EMPLOYMENT RELATIONSHIP ACCORDING TO THE BRAZILIAN LAW

I. INTRODUCTION

1.1      The rights and duties of employers and employees in Brazil are set out in the so-called “Consolidation of Brazilian Labor Laws – CLT”, which is the main statute regulating labor rights in Brazil, issued in 1943. Labor rights are also regulated by collective bargaining and collective agreements.

1.2      Foreigners cannot provide any kind of paid work in Brazil, unless they possess a Work Visa or a Permanent Visa. 

1.3      Hiring employees is extremely costly in Brazil. Thus, it is very important to know what are the conditions under which an agreement is to be considered an employment agreement.

II. LEGAL DEFINITION OF EMPLOYER AND EMPLOYEE

2.1      The regular procedure to hire an individual to render services in Brazil requires the establishment of an employment relationship under the CLT´s rules and regulations.

2.2      According to article 2 of the CLT:

Art. 2.  It is considered as employer the individual or collective company which, bearing the risk of the economic activity, hires, pays and manages the work provided personally by others.

2.3      Since the issuance of the “Consolidation of Brazilian Labor Laws”, this article has been largely studied and construed by Doctrine and Court Decisions.

2.4      In spite of the Article`s apparent limited scope, the general interpretation is that “It shall be considered as an Employer every individual or entity that makes use of subordinated workers”.[1]

2.5      Accordingly, the current understanding about the Article is that, when referring to “individual or collective company”, the actual objective of the law was to cover all kinds of Employers, including Individuals, Autonomous professionals (Ex: Accountants who hire secretaries), Non-incorporated business, nonprofit organizations, etc.

2.6      One of the reasons the article has been construed so broadly was the underlying desire to always protect the employee.

2.7      For example: A technician works for a company that is not incorporated. In most cases, he won`t be aware of the fact that the company has not been dully registered yet. Even though, his rights as an employee must be respected. In this case, the law provides that the owners of the “company-to-be” shall be considered the employers, and comply with all the employer`s obligations.

2.8      Regarding the definition of employee, article 3 of CLT establishes that;

 “Art. 3^rd. An employee is every individual that renders services not eventually, under the employer subordination (obedience to rules and orders given by the employer) and that receives a salary.”

2.9      Generally, employees are hired for an undetermined period of time. However, there can be, as an exception, temporary service rendering.

2.10    According to the CLT, the main difference between an autonomous work and the employment relationship is that the employee is legally subordinated to the employer, while the autonomous work retains independence to make its own decisions.

2.11    This subordination consists in the way the employer sets out the employee’s activities as well as the goals he/she must achieve.

III. EMPLOYMENT RELATIONSHIP – REALITY PRINCIPLE

3.1      Brazilian labor law does not require the execution of a formal written employment agreement between employer and employee to prove the labor relationship between two parties. Therefore, oral employment contacts are fully valid and enforceable, subjecting the employee and the employer to the rules and regulation of the CLT.

3.2      In consideration to the above mentioned, it’s important to highlight that Brazilian Labor Law adopts the “Reality Principle”, by virtue of which the reality of service rendering prevails over the written terms.

 3.3     In other words, the Reality Principle states that:

In Labor Law, what matters are the practical conditions, which supersede the documents. Therefore, in any case where the work is executed in disagreement with the written contract, the Law applicable to the facts shall prevail over the Law applicable to the contract.

3.4      This principle is firmly based on many of CLT`s prescriptions, among which:

Art. 442 – The personal employment contract is the tacit or explicit contract that corresponds to the employment relationship.

Art. 447 – In the lack of agreement or where the proof of essential conditions to the verbal agreement is absent, the proof of the verbal agreement shall be considered as existent, as if the parties had made proof of an agreement in accordance to the legal commands adequate to the parties’ legitimate position.

3.5      Since Art. 442 states that an employment contract will be considered as valid every time that an employment relationship is deemed existent, and considering that Art. 3 defines as employee every individual that renders services not eventually, under the employer subordination and that receives a salary; it is, therefore simple to conclude that,  every time an employee renders services, there will be a valid employment contract.

3.6      This employment contract will be entered into between the employee and an individual or collective company (the employer).

4.1 FORMAL HIRING

4.1.1   As a general rule, an employee is regularly hired by means of the inscription in his/her personal Labor Card (Social Card) and of the registration in the books of the company for purpose of payment of the social taxes and contributions.

4.1.2   But that is not always the case, because, due to the “Reality Principle”, any employment relationship implies an Employment Contract. In consequence, even if the employer does not comply with the formal hiring procedures, the employee sustains all of his labour rights.

5. CONCLUSION

5.1      Taking in consideration all the motives mentioned above, and according to the Brazilian Law:

     1)    An employment relationship can be entered into between an employee and a “non-incorporated” company, that is, a company not formally incorporated, such as a foreign company, or between an employee and an individual in Brazil, even if this individual is a foreigner;

       2)    According to the Brazilian Law, an “employment relationship” can be proved according to the facts of the case. The mere lack of documents, such as the Labor Card (Social Card) is not enough to supersede the “Reality Principle”.

So, take care.

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[1] This is the opinion of, among other, Mauricio Godinho and Magano.