BRAZIL: Annual Update – Expected labour law changes in 2016
Monetary adjustment index
Monetary adjustment index: On August 4, 2015, the Brazilian Higher Labour Court (“TST”) declared that the use of the Reference Rate (“TR”) was unconstitutional. Therefore, damages awarded in labour claims should be adjusted according to the Special Extended National Consumer Price Index (“IPCA-E”). The court ordered: (a) that the IPCA-E should be used as from July 30, 2009, except for labour damages awards already paid and (b) the rectification of the Labour Justice Monetary Adjustment Table, in order to apply the IPCA-E, even though the decision had not yet become final.
However, on October 14, 2015, the Brazilian Supreme Court (“STF”) ordered the suspension of the effects of the TST’s decision. Consequently, the TR became applicable again but it is possible that in 2016 IPCA-E shall be applicable again. Action required: Companies that are making provisions for labour claims’ expenditure should review their estimated liabilities. Use of the IPCA-E will substantially increase the value of labour claims related liabilities.
Outsourcing
Permitted outsourcing of activities: In Brazil, outsourcing is lawful only if the outsourced services relate to the company’s non-core activities. There is an important leading case pending judgment at the Supreme Federal Court (“STF”) concerning this issue. The date of the judgment is not certain but it is expected to be issued in 2016.
This leading case is expected to set specific standards for identifying and defining a company’s core activity and, thus, the limits allowed for outsourcing functions.
Action required: Regardless of the outcome of the leading case, companies will need to review their outsourced activities to ensure compliance with the limits (whatever they are) proposed by this new ruling. It is likely to have a large impact on all fields of business.
New procedural rules for labour litigation
New Civil Procedure Code (CPC): With effect from March 18, 2016 a new Civil Procedure Code (“CPC”) will apply which will affect procedures in labour disputes. For instance, there will be changes regarding aspects of evidence, procedural agreements between the judge and the parties and injunctive relief.
Action required: As these changes only relate to judicial procedures/litigation, it is not expected that companies need take any specific action in advance. However, it will be important to understand the impact of these changes when the need arises.
Privacy
Draft of a new Data Privacy Law: This draft bill of law will directly affect employers as it will regulate how the employers handle employee personal data. Processing of personal data is not currently regulated in Brazil and the law will be an essential guide for employers in this area.
The likely effective date of this proposed new law is not yet known as it has yet to be presented to Congress.
Action required: As and when the new law is implemented employers will need to take immediate action to adopt appropriate policies in Brazil, including in relation to cross border data transfers among entities of the same group. Employers are advised to track the progress of the new law and anticipate its implementation.