Publications

Category: Labor and employment

Whether it's on the way to the courthouse or at the indefatigable end-of-year gatherings, it's not uncommon for us to listen patiently to a cousin, brother-in-law, acquaintance, or even the cab driver himself tell the story of how he filed a labor lawsuit against his former employer and was successful.

With some variation in the plot - and this includes the personal experiences of each interlocutor in the dreaded pre-trial hearing - the conclusion of the conversation is usually the same: "but the boss always loses, doesn't he?"

After hearing this same question for many years, we decided to reflect on the outcome of the lawsuits: does the boss always lose?

We believe that "employers" should be divided into two groups: those who strive to comply with labor rules, adopting best practices on a daily basis, and those who effectively make no effort to follow the rules and treat labor claims as a predictable factor in their balance sheets.

For the second group, the natural answer to the question from the fellow taxi driver or that distant cousin is "yes". In that case, the boss will always lose, because he doesn't even expect to win. The labor claims and the settlements that will be reached in the course of the proceeding make up a global number in their accounts, and losses are already expected.

In the case of the first group, the answer couldn't be more relevant to our profession and that is "it depends". Often the question of losing or winning is not just based on business practices and their implementation in the employee's day-to-day life.

The Labor Courts judge with what they have in hand. In this case, the evidence in the record. Even if companies follow labor rules, have good practices, and ensure that each of them is correctly implemented in the workplace, the outcome of a labor claim is also directly related to the employer's ability to provide the judge with proof of all these elements.

There is little point, for example, in encouraging a safe environment in which every care is taken to avoid accidents at work, if, on the other hand, the company is unable to manage the provision of personal protective equipment (PPE) for its employees.

This leads us to consider that just as important as following labor rules is the company's ability to demonstrate, within the proceeding, that these rules have been complied with.

Organizing documents, formalizing contractual changes, collecting employee signatures on policies, and archiving these documents are practices that should be as valued as supervising overtime. These small adjustments can make a huge difference in a trial.

Investing in these management changes is a simple and effective way to reduce the exposure of employers who strive to comply with labor rules and avoid dissatisfaction with a judgment that does not reflect the practices adopted at the company.

Some newer discussions in the judiciary should be handled with more caution by the defending party. Unusual issues for labor judges, who are swamped with lawsuits on the same topics, can fall into the mass grave at the time of a trial or even in the course of a pre-trial hearing, and thus be judged in a legally incorrect manner.

In such cases, a good way to avoid unpleasant surprises at trial is to follow the proceedings closely, to be present in the judges' chambers to explain and clarify controverted points, and to focus on the evidence in the record - especially documentary evidence, which often goes unnoticed.

With these precautions, we can begin to change the general perception that "the boss always loses" and thus also change the direction of end-of-year conversations.

Category: Tax

The Secretariat of Finance and Planning of the State of São Paulo (Sefaz/SP) republished, on August 9, the SRE Ordinance 52/23, which amended the regulation of requests for special regimes provided for in articles 479-A and 489 of the ICMS Regulation (RICMS/SP) and established by Ordinance CAT 18/21.

The new deadlines for the entry into force of decisions on special regimes are among the main changes It has been established that,:

• if there is a request for extension of validity, the decision will have immediate effect, except in case of refusal, in which case the decision will be valid from the first day of the second month after the date on which the interested party was informed; and
• if there is a request for Amendment of procedures provided for in the special regime in force, the decision will be valid from the first day of the second month after the date on which the interested party was informed.

Other item changed was the exemption from analysis of tax the regularity of the taxpayer. The analysis of fiscal regularity, the changes could be waived at the discretion of Sefaz, if it had already been carried out in another application for special regime submitted in the period of up to two years before the date of verification. Now, although the analysis will continue to be waived when it has already been carried out in a special regime application submitted previously, this occurs only in the cases of applications submitted less than 180 days from the date of verification.

Another amendment was the repeal of the exemption from the analysis of fiscal regularity of companies classified in categories "A+" or "A" of the Nos Conformes program, since paragraph 5 of article 9 was repealed.

