Economic freedom law and workers
Nestor Saragiotto, Partner of Tortoro, Madureira & Ragazzi Advogados
It is truly no coincidence that Brazil ranks 150th position in the Economic Freedom ranking of the Heritage Foundation/Wall Street Journal and has over 28 million unemployed, underemployed (those who work less than they wish) and discouraged people (professionals who have stopped looking for a job because they are convinced they will fail to do so), according to IBGE data.
It is clear that a scenario of this magnitude can be considered the greatest issue Brazil has been facing for some time and has multiple causes, such as economic stagnation, computerization, mechanization of production, excessive taxation and low professional qualification. We can also point out the existence of a hostile environment for business as an aggravating factor, landmarked by demotivating bureaucracy, in addition to an inspection and control system that inhibits the entrepreneurs’ initiative. After the recent amendment to Law No. 13.874/2019, the Federal Government is fighting this issue, changing the legislation in order to remove obstacles and facilitate the lives of entrepreneurs, especially smaller businesses with greater vulnerability.
After the aforementioned law is approved, the traditional Employment Record Card will become an electronic file and will only be physically issued in exceptional cases. Creating and displaying employees’ working hours and shift information in a visible place is no longer required. From now on, only businesses with over 20 employees will be required to maintain a time clock system. In the previous regime, this obligation reached facilities with over 10 employees. But perhaps the most relevant change has been to allow time clocking by exception, so that only situations in which employees are working outside of their regular working hours should be recorded, such as overtime, absences, leave, vacation, delays, early departures and compensation, however, this will require an individual employment or a collective bargaining agreement to be signed.
One amendment made to the Civil Code, with inevitable repercussions in Procedural Labor Law, concerns the new rules for disregarding corporate entities. Companies’ equity autonomy was expressly recognized as a lawful tool for risk allocation and segregation, so that the shareholders’ personal property will only be liable for the debts of the legal entity when there is 1) deviation of corporate purpose, which is using the legal entity to harm creditors or other unlawful acts, or 2) by the co-mingling of assets, defined by the absence of separation between the assets. However, it is worth nothing that in certain circumstances, these new rules may raise difficulties in enforcing labor claims. The law was drafted with the purpose of providing entrepreneurs with greater protection, freedom of work and production. As one can see, its impacts on employed workers are minimal, but for the unemployed, they may see their dream come true: reentering the labor market and exercising their citizenship to the fullest, living with greater dignity and self-assurance alongside their family. So be it!