On 12 November 2019 Provisional Measure 905/2019 (PM 905) was published in the Official Gazette, creating a new type of employment agreement specifically designed to incentivise companies to offer individuals aged between 19 and 29 years their first formal job in exchange for benefits relating mainly to payroll taxation.
Types of contract that already exist for the same group of individuals (eg, apprenticeship contracts) are not considered part of PM 905 and do not benefit from its special conditions.
PM 905 (the so-called 'green and yellow programme' in a reference to the colours of the Brazilian flag) is consistent with the actions of the current government, which is repeatedly trying to promote changes to existing laws to reduce the bureaucracy for businesses to operate in Brazil and help the economy to get back on track after years of poor returns.
However, in a move that is also consistent with the government's past actions, PM 905 addresses several other employment topics and has gained the nickname 'the new labour reform' in a reference to a major change in employment law that happened in Brazil in 2017.
The provisional measure contains 52 articles, which change approximately 25 laws, with the most significant changes being made to the Labour Code (approximately 132 items of which would be changed). Importantly, some of the proposed changes would depend on further rules to be issued by the government; thus, its enforcement would not be immediate.
Among the changes proposed by PM 905, a few items are long awaited by some economic sectors, while heavily criticised by others. Hot topics covered in PM 905 include:
- the profit (or results) sharing plan, which can be negotiated between a company and a commission of employees, without union participation. The plan can also be negotiated directly with employees who meet certain legal requirements;
- premiums – namely, amounts that are not subject to payroll charges and are paid for performance that exceeds the ordinarily expected result. The premium would be considered valid if the performance that was ordinarily expected is previously defined by the company, and if the payments are limited to one per quarter and four per civil year;
- social security contributions on amounts received as unemployment insurance, in exchange for the period that the benefit is paid being considered as valid time of service for employees (ie, counting towards retirement requirements);
- increasing bank employees' (excluding cashiers') work hours, whereby work hours would increase from six to eight hours a day, with the relevant salary increase;
- work on Sundays and holidays being authorised for all sectors, without the need for authorisation by a union (as long as certain minor requirements are met);
- penalties for non-compliance with the labour laws. The penalty amounts would be updated, starting at R1,000 and could reach up to R100,000 in certain situations;
- limitations on the settlements proposed by the Labour Public Attorney's Office – namely, the so-called 'term for adjustment of conduct', which are settlements executed between companies and the Labour Public Attorney's Office with regard to compliance with the labour laws. The terms would be valid for two years and can be renewed for another two years as long as such extension is justified by a technical report (until PM 905, once a company signed one of these agreements, there was no expiration date for the obligation); and
- adjustments to the amounts discussed in labour claims, including changes to the monetary adjustment and interest rates. Until PM 905, an amount discussed in a labour claim would accrue at a rate of approximately 16% per year and, after the proposed change, the same amount would accrue at a rate of approximately 8%.
The several groups opposing PM 905 include:
- unions that represent employees;
- sections of the press;
- labour judges; and
- the Labour Public Attorney's Office, which recently filed a lawsuit at the Supreme Federal Court alleging that the PM 905 articles which would change how the Labour Public Attorney's Office acts are unconstitutional.
On the other hand, some sectors of the government, company representatives and unions that represent companies are trying to shed light on the discussion and emphasise that the changes could represent an increase in formal jobs and economic growth for the country.
Will changes resist challenges?
Provisional measures are valid for no more than 120 days. During this 120-day period, provisional measures must be reviewed and approved by Congress (the Chamber of Deputies and the Senate), otherwise the text is revoked (although actions taken during the period that the provisional measure was valid are considered legally compliant).
If a provisional measure is not approved within 45 days from the date it was issued, the provisional measure starts to block the agenda of other legal bills until the house reviewing the provisional measure decides on an extension, its conversion into law (after the president's approval) or its rejection.
PM 905 unleashed a wave of criticism, compliments, discussions and a record number of requests for amendments to its wording. At present, more than 1,900 requests for changes have been submitted to Congress and this 'blocking' rule started on 6 February 2020, so there is already a heated discussion regarding the provisional measure and its proposed changes.
The first meeting in Congress by a joint commission of members from the deputies and senators to discuss the approach to the vote of PM 905 was scheduled for 4 February 2020, but it is expected that the vote will take place after carnival, which is at the end of February.
In the meantime, most companies remain cautious regarding the changes brought by PM 905, while the unions continue to organise and unite themselves against the measure. For example, in early February 2020, some of the unions issued a booklet to explain how PM 905 would remove employment rights and be detrimental to employees – it is fair to say that these initiatives will only increase over time.
The government is also trying to defend the measure. Recently, the Brazilian Institute of Geography and Statistics indicated that there was a drop in unemployment rates between 2018 and 2019, and that there are also signs that the economy is slowly recovering. The government is using these small but positive results to justify the need for change and put pressure on Congress to vote on this matter and other controversial items (eg, the tax and administrative reforms).
However, for the general public, disinformation and confusion persists regarding most of the changes proposed by PM 905, which will not help Brazil to resume its course of action into economic growth. The number of lawsuits concerning whether the changes are constitutional have also increased the instability.
The final decision regarding PM 905 should happen after April 2020, so there is plenty to come with regard to changes to the measure's original wording and the final version that will be submitted for the president's approval.
In the meantime, companies should seek legal advice while implementing the changes proposed by PM 905, since it is still uncertain whether the changes made over the coming months will be maintained after the provisional measure is voted on.
