Publications

Category: Labor and employment

Published with the objective of mitigating the economic losses resulting from the covid-19 pandemic, Executive Order No. 927/20, of March 22 (MP 927/20), also sought to ensure compliance with the constitutional principles of a broad defense and adversarial proceeding to companies, established in article 5, subsection LV, of the Federal Constitution of 1988.[1]

In its article 28, MP 927/20 provides for the suspension of procedural deadlines for filing defenses and filing appeals in administrative proceedings arising from labor assessments during the 180-day period. The suspension order covers administrative proceedings arising from labor infraction notices and FGTS (Guarantee Fund for Time of Service) deficiency notices under the purview of the Ministry of Economy.

The measure ensures compliance with the rule set forth in subsection LV of article 5 of the Federal Constitution of 1988, which is fully applicable to administrative proceedings, in which the parties have the right to a broad presentation of evidence, regardless of which type, and may even request the designation of a hearing for oral evidence.

Moreover, according to the changes introduced in the Consolidated Labor Laws (CLT) by Executive Order No. 905/19, which instituted the Green and Yellow Employment Contract, the review of defenses and administrative appeals must be performed by a different federative unit from the one that issued the infraction notice, per the criterion of deterritorialization.

It should also be noted that the Ministry of Economy does not have an electronic filing system for sending defenses and administrative appeals, such that the filing of briefs must be done in person by the company, preferably at the office responsible for the assessment, or by sending correspondence through the Post Office.

For the filing of briefs, it is necessary to travel, either to go to the office of the Ministry of Economy, or to go to a branch of the Post Office. In the latter case, considering the measures adopted to contain the disease, there are post offices that are not even operating.

Faced with the current situation of social distancing and considering the decree of public emergency due to the coronavirus pandemic, it is extremely difficult to guarantee the regular processing of administrative proceedings, such that the applicable procedures and constitutional guarantees assured to the companies assessed are observed.

For this reason, suspension of the procedural deadlines for filing a defense and lodging appeals in administrative proceedings arising from labor assessments and FGTS deficiency notices is of paramount importance.

However, MP 927/2020 does not set forth situations to be observed in the case of ongoing inspections under the purview of the Ministry of Economy. It is necessary for companies to enter directly into contact with the respective labor inspectors to determine what position will be adopted on a case-by-case basis. Despite this circumstance, which has not been adequately addressed by the executive order, assessments arising from the ongoing inspections are suspended.

In addition, MP 927/20 also promotes changes in the conduct of labor inspectors with the Ministry of Economy within 180 days of its publication. In accordance with article  31 of MP 927/20, it shall be incumbent upon these public officials to provide guidance regarding the irregularities found during this period. This means that if any irregularity is found, the tax auditors should advise the companies on how to remedy it before an assessment is issued.

The exceptions to this rule, which allow the issuance of infraction notices within 180 days after the plan, are provided for in subsections I to IV of the same provision: (i) lack of employee registration, based on complaints; (ii) situations of serious and imminent risk, only for the irregularities immediately related to establishing the situation; (iii) occurrence of a fatal work accident as a result of an inspection procedure performing accident analysis, only for the irregularities immediately related to the causes of the accident; and (iv) work in conditions analogous to slavery or child labor.

Such a determination is of extreme importance, considering that, in the current circumstance, companies are facing innumerable difficulties in conducting their activities, focusing, in the first place, on the health of their employees to the detriment of attending to legal formalities that may be considered unnecessary or put in second place at least at this moment.

Thus, given that the current situation may make it impossible for companies to comply with certain rules as a result of force majeure, the provision set forth in article 31 of MP 927/20 is extremely reasonable, especially in view of the fact that serious infringements committed by companies will continue to be monitored by the Ministry of Economy and will lead to the issuance of infraction notices.

[1] “LV - to litigants, in judicial or administrative proceedings, as well as defendants in general, are guaranteed the right to an adversarial proceeding and a broad defense, along with the means and appeal inherent thereto;”

Category: Public and regulatory law

“We have before us an ordeal of the most grievous kind.
We have before us many, many long months of struggle and of suffering.”
Winston Churchill

A comparative analysis of the curves of the number of infected and the mortality of the new coronavirus (causing covid-19) allows for no other conclusion than that Brazil will be one of the countries most seriously impacted by the pandemic. The effects will be potentially devastating for the affected populations, for the Brazilian economy and, above all, for the Unified Health System (SUS) and its capacity to absorb new patients, which, judging by the official authorities' statements, may collapse within the next few weeks.

