COVID-19 and its impacts on labor relations

03/04/2020

(information and measures available as of this date, subject to change as new measures are announced by the authorities)

 

 

With the World Health Organization (WHO) declaring the new type of Coronavirus (Covid-19) a pandemic and guidelines restricting movement and movement in the country, with effectively restrictive measures and the suspension of activities of several commercial establishments in some states, companies have faced difficult decisions about how to deal with the survival of their businesses and the preservation of jobs.

 

On 06/02/2020, Law No. 13.979 was published, which establishes policies to combat Covid-19, but does not determine specific measures to protect workers and jobs, limiting itself to considering as justified absence the employee's absence from work for the purposes of investigation, care and treatment of the disease.

 

The Federal Government announced credit measures for companies and measures aimed at protecting jobs through Provisional Measures ("MP"). In the labor field, to date, MPs 927 of March 22, 03, 2020 of March 928, 23, and 03 of April 2020, 936, have been issued and published.

 

Therefore, we present below the options currently existing in the legislation for saving companies and preserving jobs, already considering the innovations brought by the recently published MPs, highlighting that they are clear in determining that their provisions only apply during the state of public calamity recognized by Legislative Decree No. 6, of March 20, 2020.

 

In addition to the options listed below, it is important to check that:

• MP 927/2020 recognizes that the state of public calamity declared by the Federal Government constitutes a case of force majeure, under the terms of art. 501 of the CLT;
• MP 927/2020 is clear in providing that cases of contamination by Covid-19 will not be considered occupational, except upon proof of a causal link;
• Measures adopted by employers that do not contradict the provisions of MP 927/2020, taken in the 30 days prior to its publication, are validated;
• There are specific measures for healthcare facilities – we are available for further details.

 

We remind you that, regardless of the measures chosen by the company, while employees remain in the workplace, it is the employer's responsibility and obligation to adopt the necessary and possible precautions to protect their employees and prevent the spread of the disease, such as informing employees about the topic and hygiene precautions, providing a washbasin with soap and water, providing sanitizers (70% alcohol gel or other suitable), implementing measures to change the work routine to make working hours more flexible and avoid crowds, spacing workstations, etc.

 

Options currently existing in the legislation, as supplemented by MPs 927, 928 and 936 of 2020, which aim to preserve employment and income, continuity of work and business activities and reduce the social impact of the current state of public health emergency:

 

1. a) Home office:

• Written notice from the employer to the employee 48 hours in advance;
• Not applicable to telemarketing employees;
• Journey control waived;
• The written agreement is waived, but the provisions regarding responsibility for the acquisition, maintenance or supply of technological equipment and necessary infrastructure must be the subject of a written contract signed within 30 days of the date of the change in the work regime;
• If the employee does not have the technological equipment and infrastructure necessary and appropriate for the job, the employer may (i) provide the equipment on a loan basis and pay for infrastructure services or (ii) consider the employee's normal hours as being at his disposal, even if he is not performing any activity;
• Application for apprentices and interns is permitted.

2.b) Advancement of individual vacations:

• Written notice from the employer to the employee 48 hours in advance;
• Minimum duration of 5 days;
• They may be granted unilaterally by the employer, even if the employee has not completed the acquisition period;
• Possibility of individual negotiation of advance payment of future vacation periods by written agreement;
• Priority in granting to employees in the Covid-19 risk group;
• Possibility of deferring vacation payment until the 5th business day of the following month and the additional 1/3 until the date on which the 13th salary is due;
• Conversion of up to 1/3 of vacation into cash compensation will depend on the employer's agreement;
• In the event of the employee's dismissal, the amounts not yet paid in relation to vacation must be paid together with the severance pay.

 

3.c) Collective holidays:

• Written notice from the employer to the employee 48 hours in advance;
• Mandatory prior communications to the local labor authority (Ministry of Economy) and unions representing employees are waived;
• Although the text is not clear in this regard, it is possible to interpret extensively the possibility of deferring the payment of vacations and the additional 1/3 also in the granting of collective vacations.

 

4.d) Anticipation and use of holidays:

• Written notice from the employer to the employee must be given 48 hours in advance;
• Valid by unilateral decision of employers, except for religious holidays, which depend on written consent of the employee;
• Holidays may be used to offset the balance in the time bank.

5.e) Time Bank:

• The establishment of a special working hours compensation scheme is authorized, through a time bank, established through a formal collective or individual agreement, for compensation within a period of up to 18 months, counting from the date of the end of the state of public calamity.

