There is currently no law in Brazil governing the outsourcing of services. Companies can only outsource non-core business (“atividade-meio”, as known in Portuguese) based on Precedent 331 issued by the Brazilian Superior Labor Court (“TST”). There is no precise definition of the meaning of “non core business activities”.
Uncertainty in hiring an outsourced worker is aggravated since Brazilian employment law adopts the concept of the “reality agreement”. Under this concept, an employment relationship can be recognised, regardless of the existence of a written contract entered into with the outsourced company, whenever the requirements needed for characterising a worker as an employee are satisfied.
It is important to note that the legal definition for “employee” under the Brazilian Consolidation of Labor Laws (“CLT”) is: an individual (natural person, not a legal entity) who personally renders services on a regular/periodic basis, under the employer´s subordination (obedience to rules and orders given by the employer) and against payment (salary).
In this regard, if the outsourced worker personally renders his/her services on a regular/periodic basis and under the direct oversight of the service taker’s employees, he/she would be considered a fully-fledged employee of the service taker.
In this context and as stated above, the outsourcing of a company’s core business is considered to be null and void under Brazilian Labor Courts, the legal consequence for the service taker being that it will be considered to be the employer of the outsourced workers.
In other words, in an outsourcing scenario, the service taker would be secondarily liable for the service provider’s employees’ employment obligations, if the outsourcing is considered to be legal (i.e. non-core business activities are outsourced) and would be jointly and severally liable if the outsourcing were to be considered illegal.
Such scenario may be in the imminence of changing radically. On 19th March 1998, a Bill of Law was proposed to regulate the outsourcing of core and non-core activities. After years discussing such subject, on 22nd March 2017, the House of Representatives approved the contents of the Bill of Law which will allow companies to outsource core and non-core activities. The Bill of Law must be sanctioned by President Temer, who can also veto certain sections (in such case the Bill of Law should return to Congress for further deliberation).
Outsourcing of services has always been a controversial issue in Brazil, since although it can be used to improve company’s services through specialization of activities, many companies have outsourced their activities to cut labor costs and, in certain cases, to defraud labor laws.
That having been said, even if such bill of law is sanctioned by the President, discussions will probably continue due to the resistance offered by Labor Courts, contrary to the outsourcing of the core business activities.