In the face of such exceptional circumstances, public law will play a central role, on the one hand, in the treatment of the public health crisis and, on the other, in tackling the economic crisis.

As for the fight against the virus, the main legal document conceived thus far is Law No. 13,979, of February 6, 2020 (the Coronavirus Law). With the escalation of the outbreak, however, the instruments provided for in it had to be revised, standardizing guidelines for application throughout Brazil and expanding its scope.

The amendment to the Coronavirus Law came through Executive Order No. 926, of March 20, 2020 (MP 926), and its constitutionality has even been recently confirmed in limine, under ADIn 6.341/DF. Among other provisions, MP 926 introduced paragraph 8 to article 3 of the law, ensuring that any measures adopted within the scope of combating and tackling covid-19 should safeguard the exercise and functioning of public services and essential activities.

The provision was simultaneously regulated by Decree No. 10,282, also of March 20, 2020 (the Coronavirus Decree). The regulation determines that the containment actions established in the Coronavirus Law may not impact on essential public services, activities that are essential and indispensable to meet the unavoidable needs of the community, that is, without which the survival, health, and safety of the population are in danger, including the respective chains of related, supporting, and ancillary activities.

The list of activities qualified under the decree involves, among others: (i) health assistance; (ii) social assistance; (iii) public and private security; (iv) national and civil defense; (v) passenger transport, including apps; (vi) telecommunications and internet; (vii) sanitation; (viii) energy generation, transmission, and distribution; (ix) public lighting; (x) cargo transport, including delivery services through electronic commerce; (xi) air, water, and land traffic control; and (xii) capital and insurance markets; without prejudice to other activities that the Crisis Committee for Supervision and Monitoring of Covid-19's Impacts may define as essential.

The decree comes at a good time, inasmuch as the profusion of normative acts promulgated at the three levels of the Federation, aimed at declaring public health emergencies, encouraging social isolation, restricting public activities, and services, threatened to stifle private providers of essential activities with regulatory uncertainties that, at the limit, threatened to paralyze providers mesmerized by such regulatory hypertrophy.

As a general rule, the Coronavirus Law now provides that "limitations on public services and essential activities, including those regulated, granted, or authorized may only be adopted via a specific act and provided that it is in prior coordination with the regulatory agency or the Granting or Authorizing Power" (article 3, paragraph 6).

MP 926 also qualified the bidding waiver arrangement provided for in the law for purchases related to the pandemic, (i) clarifying that the goods acquired need not be new, provided that their conditions of use are guaranteed by the supplier; (ii) dispensing with the preparation of preliminary studies, in the case of common goods and services, and allowing the submission of a simplified reference term sheet or basic plan, in the case of more complex goods and services; (iii) reducing by half the terms for the acquisition of goods and services by electronic or in-person auction; and (iv) increasing the margin for the Government to provide for additions or deletions to the subject matter contractually agreed upon up to 50% of the initial value.

In addition, the scope of the exemption from bidding provided for in the law was extended to include engineering services, including suppliers who are declared to be unfit to contract with the Government (provided that they are, demonstrably, the only possible suppliers for the goods or services to be acquired), or even those that cannot prove good tax or labor standing or other requirements to qualify for the public bidding process, in the event that there is restriction on possible suppliers.

The measure opens the path for contract engagements with contractors for the construction, renovation, and expansion of hospitals, adaptation of other public equipment for the creation of new beds, and other measures to remedy or mitigate the imminent collapse of the SUS. Waiver will also be essential for the purchase of ventilators (even if used), reagents for testing, personal protective equipment, drugs, R&D inputs for vaccines, new drugs, or even for the secondary use of existing drugs.

Another important, albeit delicate, instrument provided for in the Coronavirus Law is administrative requests, which may support, as long as the crisis continues, the use by the Government of private initiative resources, such as hospitals, beds, hotels, cruise ships, stadiums, clubs, and sports venues, in addition to surgical masks, hospital aprons, or antiseptics for hygiene. Services such as technical training for the use of new equipment and medical/hospital services in general may also be subject to administrative request. It is essential to emphasize that the measure must be justified, strictly linked to the fight against the pandemic, and must guarantee subsequent compensation to those from whom the goods or services were requested, even if the valuation of this compensation is a potential source of future conflicts.

