The Application of Brazilian for Employee Hired to Work Abroad - From MHM Advogados

The Application of Brazilian for Employee Hired to Work Abroad - From MHM Advogados

Chamber Member News Post Date: 07/26/13 Source: Madrona Hong Mazzuco Brandão – Sociedade de Advogados By: Matheus Cantarella Vieira and Priscila Carbone

Faced with the globalization of the labor market, when companies based in other countries or multinational companies use Brazilian labor, it is necessary that the legislator pay attention to issues relating to this type of contract from a legal perspective.

For a long time the rule was the use of the territoriality criterion. The foundation was as much legal (article 198 of the Convention on Private International Law in Havana – 1928 – the Bustamante Code) as Jurisprudential, as per the previous Precedent No. 207 of the Superior Labor Court (TST), whereby "the labor legal relationship is governed by the laws in force in the country where the service is rendered, and not by those of the place of employment.”

With the modification of Law No. 7,064/82 through the edition of Law No. 11,962 of 2009, and the cancellation of the Precedent No. 207 by TST in the year of 2012 (via resolution No. 181/2012), employment agreements are now drawn up on the basis of the most favorable terms to the employee i.e. the legal employment relationship will only be governed by the laws of the country where the services were rendered when this law brings greater benefits to the employee when compared to the Brazilian law.

Law No. 7,064/82 regulated the transfer of workers from engineering companies to other countries. It so happens that it used to bring great legal uncertainty to the matter since there was a division in the doctrine: a school of thought understood that the norm would only subject those individuals specifically in the engineering field, there being no cause to apply this to workers in different fields. A second school of thought understood that, in the absence of a specific rule for the remaining workers transferred abroad, Law No. 7,064/82 should be applied by analogy.

The new wording of article 1st of the Law No. 7,064, 1982, brought the following determination: "This law regulates the situation of workers hired in Brazil or transferred by their employers to provide services abroad.”

There is an understanding that the law refers to two situations, namely: that the worker starts the activity in Brazil and is then transferred abroad, to which the most favorable legislation applies (article 3rd, II, of the Law No. 7,064/82); and that the employee is hired directly by a Brazilian or foreign company to work abroad, a situation in which the territoriality principle used to be applied (article No. 14 of the Law No. 7,064/82).

In light of this change, the Ministers of the TST have been applying the Brazilian legislation to the contracts of workers transferred abroad because it is more beneficial to the employee, thus ensuring rights such as 13th salary and proportional vacation, not to mention the collection of FGTS and INSS.

It so happens that, contrary to what the Ministers of the TST intended, in addition to burdening even more the employers – which will have to pay for the rights provided for in the Brazilian legislation (INSS and FGTS payments, for instance) and for those acquired by the employee after his/her transfer.

Regarding to the additional payment for relocation in these cases, there is also no consolidated understanding in the labor field. While article 4th of the Law No. 7,064/1982 provides that "Upon a written agreement, employer and employee shall determine the values of the base salary and the additional payment for relocation”, article No. 469, §3rd, of the Brazilian Labor Code (CLT), determines an additional payment that should never be less than 25% of the salary that the employee used to be paid.

For this reason, it is understood that, despite the possibility of agreement between the parties, the minimum 25% rate established in the law should always be respected, safeguarding the principle of the salary irreducibility (article 7th, VI, of the Federal Constitution).

It is important to note that such situation must be examined on a case-by-case basis because, in the event that the foreign law is the most beneficial to the employee, the latter should be applied, in accordance with item II, of the article 3rd, of the Law No. 7,064/82.

Another matter brought by the recent changes is in relation to the application of labor law in a period of time. The understanding is that the employment contracts covenanted before this new law published in 2012 remain unchanged, since the principle of non-retroactivity of laws is well established.

Finally, it is important to note that, despite the application of the Brazilian law to employment contracts to be performed abroad, the same should not occur with regard to the Brazilian collective labor standards. This is because the foreign company has never been part of this collective relationship, to the extent that such rules are only applicable in the Brazilian national territory. Furthermore, these are rules of territorial scope and their applicability is restricted to the location where the services are rendered, with each union having its own territorial basis, according to article 8th, II, of the Federal Constitution.

For all of the above, employers should make decisions carefully, identifying all the risks inherent to the transfer of their employees, particularly studying the laws of the country where the services will be rendered and never failing to comply with the obligations established by the Brazilian law.