Despite the repeal, in order to still benefit these taxpayers and speed up the process of applications, it was stipulated that the decision on the extension of the requests for special regime submitted by these taxpayers will be taken by the regional tax delegate.

For this displacement of competence to occur, Sefaz/SP will consider as "A +" or "A" the classification of the 12 months prior to the request for extension of the validity of the special regime, highlighting that:

• To be considered as "A+", the company must have been classified:
  • in at least 9 of the 12 months immediately preceding the application;
  • in its most recent rating to the request.
• To be considered as "A", the company must have been classified:
  • in at least 9 of the 12 months immediately preceding the application; or
  • higher, in its most recent rating to the request.

In the case of requests for extension made by these companies, the attribution of the decision-making competence to the regional tax delegate will only happen if the decision to grant or extend it has been issued by the Executive Board of the Tax Administration (Deat) or by the coordinator within five years.

Category: Labor and employment

Since the Consolidated Labor Laws (CLT) entered into force, the chapter on working hours, in particular the limitation of working hours to eight hours per day and the payment of overtime, has included exceptions provided for in article 62 of the same law.

The articles on the subject are not new, but the discussions in legal scholarship and case continue to be heated, especially since the emergence of the internet and the evolution of technology.

The main criterion used in some labor court rulings to rule out falling within the exception provided for in article 62, subsection I, is the existence of direct or indirect means of monitoring the employee's working hours.

The mere possibility of supervision, even if it is not practiced, is considered sufficient by some courts to justify finding absence of off-site working hours. The understanding is based on the fact that the article of the law stipulates that off-site activity must be incompatible with fixed working hours.

Although it is necessary to analyze the body of evidence on a case-by-case basis in order to assess all the elements and grounds for persuasion, article 62, subsection I, of the CLT does not stipulate that the mere provision of telematic devices, such as a corporate telephone or iPad, disqualifies the classification in the exception in question.

This is because the wording of subsection I, despite having undergone changes over the years, continues to provide that the conditions that qualify the employee in the legal scenario mentioned would be:

• exercise of off-site activity incompatible with the establishment of working hours; and
• annotation of this condition in the Work and Social Security Ledger (CTPS).

Considering the wording used by the legislator, what establishes a true off-site employee is not the mere possibility of supervision by the employer, but the determination that work hours be carried out within a defined timetable.

With the advance of telematic means, there is always the possibility of controlling an employee's working hours. However, if the employer does not do this, i.e. does not set working hours for off-site workers to carry out their activities, the case of article 62, I, of the CLT applies.

Any understanding other than this represents usurpation of jurisdiction, making the exception in the article mentioned “dead letter law".

What really needs to be assessed in order to apply the rule to reality is whether the employer can order the employee to work within a specific period of hours. It must also be assessed whether it will be possible to accurately ascertain whether employees carried out their work activities within those working hours.

As explained by Judge Ricardo Apostólico Silva of the 13th Panel of the Regional Court of Labor Appeals of São Paulo (2nd Region) when deciding a case brought by a sales representative for the pharmaceutical industry, "it is not enough to know the time at which the worker performed the first and last services of the day; it must be possible for the employer to know and control how the worker spent his time throughout the day. On the other hand, those who work off-site may, in theory, invest part of the time between the start and end of the work day to resolve private issues, which obviously does not give rise to the right to compensation."^[1]

With this in mind, we believe that the way to try to avoid judgments for overtime due to misapplication of the exception to off-site working hours provided for in article 62, subsection I, of the CLT is to look for alternatives to recognize the exception. The issue should also continue to be taken to the Superior Labor Court (TST) in order to standardize case law and bring it into line with current reality.

The first alternative to avoid a judgment is to increasingly adapt field practices to demonstrate the autonomy and flexibility of off-site workers, presenting proof that the telematic instruments, including the systems installed in them, are intended for organizing day-to-day work and not for controlling/interfering with working hours.