Other instruments are gradually being designed against the economic aspects of the crisis. The first sector to receive emergency treatment was civil aviation, for which Executive Order No. 925 (MP 925), of March 18, 2020, was promulgated. The measure sought, on the one hand, to guarantee some financial relief to airports subject to concession by the federal government, allowing any fixed and variable contributions (particularly the amounts due by way of a concession), due throughout 2020, to be paid by the end of the year. On the other hand, MP 925 guaranteed airlines the possibility of reimbursement within 12 months for tickets impacted by the pandemic.

Other measures have already taken shape, such as deferment of payment of federal taxes (especially under the Simples tax arrangement, under the terms of Resolution 152 of the Simples Nacional Management Committee) or the plan to combat the crisis conducted by BNDES, involving the full suspension, for six months, of payment of interest and principal on direct and indirect transactions with the bank or expansion of credit for working capital for micro, small, and medium-sized enterprises.

Another relevant measure was the publication of Legislative Decree No. 6/20, which, according to article 65 of the Tax Responsibility Law, recognizes the state of national public emergency, with the objective of relaxing budgetary rules and attaining tax results in order to boost the strategic allocation of public resources against the crisis.

It is clear that the government’s medicine toolbox is gaining strength to combat covid-19 in all its respects. It is imperative, however, that the remedies be managed well, effectively, vigorously, and wisely. The undersizing of the dosage, as much as the abuse thereof, will have disastrous consequences. Beating the virus is now a national priority, however long and arduous the path to victory may be. As Winston Churchill recalled in his first speech as Prime Minister, having been appointed precisely to combat a colossal threat to world civilization, "without victory, there is no survival."

Category: Labor and employment

Executive Order No. 927/20 (MP 927/20) provided in its article 13 that, during the state of public emergency in Brazil due to the covid-19 pandemic, employers may accelerate federal, state, district, and municipal non-religious holidays, upon written or electronic notice to employees, at least 48 hours in advance. The holidays advanced must be expressly stated in the notice.

In order to accelerate religious holidays, the employee's agreement is required, as its formalization by a written individual agreement.

The discussion regarding possibility of accelerating holidays and the impact this may have on the economy is not new. According to data released in 2014 by the U.S. human resources consultancy Mercer (and used until today for statistical purposes), Brazil is the seventh country in the world with the most holidays, along with South Africa, Peru, and Greece, totaling 12 national holidays. First are Colombia and India, with 18 national holidays each, and second are Thailand, Lebanon, and South Korea, with 16 national holidays each.

Also according to Mercer, a country's productivity is directly linked to the number of holidays it has: the higher the number of holidays, the lower the productivity. Given the possible impacts that holidays may have on the economy, Brazil has already put the issue on the agenda on several occasions.

In 1985, the government of President José Sarney published Law No. 7,320, mandating the acceleration, to Mondays, of holidays that fall on other days of the week. The exception were those on Saturdays and Sundays and on January 1 (Universal Brotherhood), September 7 (Independence), December 25 (Christmas), Good Friday, and Corpus Christi. The law was repealed in 1990, under the Collor government, by Law No. 8,087.

Almost 35 years later, in 2019, the Education, Culture and Sports Commission approved a bill proposed by the Senate, PLS 389/16, mandating the commemoration, via acceleration, on Mondays, of holidays that appear on the other days of the week, with the exception of those that occur on Saturdays and Sundays and on January 1 (Universal Brotherhood), Carnaval, Good Friday, May 1 (Labor Day), Corpus Christi, September 7 (Independence Day), October 12 (Our Lady of Aparecida, Patroness of Brazil), and December 25 (Christmas), that is, basically in the same terms provided for by Law No. 7,320/85. The explanatory memorandum on PLS 389/16 has been forwarded to the Chamber of Deputies, where it awaits consideration.

The justification for acceleration of holidays in the three measures is the same: to minimize the impact on the functioning of companies, to the employment of workers, and to the collection of taxes, bearing in mind that holidays lead to a reduction in work days for the production and marketing and sale of goods and services, especially in a pandemic situation, when a great part of the activities were interrupted and/or readapted to minimize the risk of contagion and spread of covid-19.

This is an advantageous measure for companies, especially those waiting for a significant increase in the volume of work after the period of public emergency, as in the case of replenishment of inventories, provided that the acceleration of holidays is strictly observed by both employees and employers, avoiding the lack of double work.

Category: M&A and private equity

The covid-19 pandemic is becoming more and more perplexing as society and market players realize the extension of its effects on the economy and the business environment globally. This article seeks to address the impacts caused by this crisis on the group of merger and acquisition transactions apparently most affected, to wit those for which contracts have been signed, but the deal itself has not yet been completed. These are transactions in the so-called interim period, which begins with the signing of the share purchase agreement and ends with the closing of the deal, by transferring the shares of the target company to the purchaser and paying the purchase price for the shares to the seller.

