Collective Bargaining and the Role of Trade Unions in Post-Pandemic Brazil

The advent of the COVID-19 pandemic in Brazil has given rise to countless new laws and regulations, in addition to contributing to the formation of new case law and several changes in employers’ practices and culture nationwide. 

While the above-mentioned narrative is not exclusive to Brazil, it is very interesting to note that, even in the face of this array of new regulations, collective bargaining (meaning, negotiations held between employers’ associations and employees’ unions or employers and employees’ unions that ultimately result in signing collective bargaining agreements) has gained unprecedented importance in recent years – namely after the COVID-19 pandemic hit. 

The possibility of negotiating with trade unions has been around for several years now, as it is provided both in the Brazilian Labor Code (enacted in 1943) and in the Brazilian Federal Constitution, which dates back to 1988 and has, essentially, instituted our current trade unions’ system.

Even though employers are “free” to contact the professional unions that represent their employees’ interests and start a negotiation, at any time, about any topic that is not legally non-negotiable, companies in Brazil tend to avoid such connections. Until recently, they mostly contacted unions to negotiate basic, standard matters, such as a Profit-Sharing Programme or a working hours’ offsetting agreement, if such topics were not covered in the general collective bargaining agreement (CBA).

For clarification purposes, the Brazilian trade unions’ system encompasses two types of collective bargaining agreements. 

The first type is a general CBA, signed between an employers’ association and the corresponding employees’ trade union, which will apply to all employees in that professional category within the geographic area covered by said unions’ representation scope. This general CBA tends to be lengthy and covers various topics, ranging from the professional category’s minimum wage to circumstances that will result in employment protection or provisional job tenure (on top of the ones already provided in the law).

The second type is a specific CBA, signed between a company and the trade union representing its employees. This specific CBA tends to be short and  covers one to three topics. Its applicability is restricted to the employees of the company that signed it.

The two types of CBAs can coexist, in relation to the same group of workers, as one does not exclude the other. Most unions do sign general collective bargaining agreements, so, as a rule, there will always be a general CBA to consider. However, if an employer negotiates and signs a specific CBA on a topic already covered by the general CBA, then the specific CBA will prevail over the general one. This is a very clear rule established by the Brazilian Labor Code.

Another interesting fact is that every employee and employer in Brazil are automatically and compulsively, represented by a trade union and by an employers’ association (respectively). Employees (and employers) are free to decide if they want to affiliate with their respective trade union, but they will be 100% covered by the respective general CBA, irrespective of affiliation.

All of a company’s employees must be covered by the same general CBA unless the company has employees that classify as “differentiated category” professionals, who shall be represented by their specific trade unions.

At this point, it is worth dwelling a little longer on the union representation topic to also clarify that, in Brazil, no employee nor employer can choose which union will represent them: this definition is made on objective, legally established criteria – namely, the employer’s economic activity and the entities’ geographic scope of representation. Also, workers cannot simply found a new trade union whenever and wherever they desire because there cannot be more than one trade union representing a specific professional category in the same geographic area.

Additionally, neither workers nor employers are allowed to set up a trade union exclusively to represent employees of a given company or one company’s interests. This is not possible per the union organisation rules set out in Brazilian laws. 

The specific CBA mentioned earlier can be considered an exception in the collective bargaining scenario. As a rule, employers will only start a direct negotiation with a trade union in the following situations: 

• the law does not provide on that specific topic; 
• the law does provide on the topic, but in very general terms; 
• the general CBA does not provide on that specific topic; 
• the general CBA expressly requires that the topic be directly negotiated between the employer and the employees’ union; or
• the topic cannot, or should not, be negotiated directly between the employer and its employees. 

Whatever the reason for a specific, separate negotiation, it is still true that the scenario of collective bargaining between employers and unions has undergone changes, with a welcome increase in unions’ opportunities for action and influence.

The above-mentioned changes can be attributed to three main reasons:

• the Brazilian Labor Reform, effective on 11 November 2017;
• the cultural and practical changes brought about by the pandemic itself; and
• that the Brazilian Supreme Court has been giving more effectiveness to collective bargaining ultimately granting more legal certainty to the practice, thus encouraging employers to engage in it. 

