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A New Beginning for Brazil? What Lula’s Administration Could Mean for Labour and Employment Law

As Brazil prepares to welcome a new government led by the Workers’ Party, Trench Rossi’s Leticia Ribeiro Crissiuma de Figueiredo looks at what President-elect Lula must do to maintain stability and retain support while staying true to his trade union roots.

Published on 15 December 2022
Leticia Ribeiro Crissiuma de Figueiredo, lawyer at Trench Rossi Watanabe and Chambers Expert Focus contributor
Leticia Ribeiro Crissiuma de Figueiredo
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Brazilian President-elect, Luiz Inácio Lula da Silva, is expected to push for changes in employment law after he takes office on 1 January 2023. Although such changes are expected to be employee-friendly, no immediate radical alterations are predicted at this time.

During the presidential campaign, many feared that a Lula-led government could entirely revoke the employment law reform of 2017. This latest overhaul of Brazilian employment laws aimed to make them more modern and flexible. However, as part of a large coalition built with the support of more than 15 political parties, Lula has already publicly declared that his administration will maintain the bulk of the reform – although he emphasised that some of its more controversial aspects may be adjusted.

“Lula may need to keep his union leader roots and rhetoric in check.”

In order to maintain the wide support gathered during the recent campaign, Lula may need to keep his union leader roots and rhetoric in check by adopting a more pragmatic approach when it comes to any insinuated changes to the labour reform. Although maintaining the status quo seems unlikely (given the previous Workers’ Party governments), modifications that increase payroll taxes are likely to be met with much resistance from important sectors of the Brazilian economy that previously lent the newly elected President support.

What Does Lula Plan to Do for Workers?

In the context of a very tight election that produced a broad coalition encompassing very different views, there is currently a lot of speculation concerning what concrete changes can be expected from the new administration – especially in the shorter term. Considering the public statements made to date, the new government will presumably choose to focus on the following matters.

Reviewing the unions

One likely priority for new government is an extensive revision of the union structure that not only covers the financing of unions but also addresses their actual representative power, strategic articulations and the terms of collective negotiations (including the validity of bargaining agreements once they expire). The removal in 2017 of the historic mandatory union contribution – to align with more direct employee bargaining and digital ways of working – created a very adverse environment for unions to operate in.

Given his union leader background, restoring the status of trade unions in Brazil remains of great significance to Lula. Proposals currently being considered include paying a specific fee at the time of the collective negotiations, as well as redefining the limits of direct employee bargaining without union involvement.

Removing labour litigation costs

One of the most explicit provisions contained in Lula’s written government plan concerns workers’ free access to the labour court system. The 2017 reform drastically reduced Brazil’s extremely high prior litigation levels by creating additional payment requirements for plaintiffs, who were used to litigating at practically no cost (even in more frivolous disputes). The fresh possibility of employees having free access to the labour courts once more is predicted to cause a rapid spike in the number of new cases from 2023 onwards.

Protecting independent contractors

Another specific aspect of Lula’s government plan pertains to independent contractors, workers engaged via digital platforms and remote workers – in particular, the need to address their lack of adequate protection following the 2017 reform. Such protection may come in the form of minimum safeguards and mandatory payments, especially for those categories of workers that currently have no discrete regulatory framework. These changes potentially could apply to outsourced employees as well.

Firming things up for intermittent workers

Intermittent hiring was introduced by the 2017 labour reform with the aim of enabling employees to provide services to different employers on a non-continuous basis. Although this new form of employment contract will continue to exist, substantial shifts have been confirmed by Lula’s transition team.

Currently, the employer only pays for the active employment period – thereby allowing the employee to work for other companies when work demand is low. The system has been criticised for the lack of certainty employees face with regard to their actual pay during periods when no work is available. Several very heated debates have been taking place before even the Brazilian Supreme Court.

The Outlook

All these plans have to be approved by the National Congress of Brazil before they can be implemented. They are also likely to come under great scrutiny, thanks to varying alliances built during the campaign that span very different viewpoints on employment-related matters. Besides the need to maintain the legal stability required for the growth of both local and foreign investment, there is a very clear and immediate risk of increased unemployment rates in the event of measures that impact labour costs.

On a final note, despite the foreseeable changes and above-mentioned predictions – and even though the total revocation of the 2017 employment law framework is no longer on the horizon – it is impossible to rule out more aggressive modifications in the coming years. Such adjustments could influence not only legal statutes but also current case law.

“A Workers’ Party government looks set to place greater emphasis on workforce protection.”

Brazilian labour courts have traditionally been very employee-friendly and managed to resist many of the new reform rules. A Workers’ Party government looks set to place greater emphasis on workforce protection, possibly exceeding current levels.

As the new government transition team deepens its work and new members are announced, the impact of Lula’s administration on Brazilian labour and employment law will become more palpable.

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