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July 15, 2020

Law No. 14,020/2020: Conversion of Provisional Measure No. 936 and other provisions

Labor

Law No. 14,020/2020, published on July 7, 2020, originated from Provisional Measure No. 936 (MP No. 936), regulates the adoption of measures for proportional reduction of working hours and salary and for temporary suspension of the employment agreement during the state of calamity resulting from the COVID-19 pandemic.

We have already analyzed in a prior newsletter the original content regarding MP No. 936. Hence, this newsletter is dedicated to the main innovations brought by Law No. 14,020/2020 in labor matters.

Law No. 14,020/2020 allows the execution of an individual written agreement to suspend the employment agreement or to reduce working hours with proportional reduction of salary based on (i) the gross revenue earned by the employer in the calendar year 2019, and (ii) the salary range of the employee as follows:

  • Employer with a gross revenue in the calendar year 2019 higher than BRL 4.8 million: individual agreement is allowed to employees with salaries of up to BRL 2,090 (before it could be performed with employees with salaries of up to BRL 3,135).
     
  • Employer with a gross revenue in the calendar year 2019 equal to or lower than BRL 4.8 million: the original rules of MP 936 were maintained, which means that individual agreement is allowed to employees with salaries of up BRL 3,135.
     
  • “Hipersuficiente” employee (i.e., holder of a university diploma and that currently receives a monthly salary equal to or higher than BRL 12,202.12): individual agreement is allowed, regardless of the gross revenue of the employer in the calendar year 2019.
     
  • Employees who do not fit any of the alternatives above: individual agreement for a 25% salary and working hours reduction is allowed. Different levels of reductions must be performed through a collective bargaining agreement negotiated with the union.

Other situations in which the Law allows individual written agreement:

  • When the total amount received monthly by the employee is kept: In case of proportional reduction of working hours and salary or temporary suspension of the employment agreement when the individual agreement negotiated does not result in a reduction of the total amount received monthly by the employee, including in this amount (i) the Emergency Benefit paid by the Government (Emergency Benefit), (ii) the monthly allowance offered/paid by the employer and, (iii) in case of working hours reduction, the salary paid by the employer due to the remaining working hours.
     
  • Retired employees: Employees who are already retired in accordance with the Brazilian rules and receive the retirement benefit from the Government, but continue to have an active employment agreement, are ineligible to receive the Emergency Benefit. However, the employer may still adopt the measures for proportional reduction of working hours and salary or temporary suspension of their employment agreement through an individual written agreement if, in addition to the requirements mentioned in the items above for authorization of the execution of an individual written agreement, the employer pays a monthly allowance with the following conditions: (a) the amount of the monthly allowance must be at least equivalent to the amount of the Emergency Benefit that the employee would receive if he/she was not retired; (b) in the case of an employer with a gross revenue higher than BRL 4.8 million in the calendar year 2019, the amount of the monthly allowance must be at least equal to the sum of the amount mentioned in the previous item (a) and the amount equivalent to 30% of the employee's salary.

If after an individual agreement is signed, a collective agreement is executed with the employees’ union and has clauses that conflict with those of the individual agreement, the following rules must be observed:

  • The rules of the individual agreement apply in relation to the period prior to the collective agreement;
     
  • As of the effective date of the collective agreement, the individual agreement applies only in relation to the conditions that are more favorable to the employee.

Law No. 14,020/2020 establishes that the Government has the prerogative to extend the maximum periods of adoption of such measures: (i) the suspension of the employment agreement and (ii) the reduction of working hours and salary.

Therefore, on Tuesday, July 14, 2020, Decree No. 10,422/2020 was published on this regard. The maximum period for the suspension of the employment agreement was extended by 60 days, and the maximum period to reduce the working hours and salary was extended by 30 days.

Consequently, the maximum period for using the suspension of the employment agreement or the reduction of working hours and salary, or both alternatives in a combined way, is 120 days.

The Emergency Benefit was also extended, but there is no guarantee of payment, because Decree No. 10,422/2020 conditioned it to Government’s budget availability.

In relation to the job stability period of the employees as a result of the adoption of one of such measures, Law No. 14,020/2020 added specific provisions for pregnant employees and employees with disabilities:

  • Pregnant employees: the job stability period of Law No. 14,020/2020 will only start to count after the end of the job stability period already guaranteed to pregnant employees by our Federal Constitution. Hence, after the end of the period of 5 months after the delivery of the baby, the employees will still be entitled to the job stability period of Law No. 14,020/2020.
     
  • Employees with disabilities: the termination without cause during the state of public calamity is prohibited.

Law No. 14,020/2020 also establishes that the Government will not be responsible for the payment of severance/indemnification to employees who are terminated because the activities of the employer is paralyzed or suspended by a municipal, state or federal authority determination issued to confront the state of public calamity and the public health emergency arising from the novel coronavirus.

We are available to discuss the developments of these measures, considering the company needs and specific cases to assist with the implementation that best suits your organization.

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