The Chamber of Deputies of the Brazilian Congress approved a proposed Constitutional Amendment (PEC 221/19) (“Amendment”) that, if implemented, will establish a 40 hour work week over five working days with two paid days of rest. The proposed Amendment now proceeds to the Federal Senate for debate.
Given the impact on employers across Brazil, the Amendment provides for gradual implementation. Sixty days after taking effect, employers must provide two paid rest days per week and reduce the work week to 42 hours. The 40-hour workweek will become mandatory fourteen months after the Amendment becomes law.
The Amendment also establishes certain protections for workers. For example, employers are prohibited from reducing salaries due to the reduction in working hours. Union labor is also affected. In the event collective bargaining agreements do not reflect the new framework, such agreements will become invalid after the expiration of the implementation period. Certain flexibility is allowed in collective bargaining related to key industry sectors including transportation, security, healthcare, and sanitation. For these key sectors, special work schedules are permitted to reflect regular shift patterns. For example, a 12 hour per day, 36 hour work week would be allowed as long as two weekly paid rest days are maintained over the course of a month.
Employees holding a higher education degree who earn more than 2.5 times the ceiling of the General Social Security Regime (RGPS) may be exempt from working hour limitations and time tracking requirements, unless a collective bargaining instrument or the employer provides otherwise. In addition, specific transitional rules will apply to outsourced contracts with the Public Administration, conditioning implementation on contractual amendments to restore the economic-financial balance of those contracts.
Beyond these specific transitional provisions, if approved by the Federal Senate and signed into law, the Amendment would represent one of the most significant changes in labor relations since the 2017 Labor Reform, with substantial operational, financial, and organizational impacts for companies operating in Brazil.
In light of these potential changes, US-based companies with employees in Brazil should anticipate significant operational implications if the Amendment is implemented in its current form. US investors are encouraged to closely monitor the progress of the Amendment in the Brazilian Senate and begin assessing its potential impact on their Brazilian operations. In particular, such companies should evaluate current work schedules, staffing levels, and labor costs in light of the proposed reduction in weekly working hours. US investors should also review existing collective bargaining agreements applicable to their Brazilian workforce to identify provisions that may require renegotiation or amendment. Early engagement with local legal counsel is recommended to ensure timely compliance with the transitional deadlines and to develop strategies for mitigating any operational or financial disruptions.
For further guidance on this issue, please contact Tony Girolami (tgirolami@sheppard.com).