Brazil

    1.1 In what circumstances does the employee transfer law apply?

    Brazil does not have a separate transfer law. The Labour Code covers what happens when employees transfer. The transfer will be automatic in the event of an equity deal, but if there is a sale of assets, what happens will depend on the terms of the transaction and - most importantly - the employees’ consent. In any event, employees’ rights will be protected, including wages and benefits.

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    Author: Veirano Advogados

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    There is an automatic transfer if the deal is an equity deal. If it is sale of assets, the employees’ prior consent in writing is needed, unless the deal involves a major sale of the assets (e.g. the entire operation), in which case, the transferor might argue that consent is superfluous as the transaction is equivalent to an equity deal.

    If the transferor and transferee do not choose to offer a transfer to the employees, some of them may claim compulsory transfer if they hold special protection against dismissal and if there is evidence that the sale of assets frustrates their employment rights.

    (b) Outsourcing

    Outsourcing is not regulated and is considered lawful as long as it does not entail core business activities and the workers do not have a direct reporting line with the contracting company. If the outsourcing is unlawful, the employee may make a claim for direct employment with the company.

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    Author: Veirano Advogados

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    A transfer (whether automatic, voluntary or ordered by the court) requires the new employer to observe the existing employment conditions wherever they are more beneficial to the employee than the new ones would be. The new employer may swap benefits that depend on providers, such as insurance companies, for equivalent ones, but must preserve wages and other direct benefits. If an employee’s individual conditions are better than those offered by the new employer, the company must make adjustments in the individual employment to reflect the more beneficial conditions.

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    Author: Veirano Advogados

    Date: January 2017

    2.1 Who transfers?

    The law does not make any distinction between employees in automatic transfer situations and therefore all those who work in the transferring function will transfer. However, in the case of a sale of assets, the transfer may be partial and affect only the employees who work in the unit sold or operate the sold equipment. If so, only those who work in the relevant part and who consent will transfer.

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    Author: Veirano Advogados

    Date: January 2017

    2.2 Can employees object to transferring?

    If the transfer is the result of an equity deal, it will take effect automatically by operation of law.

    If it is an asset sale, the employees’ express consent is required and they are entitled to object to transferring, provided they do so as soon as possible. Note that even though there is a legal requirement for consent to be express, the courts may accept implied consent if there would be no loss and the employee has not immediately expressed his or her objection to the transfer.

    If an employee does object, he or she can continue working for the transferor. If that is not possible, the transferor will have to dismiss the employee and pay severance.

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    Author: Veirano Advogados

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    New employment contracts and policies can be agreed but the transferee must preserve the most favourable provisions of the old contracts and not make new arrangements that are to the detriment of the employees.

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    Author: Veirano Advogados

    Date: January 2017

    2.4 What about other employee benefits?

    The transferee must not make new arrangements that are to the detriment of the employees. New employment contracts and policies can be agreed but the benefits contained in the old contracts must be preserved.

    If the transferee cannot provide a particular benefit for practical reasons, it must provide something equivalent.

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    Author: Veirano Advogados

    Date: January 2017

    2.5 What happens to pension rights?

    There is no change following a transfer in relation to the state scheme provided by the social security system, the ‘INSS’, and the transferee must therefore continue to make appropriate contributions.

    The way private pension schemes are dealt with depends on their terms and conditions. Some will allow transferred employees to take the scheme to the new employer, others will permit the employee to remain enrolled until retirement and some will stipulate that a change of employer will terminate the scheme. In any event, private pension schemes are not subject to labour law, but to civil law.

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    Author: Veirano Advogados

    Date: January 2017

    2.6 What liabilities transfer?

    All labour, tax, civil and administrative liabilities transfer with the employee. This includes all liabilities that are still within the statute of limitations of five years. The only exception is individual liability for criminal prosecution, for example, based on negligence in relation to a work injury.

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    Author: Veirano Advogados

    Date: January 2017

    2.7 Do collective agreements transfer?

    There are two types of collective agreements: those that apply to the entire industry (between the trade union and the employers’ association) and those specific to one company (or group of companies). The ones that apply to the whole industry apply to the transferee as soon as it is operational.

    Collective agreements transfer in equity deals, but not in asset deals. The new employer may need to agree a new one if there is none in place.

    If a collective agreement transfers, the transferee will not be able to alter its terms before its expiry. Collective agreements normally last for between 12 and 24 months. Any new terms will depend on union approval.

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    Author: Veirano Advogados

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    The law is silent on the provision of information on transferring employees. However, typically, the transferor will provide information under its agreement with the transferor. This may include possible indemnities for inaccuracy.

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    Author: Veirano Advogados

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    Changes can be made to the employees’ terms provided they are not detrimental to the employees. If the new employment terms are less favourable than the terms offered by the transferor, the transferee can still implement them, provided it preserves the most favourable individual conditions. For example, if the transferee offers meal vouchers of BRL 20 under its policy, yet the transferred employees had meal vouchers of BRL 25, the transferee does not have to change its policy or the employment contracts of the new hires, provided it continues to offer BRL 25 to the transferred employees.

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    Author: Veirano Advogados

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    Whether or not the business has transferred, the rules are the same. Generally, an employer may terminate any employee who does not have special protection (‘stability’) at any time. It is not necessary for the role to be redundant. However, employers cannot use dismissal as a mechanism to avoid providing favourable terms to employees, for example, by subsequently rehiring the same employees on more detrimental terms. The courts might consider this to be fraud and thus pronounce the termination and rehiring to be invalid and order the agreement to continue.

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    Author: Veirano Advogados

    Date: January 2017

    4.1 Who must employers consult?

    No consultation is required by law.

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    Author: Veirano Advogados

    Date: January 2017

    4.2	What information must they provide?

    No information need be provided.

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    Author: Veirano Advogados

    Date: January 2017

    4.3	What does consultation involve?

    No consultation is required by law.

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    Author: Veirano Advogados

    Date: January 2017

    4.4	How long does consultation last?

    No consultation is required by law.

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    Author: Veirano Advogados

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    Not applicable.

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    Author: Veirano Advogados

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    The transfer of employees in an asset deal entails some time-consuming bureaucracy to do with public accounts (Social Security and ‘FGTS’ severance fund). As a result, the employee may remain part of the transferor’s entity for an extra month or two, until the paperwork is completed.

    Dormant liabilities sometimes fly under the due diligence radar. A good indemnity agreement is essential.

    In asset deals, dismissal and subsequent rehiring (instead of transferring) is often preferred, so as to avoid the legal bureaucracy and the transfer of length of service accrued at the transferor, possibly affecting the severance costs through the FGTS severance fund. This is lawful in principle, but the parties must assess the circumstances and the risk of the public authorities considering it to be fraudulent to allow the employees to withdraw FGTS funds, as these would be unavailable if the employees transferred.

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    Author: Veirano Advogados

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    In cases of outbound transfer, if the transfer is temporary, expatriation law will apply. If it is permanent, the transferor will need to terminate the Brazilian employment . A transfer into the country (i.e. where a foreign transferor sells its business to a Brazilian transferee) is treated as new employment in Brazil.

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    Author: Veirano Advogados

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    There is no specific law on transfers. Only the general provisions of the Labour Code apply.

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    Author: Veirano Advogados

    Date: January 2017

     

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