsory contributions to trade unions. These changes were soon recognised and approved by the Supreme Federal Court.

Nevertheless, we arrive at the present with a clash between a world designed to provide protection and new realities which have been ushered in by advances in technology. The pandemic has forced Brazil to speed up its huge implementation of digital technologies. Everyday activities show that, more than ever, the benefits are greater for those young Brazilians who have a larger thorough grasp of the digital world. At the same time, there may be a disproportionate increase as to those disadvantaged by not being in line with the new digital reality. Both trade union leaders and entrepreneurs must discover how to fly together with these new pilots, who fix their peculiar aeroplanes in the air in real time.

The new generation seeks to work together with supportive companies which are dedicated to tackling corporate social responsibility and Environmental, Social and Governance (ESG) issues, as well as focused on diversity and social inclusion. Accordingly, the new generation demands transparency in their institutions.

In contrast, labour legislation has always been concerned about the principle of protection and preservation of rights, which, in some cases, is in direct conflict with the values of this new generation, which has placed innovation and entrepreneurship at the core of both independent and on-demand work. Such new workers will not accept being treated as if they are hyposufficient. The millennials have implemented digital technology in Brazilian agribusiness, helping to develop a sector that plays an important role in Brazil’s GDP. Brazilian agribusiness has been acknowledged worldwide for its competitiveness.

The generations born out of this Brazilian socioeconomic environment responded adeptly to the pandemic in 2020. The future favours the new generation arising from the significant social changes (also known as the internet generation/Generation Z), which can be lightly defined as young people born between 1990 and 2010. What will be the role played by these workers, interns and trainees in relation to the necessary adjustments to labour models, legislation, companies and trade unions? They will probably be central. Currently, young people account for almost 60% of the active workforce in Brazil, from consumers to entrepreneurs, representing a great challenge for companies as they seek to integrate four different generations of workers.

How will the independent millennial worker be accepted by the market? This new generation of entrepreneurs is not willing to stray too far from the benefits of the gig economy, believing that a happy life is more important than any type of old and worn-out trade union relationship. These citizens are not focused on playing the game in the same old way. This generation is defined by its independence – working from home is one method that meets their needs, as they require both flexible places and time to work. Accordingly, more than merely complying with the former legal requirements, organisations must foresee the increasingly frequent demands imposed by technology and required for the retention of new generations.

Independent work and entrepreneurship have both found their place among the Brazilian youth. Investment funds, startup companies, service applications and digital payment services within the financial market have all exceeded expectations, in Brazil and globally. I am deeply proud of this new generation. I have learned from them, I will not fight against them: I believe and trust in them as the future of Brazil.