 

6.f) Suspension of Administrative Requirements for Occupational Health and Safety:

• Suspension of the mandatory requirement to carry out occupational, clinical and complementary medical examinations, except for dismissal examinations (this may also be waived if the most recent occupational medical examination was carried out less than 180 days ago) – note that we do not recommend waiving the admission medical examination, to avoid exposure to the risk of a potential new hire with an unidentified pre-existing condition;
• Examinations must be carried out within 60 days of the end of the state of public calamity;
• Suspension of periodic and occasional training for current employees, as provided for in occupational health and safety regulations, which must be carried out within 90 days of the end of the state of public calamity;
• Maintenance of current CIPAs until the end of the state of public calamity and suspension of ongoing electoral processes.

7.g) Deferral of FGTS collection:

• Suspension of the requirement for the collection of FGTS by employers, referring to the periods of March, April and May 2020, due in April, May and June 2020, respectively;
• Payment of obligations related to the above competencies will be settled in up to six monthly installments, due on the seventh day of each month, starting in July 2020, upon declaration of this information by 20/06/2020;
• In the event of the employee's dismissal, payment must be made immediately, without interest or fines.

8.h) Paid leave, which, if it exceeds 30 days, prevents the employee from taking vacations during that acquisition period.

9.i) Application of provisions relating to force majeure, provided for in articles 501-504 of the CLT, in particular the possibility of a general reduction in wages of up to 25%, respecting the region's minimum wage and collective bargaining and the signing of a Collective Labor Agreement (“ACT”), with provision for a guarantee of job stability in return.

10.j) Suspension of the employment contract, for a period of 1 to 3 months, for the employee to participate in a professional qualification course or program (necessarily not in person) offered by the employer, through collective bargaining, signing of an agreement and employee agreement, maintaining the concession of benefits voluntarily granted by the employer.

 

On April 1, 2020, MP 936/2020 was published, implementing the Emergency Employment and Income Maintenance Program, providing for the additional measures described below, basically enabling the reduction of hours and wages and the temporary suspension of the employment contract.

 

 

11.k) Emergency Employment and Income Preservation Benefit (the “Benefit”):

• The Federal Government will pay the Benefit monthly to employees affected by the reduction in working hours and wages and/or temporary suspension of their employment contracts, starting from the date these measures are implemented.
• From the date on which the agreement between employer and employee/union is executed (see additional details below), the employer will have 10 (ten) days to inform its content to the Ministry of Economy.
• Additional information on how to proceed will be released soon, and the Federal Government has stated that the employer will make this notification by accessing the website web employer (online system already implemented and used by companies), entering/providing details of the signed agreement and the employees' bank account; after that moment the Federal Government will pay the Benefit directly into each employee's bank account.
• The first installment will be paid within 30 (thirty) days from the signing of the agreement, provided that it is timely reported to the Ministry of Economy (within 10 days from its signing).
• The Benefit will be paid exclusively during the duration of the reduction in working hours and salary and/or the temporary suspension of the employment contract.
• Payment of the Benefit does not prevent or alter the granting of unemployment insurance if and when due.
• The value of the Benefit will be calculated based on the amount that the employee would be entitled to receive as unemployment insurance (which currently varies between R$1.045,00 and R$1.813,03), as follows:

 

Reduction of working hours and wages	Temporary suspension of the employment contract
The Benefit will be calculated by applying the reduction percentage to the calculation base (more details below).	Companies with gross revenue of up to R$. in 2019: Benefit equivalent to 100% the value of unemployment insurance.
	Companies with gross revenue of more than R$. in 2019: Benefit equivalent to 70% the value of unemployment insurance. + The company pays monthly compensatory aid in the amount of 30% of the employee's salary (aid that will not be of a salary nature)

 

• The benefit will not be paid to employees who hold public office; receive other INSS benefits (except survivor's pension and accident benefit); receive unemployment insurance; and receive a professional qualification allowance paid by INSS.

12. l) Reduction of working hours and wages:

• Maximum duration of 90 (ninety) days.
• The value of the hourly wage must be preserved.
• A written agreement is required and must be made at least 2 days in advance.
• Reduction of working hours and wages exclusively at levels of 25%, 50% or 70% (different percentages may be applied through collective bargaining with the competent union).
• Restoration of regular working hours and wages within 2 days of the end of the public calamity, the period stipulated in the agreement or the employer's communication of the early termination of the reduction.