If, on the one hand, the transactions still in the negotiation phase allow the parties to mitigate, allocate, and price the risks in accordance with the new economic conjuncture in order to make the business viable, on the other hand, the transactions that are between execution and closing are in a more delicate situation. The parties are already contractually committed, but have not yet closed the deal. This means that funds have to be disbursed and risks have to be assumed that are no longer compatible with the current reality. In this context, the provisions on conducting business and the provisions on material adverse changes (MAC) become even more relevant and deserve closer analysis.

The conduct of business provisions essentially seek to ensure preservation of the asset and ensure that the seller’s management does not adopt measures that affect fundamentals and destroy value of the target business. Such provisions establish that the conduct of business during the interim period must occur within the limits of the ordinary course of operations. The first issue that arises is whether, in a disruptive pandemic scenario like the current one, preservation of the business by the target company might depend on measures that could be classified as outside the ordinary course of business. The crisis will probably require much more than everyday measures.

In this case, a literal interpretation of these provisions would limit the seller and the management of the target company to taking only day-to-day measures, which could be fatal for the business and therefore insufficient to achieve the parties’ purpose. On the other hand, a contextual analysis of the provision allows management to adopt extraordinary measures, outside the ordinary course of business, as long as they are justified as necessary for the continuity of the business and preservation of the value of the target company.

At first, it could be argued that it would be sufficient for the seller and the management of the target company to seek the prior consent of the purchaser in order to adopt such extraordinary measures. However, the reality of a crisis requires agility in decision-making. Submitting such decisions without limitations to the purchaser would increase the risk of gun jumping, which is an element that receives constant attention in the drafting of these clauses. This is because there is always the concern with avoiding that such restrictions, vetoes, and rights granted to the purchaser in the interim period represent effective interference in the business, exchange of sensitive information, or other circumstances deemed harmful from a competition law standpoint.

However, faced with an extraordinary scenario like the current one, in which the company’s management must make difficult and perhaps unprecedented decisions in order to preserve it, it would make sense for the purchaser to participate more actively in these decisions. In this sense, just as the Brazilian Securities and Exchange Commission (CVM) relaxed some rules provided for in the capital market regulations in order to reduce the economic impacts of the pandemic on public offerings of securities, an action by the competition authorities to limit the scenarios where gun jumping will be found in these extraordinary circumstances would be welcome.

At the opposite extreme of the efforts to preserve transactions between signing and closing, it is necessary to consider the right of the acquiring party to not complete the transaction in the case of events that adversely affect the business. This right is usually provided for in the so-called MAC clauses, related to what is defined in the purchase and sale contract as being a materially adverse change, the occurrence of which, between the signing and the closing of the transaction, allows the purchasing party to choose not to close the deal.

These clauses often establish objective criteria to establish MAC, as a value or percentage of the purchase price as a reference for the losses incurred, above which the purchaser may exercise the right not to close the deal. In the same manner, exceptions to this right are often made in cases such as war, cataclysm, and natural disasters, among others. In such cases, the risks are allocated on the purchaser's side, who will not have the right to withdraw from the deal should any of these exceptional events occur. The qualification of the covid-19 pandemic as a scenario or exception to the MAC clause should be examined on a case-by-case basis. If there is deadlock, the parties should ideally seek a consensual solution, avoiding the transaction to be left on hold until the end of judicial or arbitral litigation. Given the seriousness of the economic crisis ahead, the target company itself may not survive a long period of judicial or arbitral dispute between purchaser and seller.

Among the impacts of covid-19 on contractual relations in general, it is possible to anticipate an intense debate regarding the occurrence of acts of God or force majeure, as well as claims for excessive burdensomeness or economic rebalancing of the contract. In the universe of merger and acquisition transactions, MAC clauses give a very particular tone to these debates, when inserted into share purchase and sale contracts. Undoubtedly, the wording of each MAC clause will be crucial for each specific debate. However, it is important to remember that the Civil Code exempts debtors from damages resulting from acts of God or force majeure, as long as the debtor has not expressly assumed liability for them (article 393). The Civil Code also limits termination of contract due to excessive burdensomeness to contracts of continuous or deferred performance (article 478).