Drawing up notarial minutes with screenshots of the system, with the information that must be filled in and a demonstration of what information the managers have access to (as little as possible - only what is essential to validate the work done), has also proved to be a valuable resource in lawsuits.

Another option that has become more effective since June of 2022, with the judgment of Topic 1,046, by the Federal Supreme Court (STF), is the provision in a collective bargaining agreement that employees of a certain category or company who carry out off-site work are not subject to receiving overtime under the terms of article 62, subsection I, of the CLT.

With the STF holding that “collective bargaining agreements which, taking into account the negotiated sectoral adequacy, agree to limitations or withdrawals of labor rights, regardless of the specific explanation of compensatory advantages, provided that absolutely inalienable rights are respected, are constitutional", the validity of this type of clause has gained strength in the Labor Courts.

Along these lines is the opinion drafted by Justice Alexandre Luiz Ramos of the 4th Panel of the TST in case 0001128-95.2017.5.17.0152 and that of Justice Breno Medeiros of the 5th Panel in case 0020364-97.2018.5.04.0010. Both recognize that a provision in a collective bargaining agreement for the applicability of the exception in article 62, subsection I, of the CLT does not constitute an unlawful purpose or an inalienable right.

As Justice Breno Medeiros noted in his ruling, failure to recognize the validity of this provision represents a violation of article 7, subsection XXVI, of the Federal Constitution.

These decisions reinforce the understanding of validating a clause that for years has been included in various collective bargaining agreements for employees in off-site categories, such as sales reps in commerce and industry in general, including the pharmaceutical industry. They bring the hope of complete and correct practical applicability of article 62, subsection I, of the CLT, which, unfortunately, since the emergence of geolocation systems such as GPS, has been weakened.

Therefore, until the TST defines the real concept of off-site working hours, the only thing left to do is for companies to adapt their defense arguments and their management practices for employees belonging to this category. Organizations should also strive to defend the autonomy of the collective will, to strengthen the validity of the exception and avoid unlawful judgments, especially in cases where the collective standard already provides for the application of article 62, subsection I, of the CLT.

^[1] Case 1001663-90.2019.5.02.0463 – published on August 21, 2023

Category: Labor and employment

For some it's a path backwards, for others a plot twist by the Supreme Court. The many scenes in the movie about union dues have prompted reflections - in our view necessary - about trade union funding in Brazil. Pressing the "stop" button, what does the new position of the Federal Supreme Court (STF) reveal about the current "frame" of union dues?

At the beginning of September this year, Justice Alexandre de Moraes voted in a virtual judgment of the STF (in the context of a motion for clarification in ARE 1018459 - topic of general repercussion 935) reinforced the very new position of the majority of the Court's justices regarding the possibility of unions charging all those represented, regardless of membership or association with the organization, union dues provided for in a collective bargaining agreement, provided that:

• it is approved by a general meeting of affiliated and non-affiliated workers; and
• it gives those who do not wish to pay dues the right to object.

In the not so distant past, in November of 2017, the Labor Reform (Law 13,467/17) made impactful changes to the main sources of funding for trade union activities and ended the obligation to pay union dues (collected in March of each year in an amount equivalent to one day's salary).

The end of this compulsory contribution dried up the source of funding for many unions in Brazil, leading to the closure of various organizations at the time. The most committed organizations survived, adapting to the end of the dues and, especially through negotiations, engaging members or voluntary contributions.

Shortly before the Reform, the STF had already indicated the scenes that were to come: prohibition on compulsory collection of the numerous dues instituted by a collective bargaining agreement, including the compulsory union dues.^[1]

In general terms, contributions to trade unions became optional, and were only obligatory for employees and companies that were members or for non-union members who voluntarily wanted to contribute - as long as they authorized any payment to the unions individually, and not collectively.

