Things to Consider Before Hiring Employees in Brazil

As the United States battles high unemployment rates amidst announcements of massive layoffs by the country’s largest employers, Brazil is experiencing the lowest unemployment rate in its history. The second largest country in the Americas ranks number one in expected job creation for the last quarter of 2011. Brazil has very strict labor laws, embedded in its Constitution as nonnegotiable fundamental rights. As a result, Brazilian workers enjoy many legal protections that would be considered perks in other countries. Such laws give rise to voluminous litigation in Brazilian Labor Courts, with around 2 million complaints filed every year. This article highlights some of the issues that employers may face when dealing with their workforce in Brazil.

Since labor laws are statutory in nature, labor contracts must fit squarely within their narrow parameters. Employment contracts cannot deviate from the law in any way that waives, releases, or circumvents a worker’s rights. Some employers get creative and choose to frame the relationship as that of an independent contractor, rather than an employee. However, structuring the relationship in that manner has little effect if a Labor court finds that the independent contractor was in fact performing activities of an employee as legally defined. Courts will consider variables such as work hours, place of work, subjectivity to the employer’s administrative rules, reporting requirements, and compensation, among others, in determining whether the individual is indeed an independent contractor or in fact an employee. Unfortunately for companies, courts tend to favor protecting the employee and usually grant whatever statutory benefit for which the individual has petitioned.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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