 

 

13.m) Temporary suspension of the employment contract:

• Maximum duration of 60 (sixty) days (which can be divided into 2 periods of 30 days).
• A written agreement is required and must be made at least 2 days in advance.
• The employer must continue to pay all voluntary benefits (except transportation-related benefits, i.e., mileage, fuel, transportation vouchers, etc.).
• If the employee is required to work during the suspension, the suspension will be considered null and void and the employer will be subject to full payments and applicable penalties.
• Companies with gross revenue exceeding R$4.8 million in 2019 must pay mandatory compensatory aid in the amount of 30% of the employee's salary (aid that is not salary-based), the amount of which must be expressly provided for in the agreement.
• Reinstatement of the employment contract within 2 days after the end of the public calamity, the period stipulated in the agreement or the employer's communication.

 

14.n) General terms and conditions of the Emergency Employment and Income Maintenance Program:

• The Benefit can be accumulated with the compensatory aid paid by the employer.
• Compensatory assistance must be agreed in writing, will not be of a salary nature and will not be considered as a basis for calculating social security contributions, FGTS and income tax.
• Employees receiving the Benefit will be entitled to job stability for the duration of the reduction in working hours and salary and/or the temporary suspension of the employment contract, plus an equivalent period, and after the termination of such measures (i.e., if the reduction in working hours and salary or the suspension of employment lasted 2 months, the employee will have job stability for those 2 months plus an additional period of 2 months).
• Any termination without just cause made during the period of job stability will subject the employer to fines, in addition to the payment of full severance pay (not valid for resignations or terminations for just cause).
• The benefit paid during the reduction of working hours and salary or the suspension of the employment contract will be calculated and can be negotiated/executed (individually or collectively) as follows:

 

Reduction of	Benefit Amount	Individual Agreement	Collective Labor Agreement
Less than 25%	0	It's not possible	Possible
25%	25% of the unemployment insurance amount to which the employee would be entitled	Possible	Possible
50%	50% of the unemployment insurance amount to which the employee would be entitled	Possible only for employees earning up to R$3.135,00 OR employees with a completed higher education degree e who receive more than R$12.202,12	Available for all employees. Mandatory for employees not included in the previous group.
70%	70% of the unemployment insurance amount to which the employee would be entitled	Possible only for employees earning up to R$3.135,00 OR employees with a completed higher education degree e who receive more than R$12.202,12	Available for all employees. Mandatory for employees not included in the previous group.

15.0) Individual agreements must be reported to the union within 10 days from the date of their execution.

• The measures adopted by MP 936/2020 are also valid for part-time employees and apprentices.
• The maximum period for implementing the measures, even if combined/successive, cannot exceed a total of 90 (ninety) days.
• The possibility of suspending the employment contract for professional qualification purposes provided for in article 476-A of the CLT can only be implemented for in-person courses, lasting a minimum of 1 month and a maximum of 3 months.
• The meetings and votes required for collective bargaining agreements may be held electronically.
• Employees under intermittent employment contracts are entitled to the emergency benefit of R$600,00 per month, for 3 (three) months, non-cumulative.
• Current collective agreements may be renegotiated within 10 days to comply with the terms of MP 936/2020.

The measures implemented by MP 936/2020 must safeguard the continuity of public services and essential activities.

 

• Comments Additional information from Montgomery & Associates:
• MP 936/2020 allows companies to combine and implement the measures they deem appropriate for each of their departments or groups of employees, respecting equality. It does not require the same measure to be implemented for an entire department, commercial establishment, or business unit.
• The reduction in working hours is flexible and can be implemented in shifts, days of the week, hours per day, etc.
• The employee must inform their bank account into which the Benefit will be paid in the individual or collective agreement to be executed with the employer/union – therefore, the Benefit money does not go through the company, but directly to the employee affected by the salary reduction or suspension of their employment contract.
• Additional information on how to process the Benefit application is expected to be issued by April 3, 2020.
• It is still unclear whether the base salary alone or the total remuneration, which includes variable remuneration (i.e., commission, bonuses, etc.), should be considered as the basis for calculating the compensatory allowance/reduction. The Employment Secretariat (of the Ministry of Economy) has verbally confirmed that only the base salary should be considered. However, this issue could trigger legal disputes, as the Consolidation of Labor Laws (CLT) stipulates that commissions and bonuses are part of the salary.