It is also important to briefly examine the possible impacts of covid-19 on the transfer of control of publicly-trade companies, especially in relation to the obligation to carry out a public tender offer (OPA) to minority shareholders. An OPA is a condition for the effectiveness of the transaction to transfer control and seeks to give equal or equitable treatment to minority shareholders as to sharing the control premium. Therefore, transactions for transfer of control that were entered into before the impacts of covid-19, but that still require the performance of an OPA to minority shareholders impose a very challenging situation on the purchasers, since they will have to pay to the minority shareholders a price per share between 80% and 100% of the amount paid to the controlling shareholders in a scenario of acute deterioration of the values of the assets.

It is important to emphasize that the application for registration of the OPA with CVM must be submitted within a maximum period of 30 days from the execution of the contract related to the transfer of shareholding control (IN CVM 361, article 29, paragraph 2). This deadline prevents fulfillment of the condition from being implemented in a more prolonged manner, which is ideal in the current situation of widespread uncertainty. In the case of transactions in which the OPA has already been published, CVM regulations allow for modification thereof, without the need for authorization from the agency, provided that it is for the benefit of the recipients. Any other change requires prior authorization from CVM (CVM IN 361, article 5). These are examples of situations that will require sensitivity from the regulator, and it is advisable to make the rules more flexible, as has already occurred in relation to other rules.

In the current crisis scenario, full of uncertainties, it is essential that all those involved in mergers and acquisitions be aware of the actual and potential impacts on each transaction. Efforts to minimize them depend not only on authorities and regulators, but also and above all on common sense, creativity, and legal intelligence applied by the parties and their advisors until normality is restored.

Category: Labor and employment

Within the package of measures promulgated by the federal government on March 22 (Executive Order No. 927/20 (MP 927/20) to change labor relations guidelines in Brazil during the covid-19 pandemic, three articles directly amend the rules on workplace health and safety.

According to article 15 of MP 927/20, the obligation to conduct occupational, clinical, and complementary medical examinations is suspended during the state of public emergency referred to in article 1 of the order. They should be carried out, however, within 60 days after the end of the emergency period. Examinations upon dismissal, in turn, will be maintained in all cases of dismissal without cause and performed within ten days of the date of termination. The exception is workers who have undergone a periodic examination within 180 days prior to the date of dismissal. The previous period was 90 days for companies in risk groups 3 and 4 of Regulatory Standard (NR) 4 and 135 days for risk groups 1 and 2 of that same standard.

According to paragraph 2 of article 15, the doctor responsible for the company's Occupational Health Program may ask workers to undergo such examinations, in cases where he finds that extension of deadlines may pose a risk to their health.

This is a common sense measure, in line with the other measures contained in MP 927/20, since the current situation demands social distancing and it would not be prudent to maintain the obligation to undergo non-urgent examinations during a period of public emergency.

Another point of special attention changed by MP 927/20 was suspension of the requirement for mandatory training for some activities, such as the training provided for in NR-12, 13, 18, 20, 23, 33, 35, and 36, which we cite as examples. During the exception period, therefore, specific training for working at heights, in confined spaces, with combustibles and flammables, in boilers, or with pressure vessels, as well as the mandatory training on fire prevention measures, are suspended. Employers may, however, provide distance learning courses on these subjects, as long as they confirm the relevance of the programs, as required by paragraph 2 of article 16 of MP 927/20.

Any accidents in activities considered to be "risk activities" may generate strict liability on the part of employers, and it is incumbent on them to prove the exclusive fault of the victim. In such cases, lack of mandatory training during the calamity period cannot be used as an argument for exemption from liability.

Therefore, it is advisable to review this article of MP 927/20 with caution: employers must confirm which training courses they will not be able to offer remotely and perform them within 90 days of the end of the public emergency period, as provided for in paragraph 1 of article 16 of MP 927/20.

Finally, in the chapter of MP 927/20 that deals with suspension of administrative requirements in occupational safety and health, the passage that may give rise to more doubts for employers is article 17. Per its wording, internal accident prevention committees (CIPAs) may be maintained until the end of the state of public emergency (i.e., terms of office that would end during that period may be maintained until it ends), and ongoing electoral processes may be suspended.

The first possible point of doubt relates to when job security begins and ends in processes that have already begun and in commissions that would end during the public emergency. This is because employees elected to the CIPA by their peers have job security from the moment of their candidacy until one year after the end of their investiture in the position.

Suspension of the electoral process does not invalidate it and is not a cause for interruption, that is, at the end of the period of the public emergency it will resume from the point where it was suspended. If candidacies have already been formalized, applicants may be considered to have job security throughout the public emergency period. In the same sense, the security of current members should be extended until the end of the public emergency period, even if their terms of office end earlier.

