Global News

• 3 April 2020

Provisional Measure authorizes suspension or reduction of activities with the proportional reduction of salaries

The Provisional Measure number 936/2020 (“PM 936”) was issued by the Brazilian Federal Government, establishing the Emergency Employment and Income Maintenance Program, and providing for complementary labor measures to deal with the state of calamity arising from coronavirus (COVID-19).

The new program was approved to avoid layoffs in the private economic sectors with a national salary subsidy for employees through the payment of Emergency Job and Income Preservation Benefit (“Emergency Benefit”).

The central idea of PM 936 is to make it possible for employers, through individual agreements with employees, or collective bargaining agreements with the Employees’ Unions (“CBA”), to proportionally reduce the working hours and salaries, or even temporarily suspend employment contracts. Only in those hypotheses an employee would be eligible to receive the Emergency Benefit.

The amount of the Emergency Benefit will be based on the calculation of the monthly amount of unemployment insurance that would be due to the eligible employee and will be paid regardless of the fulfilment of the criteria usually foreseen by law.

The Emergency Benefit will be due from the date of the start of the working day/salary reduction or from the temporary suspension of the employment contract. Employers must inform the Ministry of Economy about the agreements signed within ten days counted from its execution, through a procedure that will be regulated in another Provisional Measure.

For the hypothesis of proportional reduction of hours and salary:

• The employer may, through an individual written agreement or through CBA, limited to ninety days;
• The proportional reduction in working hours and salaries may be carried out exclusively in the percentages of 25%; 50% and 70%. This percentage will be applied to the monthly amount of the unemployment insurance to which the employee would be entitled, in order to calculate the Emergency Benefit;
• Individual agreements may be negotiated with any employee if the proportional reduction in working hours and salary is of 25%;
• For the other reduction percentages (50% and 70%), individual agreements may only be negotiated: (a) with employees who receive up to BRL 3,135.00 (three thousand one hundred and thirty-five reais) and / or (b) with employees who have a higher education diploma and receive a monthly salary equal to or higher than twice the maximum limit of benefits under the General Social Welfare System (BRL 12,202.12);
• For the hypotheses not covered above (employees earning between BRL 3,135.00 and BRL 12,202.12), the proportional reduction in working hours and salaries can only be established through CBA;
• Through CBA, different percentages of proportional reduction of working hours and salaries may also be established, maintaining the calculation basis and percentages for the Emergency Benefit;
• The proposal for individual agreements by the company must be sent to the employee at least two calendar days in advance.

For the hypothesis of temporary suspension of the employment contract:

• The employer may, through individual written agreement or through CBA, adjust the temporary suspension of the employment contract of its employees, for a maximum period of sixty days, which may be divided into up to two periods of thirty days;
• Individual agreements may be negotiated with employees who receive up to BRL 3,135.00 (three thousand one hundred and thirty-five reais) or with those who have a higher education degree and receive a monthly salary equal to or greater than twice the maximum benefit limit the General Social Welfare Regime (BRL 12,202.12);
• For the hypotheses not covered above (that is, employees earning between BRL 3,135.00 and BRL 12,202.12), the proportional reduction in working hours and salaries can only be established through CBA;
• Companies that have earned, in the calendar year of 2019, gross revenue exceeding BRL 4,800,000.00 (four million and eight hundred thousand reais), may only suspend the employment contract of their employees by paying a monthly compensatory aid of 30% of the employee’s salary, which will not have a salary nature. For this hypothesis the Emergency Benefit will be equivalent to 70% of unemployment insurance;
• For companies that have earned, in the calendar year 2019, gross revenue of up to BRL 4,800,000.00 (four million and eight hundred thousand reais), there will be no obligation to pay a monthly compensatory aid. Therefore, the Emergency Benefit will be equivalent to 100% of the unemployment insurance to which the employee would be entitled;
• During the period of suspension of the employment contract, all benefits usually granted to employees must be maintained;
• There may not be any kind of work for the employees on leave while the contract is suspended. If the employee continues to perform any type of work during this period even if remotely (via telework or home office), the suspension of the employment contract will be uncharacterized and the employee will be entitled to the immediate payment of his salary and all social charges related to the period. In addition, the company may still face the sanctions provided for in legislation or CBA.

Of the other provisions covered by the Provisional Measure

• The Emergency Benefit may be accumulated with any compensatory aid, paid by the employer as an act of generosity, due to the reduction of the working hours and salaries or the temporarily suspension of the employment contracts. The compensatory aid will not have salary nature and will not be part of the employment contract.
• For employees who receive the Emergency Benefit as a result of the proportional reduction in working hours and salaries or the temporary suspension of the employment contract, the company must respect a period of temporary tenure, so that they cannot be dismissed without just cause:
  • During the agreed period of proportional reduction of working hours and salaries or temporary suspension of the employment contract; and
  • After the re-establishment of the working day and salary or the end of the temporary suspension of the employment contract, for a period equivalent to that agreed for the reduction or suspension.
• Thus, for example, if the individual agreement to reduce wages and hours, or the suspension of the employment contract, persists for 2 (two) months, the affected employee will have a temporary job tenure of 4 (four) months – 2 (two) months arising from the period reduction or suspension and 2 (two) months after his/her return to the regular work conditions.
• Nevertheless, if inevitable, the dismissal without just cause of an employee in this period will bind the employer to the payment of the corresponding severance payments, in addition to the indemnification under the terms of the PM 936.
• The following items were also relaxed: (i) the form of holding meetings to establish a CBA, which now may be virtual; and (ii) the deadlines for the development of such CBA.

Our team remains available to answer any questions that may arise from the application of MPV 936.

Aloizio Lima
aloizio.lima@lefosse.com
Tel.: (+55) 11 3024 6382

Paulo Peressin
paulo.peressin@lefosse.com
Tel.: (+55) 11 3024 6383

Rafael Sorbo
rafael.sorbo@lefosse.com
Tel.: (+55) 11 3024 6384

Giulia Caruso
giulia.caruso@lefosse.com
Tel.: (+55) 11 3024 6196

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