In the post-reform period, although under strong criticism from experts and organizations, this logic of voluntary contribution continued to be supported by the majority of STF justices - as seen by all in the judgment of ADI 5.794 -, guiding the dynamics of union funding in Brazil over the last six years.^[2]

As the STF pointed out in the judgment of ADI 5.794, the compulsory union dues in Brazil (nicknamed by some as a "negotiation fee") is similar to the so-called agency fee, charged by US unions to workers to fund collective bargaining, with the exception of the employee's right to object when it becomes clear that these funds are being used inappropriately, such as for political funding.

The move towards compulsory union funding only for some and not for others has intensified the controversy over the lack of funding for employees and companies that benefit from collective bargaining but choose not to contribute to the unions that negotiated these rules.

Some have called the non-paying beneficiaries "hitchhikers"^[3] - a term cited by the US Supreme Court in the grounds of the emblematic precedent Janus v. AFSCME (2018), also dealing with agency fee contributions from non-unionized (public) workers to unions.

There are those who say that, in practice, the change in the STF's position on issue 935 on compulsory union dues flirts with the concept of the now defunct union tax, based on the practical need to resolve the financial issue of unions in the post-Labor Reform period.

On the other hand, in what seems to us to be a reasonable balance, there are those who argue that the costs of union representation in collective bargaining can be shared among those represented who benefit from the collective bargaining agreements, regardless of their union membership, with the exception of the right to object to the payment of these fees for those who prefer to do so.

After all, how could the members of a category benefit from the "lunches", even if they don't bring the best menu, but insist on it being free?

Raising awareness about financing among all those who benefit from collective bargaining agreements, regardless of union membership, inevitably involves a debate that brings together both companies and labor lawyers.

The STF's case law also deserves attention, especially in view of the questions that may arise regarding the liability of companies that fail to deduct the union dues from their employees or, by omission, fail to pass on the amounts arising from this fee to the unions.

For now, we await the publication of the STF's decision, which will certainly bring more scenes to this feature film.

^[1] ARE 1018459 RG / PR, decision published on March 10, 2017.

^[2] STF/ADI 5.794, decision published on June 29, 2018.

^[3] free translation of the expression "free rider", a term mentioned by the U.S. Supreme Court in the judgment of the case Janus v. AFSCME, 585 U.S. __ (2018).

Category: Labor and employment

Working hours on Sundays and public holidays have been the subject of debate and updates over the last few years. In 2021, with the Infralegal Labor Regulatory Framework (Decree 10,854/21), a bill was launched to update infralegal labor rules, including authorization to work on Sundays and public holidays.

In the context of the Infralegal Labor Regulatory Framework, on November 11, 2021, MTP Ordinance 671 was published, which granted permanent authorization to work on Sundays and public holidays for various activities. In addition, the ordinance removed the need for authorization to work on public holidays in commerce to be done through a collective bargaining agreement.

However, Ordinance 3,665/23, issued by the Ministry of Labor and Employment and published on November 14, revoked the permanent authorization to work on public holidays for various sectors of commerce. They are:

• fish retailers;
• retailers of fresh meat and game;
• fruit and vegetable retailers;
• poultry and egg retailers;
• retailers of pharmaceutical products (pharmacies, including handling of prescriptions);
• trade in regional products at hydro-mineral resorts;
• trade at ports, airports, roads, and bus and train stations;
• commerce at hotels;
• commerce in general;
• wholesalers and distributors of industrialized products;
• dealers in tractors, trucks, cars, and similar vehicles;
• retail trade in general; and
• markets, retail supermarkets, and hypermarkets, whose main activity is the sale of food, including the transportation inherent to them.

With the revocation of the authorization, these sectors of commerce must once again negotiate with the professional unions so that their employees can work on public holidays.

Work on Sundays, on the other hand, remains authorized for commerce in general, under the terms of article 6 of Law 10,101/00. There has been no change in this respect.

The sectors of commerce listed above, therefore, in addition to complying with the specific legislation in force, must exercise greater caution in collective bargaining to ensure that they can also operate on public holidays.

If there is no express authorization through a collective bargaining agreement negotiated with the professional union, working on public holidays in these sectors of commerce exposes companies to penalties in the event of an inspection, including payment of an administrative fine.