In an extreme situation, it is possible that, in the same period, there may be employees with job security because they are members of CIPA, with security because they are candidates in elections whose process has already begun, in addition to those who have security for the period after their term of office. This is an unusual situation that cannot be overlooked by companies.

The second doubt is generated by the word "may", since it may cause future discussion to leave it up to the employer to decide whether or not to maintain a CIPA when it would have its validity end during the emergency period and suspend the electoral process.

Numerous claims for discriminatory dismissal brought by employees before the beginning of the electoral process are nothing new. Assigning to the employer the power to suspend a new process may generate this type of claim if candidacies have not yet been registered.

The three articles are in line with the other measures of the federal government for this moment of crisis, but the doubts they raise may end up jeopardizing their adoption by employers.

Category: Labor and employment

Faced with the state of public emergency recognized by Legislative Decree No. 6, of March 20, and the public health emergency of international importance due to the rapid spread of the coronavirus (covid-19), the federal government published Executive Order No. 927/20 on March 22 (MP 927/20) to establish labor alternatives that may be implemented by employers to preserve jobs and income.

One of the measures brought in by MP 927/20 is suspension of the requirement for employers to withhold the FGTS for March, April, and May of 2020, for wages in April, May, and June of 2020, respectively. According to the new rule, companies will be able to pay these amounts starting in July of 2020.

This suspension of FGTS payment and deferral of payment reveals a concern on the part of the federal government with giving more flexibility to the cash flow of companies, not least in order to avoid the closing of their activities and mass layoffs. The measure applies to any employer regardless of:

• number of employees
• tax system
• legal nature
• branch of economic activity
• prior adhesion

In anticipation of the potential difficulty companies may have in paying the total amount at the end of the period of suspension of enforceability, MP 927/20 authorizes payment of the FGTS for the periods of March, April, and May of 2020 in up to six monthly installments. In this case, companies must observe the due date of the installments, which will coincide with the seventh day of each month, starting in July of 2020.

As it does not arise from default, but rather from a suspension of enforceability, the amount to be paid via installments will not be subject to the adjustment for inflation, penalties, and charges provided for in article 22 of Law No. 8,036/90.

The installment plan is available, in principle, to all employers, but, in order to enjoy this prerogative, they must necessarily declare, by June 20th of this year, information on the triggering events, calculation base, and amounts due as social security contribution.

The information provided will constitute a declaration and recognition of the debts arising therefrom, will constitute an acknowledgement of debt, and will constitute an adequate and sufficient instrument for the payment of the FGTS debt. In turn, amounts not declared shall be considered to be in arrears and shall be subject to the levying of a penalty and charges as per article 22 of Law No. 8,036/90.

Should termination of employment occur, the suspension of the enforceability of the FGTS payment will be understood to be terminated, and the employer will be obliged to proceed with payment of the corresponding amounts, without imposition of the penalty and charges set forth in article 22 of Law No. 8,036/90, provided that it is made within the legal period established for performance thereof, by the 7th day of the month subsequent to the month of accrual.

In the event of termination of employment during the installment payment period, any outstanding installments will have their maturity date advanced to the period applicable to the payment of the amounts for the month of termination and the month immediately preceding the one in which it has not yet been paid.

In an attempt to ensure that FGTS payments are effectively made upon the end of the suspension of enforceability thereof, MP 927/20 clarified that any default will result in the imposition of penalties and charges set forth in article 22 of Law No. 8,036/90, in addition to the blocking of the FGTS certificate of good standing, a document issued exclusively by Caixa Econômica Federal that proves the employer’s good standing.

Although MP 927/20 is not explicit regarding the starting date for the assessment of penalties and charges, we believe that it cannot have retroactive to the month in which the FGTS is due (March, April, or May), bearing in mind that, in view of the authorized suspension of enforceability, the obligation to pay the penalty only begins to exist after the deferment period.

Exceptionally, MP 927/20 also suspends the counting of the statute of limitations for FGTS contributions for a period of 120 days, counting from the date of entry into force of the executive order. This means that, during this period, the employee's five-year right to claim, in labor courts, differences arising from non-payment of FGTS contributions will be suspended.

Certificates of good standing issued before the effective date of MP 927/20 will have their terms extended by 90 days, and the current FGTS debt installment payments that have payments due in March, April, and May will not prevent the issuance of a certificate of good standing.