With respect to the Labor Reform, even though it took place before the pandemic, it deserves its own spot here, as it was the unions’ first catalyst to move from a passive to an active approach to collective bargaining. The Labor Reform ended mandatory union fees, so, since then, such fees can only be deducted from the salaries of employees who expressly agree to it prior to the deduction. This has “motivated” trade unions to work harder and more creatively to ensure that as many workers as possible will choose to keep paying their fees or that companies pay “negotiation fees” whenever they choose to negotiate ACTs (specific agreements) with them.

As a rule, any right can be negotiated unless the law expressly states that such is non-waivable or non-negotiable. This is usually the case with the labour rights listed in the Brazilian Federal Constitution and those listed under a specific article of our Labor Code – Article 611-B. Additionally, the Labor Reform introduced a principle known as “predominance of Collective Bargaining Agreements over the law”, which has greatly encouraged companies to negotiate with unions. 

Prior to the above-mentioned principle, the Superior Labor Court would analyse a given agreement and only ratify the clauses that provided for additional rights to the workers but invalidate those that provided for reductions, even if such reductions were duly compensated by the extra rights. If the case ever made it to the Brazilian Supreme Court, through an appeal, the Supreme Court would often disagree with the Superior Labor Court and overrule its decision.

The truth is that, even now, post-Labor Reform, CBAs are still often challenged in court, and many are declared null and void, especially when they reduce or eliminate a labour right by Labor Courts. 

While the Brazilian Supreme Court (STF) has set a few good precedents, in recent years, in favour of the predominance of collective bargaining over the law, the Supreme Court has recently taken a definitive step towards reducing the legal uncertainty around the matter: on 2 June 2022, the Court issued Theme # 1,046, with General Repercussion, stating that labour rights can be reduced, or even eliminated, through collective bargaining agreements - except for rights that are, unquestionably, non-negotiable or inalienable, such as minimum wage, maternity leave or employees’ right to strike.

Such Themes play an important role in case law harmonisation and serve as guides for the Lower Courts and Judges, when they face similar cases.

In view of the above, it is expected that more CBAs will be negotiated and signed in the near future and that Labor Judges and Courts are more flexible in their analysis of such documents, should they be challenged in Court.

The Brazilian Supreme Court’s Theme # 1,046 is very much in line with the “reshaping” of Brazilian employers’ mindset in relation to collective bargaining, to which we alluded at the beginning of this essay. 

It can be affirmed that the COVID-19 pandemic is mostly to blame for the increase in collective bargaining between employers and trade unions, but such change should still be taken into consideration, as it has resulted in various new agreements covering a diverse range of topics that, before the pandemic, were rarely raised as negotiation topics and, much more rarely, formalised into CBAs.

Below are a few examples of topics that, albeit negotiable, were rarely negotiated, before the pandemic.

Remote work and hybrid work regimes: the Brazilian labour and employment laws have provided for the possibility of teleworking since the Brazilian Labor Reform took place. Nevertheless, the telework-related demands brought about by the pandemic were mostly unprecedented, eg:

• the possibility of a hybrid work regime being implemented since the laws only provide for in-office or on-site work, external work and telework, with no in-between;
• the possibility of employees working from Brazil, under a telework regime, on behalf of a company not established in Brazil (or the other way round);
• the possibility of apprentices and interns working remotely;
• granting of tools or allowances to employees on telework;
• work health and safety measures versus telework;
• how to evaluate the performance of employees on telework;
• whether and how to prorate rights and benefits for employees who work remotely (especially for those living abroad or in regions different from those where there is a company facility) or under a hybrid regime; and
• control (or not) of the working hours of employees on telework.

According to research conducted by DIEESE (Inter-Union Department of Statistics and Socioeconomic Studies), published on 12 April 2021, the telework topic was included in 1.2% of the CBAs signed in 2019, compared to 13.7% of the agreements signed in 2020.

Particularly in relation to the control of the working hours of employees on telework, this has been one of the highest points of concern for Brazilian employers since 28 March 2022, when a new Executive Order modified our Labor Code to establish that employees on telework are no longer exempt from working hours’ control (which they were, from 11 November 2017, until 28 March 2022) unless they are hired by production or by task, which is not the rule, in Brazil. 