Category: Labor and employment

With the publication of the full decision of the Federal Supreme Court (STF) regarding the Court's new understanding of compulsory union dues, the theory is clear - or almost: the right to object is guaranteed at the meeting. However, one practical question remains: how should this objection be formalized?

Almost two months ago, at the beginning of September this year, the STF concluded the judgment of the motions for clarification in ARE 1018459 - topic of general repercussion 935. The Court decided by a majority vote that compulsory union dues to trade unions are constitutional, as long as the right to object is preserved, which we commented on in a recent article.

In the meantime, there was suspense: some experts and organizations questioned whether the Court would rule on the form of objection or whether, in addition to the legislation, it would bring in new rules on compulsory union dues.

Published on October 30, 2023,^[1], the STF ruling details the factual and legal reasons for the change in the majority position of the justices. Central to this decision was the incorporation of Justice Luís Roberto Barroso's opinion - which addresses the right of objection - into the opinion delivered by the reporting judge Justice Gilmar Mendes, who was responsible for leading the 180º turn on compulsory union dues at the STF.

According to Justice Barroso, the employee must be guaranteed the right to object to the payment of the union dues, which will be dealt with in a meeting "with a guarantee of ample information about the collection and, on that occasion, the worker is allowed to object to that payment".

In addition, Barroso explains the contrast between the opt-out of objections and the express and individual authorization previously affirmed by the Court: "the logic is reversed: as a rule, the charge is allowed and, if the worker objects, it is no longer charged."

In other words: the right to object must take place at the employers' or professionals' meeting, when the terms of the collective bargaining agreement previously announced in the call notice will be debated. Also to be discussed is how stakeholders can contribute to the cost of collective bargaining (which usually covers fees, compensation, and the maintenance of labor unions' administrative activities).

With the publication of the alternative solution designed by Barroso, the right to object will now be debated, and exercised, at the time of the meeting. Among the labor unions, there is already a debate: if the employee expresses his refusal to pay, but is voted down by the majority in the meeting, would he then have exercised his right to object and start contributing, like everyone else, to the costs of the negotiation?

Could the class, at the time of the meeting, vote to receive "in real time" the now well-known letters of objection, signed by those who prefer to exercise their right to oppose the charge? These and other questions hang in the balance without a clear guideline.

Companies still have doubts about how to proceed

If organizations and those they represent are looking for a consensus, companies are looking for answers on how to proceed with payroll deductions and, especially, how to adapt to the STF's decision in this new reality of labor union funding in Brazil.

The path that honors the sovereignty of collective decisions in meetings seems right to us. In it, members of the economic and professional categories can exercise their right to object to a vote, with the will of the majority and the joint autonomy of those present prevailing. It is essential to communicate the meeting's decision to the participating companies so that they can proceed with the discounts.

However, it is essential that the right to vote - and to objection - in a meeting be harmonized with the right of free association, i.e.: in cases where only members are allowed to object in resolutions, the same opportunity must be given to non-members, even if at a later date.

In addition, if the community chooses to ensure the right to object by means of a letter or written notice that identifies the individuals opposed to paying the union dues, it also seems reasonable to us that this collective will should prevail. This expression of the will of the majority can be incorporated into the collective bargaining agreement to regulate the cost of negotiations.

In an attempt to clear the way, the Attorney General's Office filed a motion for clarification of the STF's ruling in order to remedy omissions in the following areas:

• softening of the effects of the decision in order to delimit from when on the collection can be done;
• prohibition of third-party intervention in the right of objection; and
• the reasonable level for setting the union dues.

The analysis of these and other motions for clarification is pending, but there are undoubtedly new perspectives and heated debates ahead on financial support for labor unions in Brazil. Until a consensus is reached, it is important that the debates reflect a joint commitment to defending the interests of the majority of those who will be affected by the decision.

^[1] ARE 1018459 RG / PR, decision published on October 30, 2023.