By Leonardo Amorim
The recent labor reform in Brazil (2017) was widely celebrated by the Temer government and by business sectors. Issues involving outsourcing have recently been relaxed, which also helps to propagate the reform as something modernizing.
One of the novelties is the intermittent contract, modality practiced in several countries of the first world and that arrives to Brazil with a certain delay. The creation of stricter rules to inhibit the judicialization of conflicts is also something celebrated among businessmen.
The flexibility of some points, as in the case of paid vacation, and allowed to be allowed in up to three periods, also deserves to be highlighted, in addition to the increase of agreements with labor unions to the condition of law.
However, the reform promoted by the government and the allied base in Congress does not address the more important issues of the labor law in Brazil.
The main labor law in Brazil is the Consolidation of Labor Laws (“CLT”), a kind of compulsory contract applicable to all labor relations qualified by subordination, remuneration and non-eventuality. The “CLT” has 922 articles, one of the best examples of the strong culture of state control over economic life.
Looking at what is available in the recent reform, the main elements of the Brazilian system have been preserved.If an entrepreneur wishes to formalize a contract, there are a number of rights predetermined by CLT and other competent rules. In so many cases. the cost of prior benefits is twice as high as the salary agreed upon.
The reduction of salary in direct negotiation is prohibited in Brazilian law. Paid vacation in 30 days added to 1/3 of the amount, reserve fund (FGTS) of 8% of the remuneration, thirteenth salary, state pension with costs between 24 and 28.8%, with corrections of accidental risks (FAP), advance notice of at least 30 days in contracts for an indefinite period, work subsidy, are some of the items that engulf the negotiations among human capital demand providers, with little for direct hits.
The Brazilian system establishes fixed costs, variables, many uncertainties that translate into tax risks that generate financial commitment very difficult to be estimated, and therefore, the doubling of the wage cost.
The Brazilian labor law maintains a tradition of centralization in the state, since the times of the president Getulio Vargas (years 1930-1950). Since then, the system that promotes various rights has become something sacred in the popular imagination and any proposal that makes it optional is intolerable. Because of this strong state culture, it is not surprising that a huge bureaucracy has developed between governments and companies.
It is not difficult to perceive the influence of fascism of the last century, in the Brazilian laws and in the behavior of the political class. There are also a number of obligations with the tax authorities, with complex rules of calculations, obligation to provide data in a system that looks more like a big brother and various ordinances for occupational safety and medicine. Despite the efforts to simplify the processes of providing data to the treasury, brazilian law is very detailed and the very dominant mentality in the state raises the culture of intense bureaucracy and legal requirements.
There are 36 regulatory norms of safety and occupational health, more CLT, the social security law to the private sector, the FGTS law, income tax, and various non-statutory regulations. In such a complex environment, much legal uncertainty prevails and disputes. In 2016 alone, there were 3 million lawsuits.
To be brief, the labor reform in Brazil retains an anachronistic system, or would say, “for english to see”.