Executive Orders are only effective for 60 days, extendable for another 60 days, after which it ceases to produce effects if not converted into a law – albeit the acts performed during its term will remain effective, even if it does expire.

This sudden change sent employers into a chaotic frenzy, as most of them were not (and are still not) equipped to comply with this new rule. Most companies do not even own a time tracking system that allows them to control the working hours of employees on telework efficiently. Plus, implementing a new, adequate system requires a previous negotiation with the respective trade union.

Even if this rule is ultimately not converted into law, it is in force now, so companies are being “forced” (so to speak) to contact the professional trade unions and negotiate a CBA pertaining to their time tracking system or to try to negotiate that their employees on telework remain exempt from working hours’ control – but, in this last scenario, the trade union will likely request that the company offers something to employees in return, such as a salary increase, a bonus or a few months of job tenure, since keeping them as “exempt” also means that they shall not receive overtime pay.

Notwithstanding the above-mentioned, should any company successfully negotiate a specific CBA with a trade union regarding the status of their employees on telework, this CBA will prevail over the current Executive Order and any future law deriving from it.

Temporary suspension of the employment and (proportional) salary/working hours’ reduction: such possibilities were introduced by two different Executive Orders, enacted during the pandemic, but, as soon as those expired, hundreds (if not thousands) of CBAs were negotiated, in relation to the same matters, as those measures represented feasible alternatives to mass terminations, during the pandemic.

According to the research mentioned in the precedent item, provisions of the expired Executive Orders (eg, temporary suspension of employment, the proportional reduction of salary and working hours, anticipation of individual vacations and granting of blanket vacations, among others) were included in 43% of the CBAs signed in 2020.

Mandatory COVID-19 vaccination: given the absence of a law that expressly allows companies to mandate COVID-19 vaccinations for their employees, this topic gave rise to countless individual labour claims presented by workers who refused to get vaccinated. Even though most labour Inspectors, Prosecutors, Judges and Courts (including the Supreme Court) in Brazil are in favour of the mandatory vaccination, the legal uncertainty is still there, hence why many employers opted to negotiate an agreement with their employees’ trade unions to avoid discrimination lawsuits. 

Roles that classify as “trust positions”: although this item cannot be solely attributed to the COVID-19 pandemic, telework has resulted in companies reviewing their positions and which ones should be considered exempt (from the control of working hours) by the employers, and which should not. Since employees with “positions of trust” are legally exempt, per the Brazilian Labor Code, some companies (including our clients) have sought out their professional trade unions to negotiate which roles are classified as a position of trust, for working hours’ control purposes. 

Our firm has conducted numerous negotiations with professional unions, not only about the topics exemplified in this essay but several others, as well. Clients’ requests for our services to assist them in negotiations with unions have been recurrent, most of them related to employees in positions of trust, telework and control of employees’ working hours. Parallel to this, we either have discussed, or are currently discussing, the signature of specific CBAs, with different clients, on the following topics:

• types of variable compensation granted by the company;
• a salaries and positions plan (mostly to avoid salary parity and/or indemnification for discriminatory treatment-related claims);
• suspension of employment for the employees’ professional qualification;
• on-call or standby work; and
• reduction of employees’ meal breaks and flexibilisation of employees’ benefits (foreseen in CBAs) when they move to different regions, in Brazil, or even abroad.

In conclusion, it is safe to say that the role of trade unions in Brazil has undergone significant changes in recent years being mostly attributable to the Labor Reform, the COVID-19 pandemic and/or the Brazilian Supreme Court’s stand on the relevance of collective bargaining. Such changes are beneficial for employers because not only are there very few non-negotiable rights but also any provision contained in a CBA carries far more legal certainty than any provision that only exists in an employment contract.

Though companies in Brazil tend to avoid contacting trade unions, unless it is absolutely imperative that they do, it is becoming clear that some negotiations are beneficial, as they can not only be used to avoid different interpretations of the law but also to stimulate employers and employees (duly represented by their respective unions) to become more flexible to general rules and regulations, adjusting them to their specific needs.