Grounds for Termination
In Brazil, employments are at will, meaning that any party may terminate the employment agreement without cause upon the mandatory prior notice and payment of the severance. It is not necessary to mention any reason for termination, except if it is termination with cause. The employer may terminate the indefinite term employment agreement at any time for any reason and the employee may also resign at any time for any reason as long as the notice period is observed, and the severances are paid. Termination with cause is the most severe sanction for an employee and results in the reduction of the employee’s severance entitlements. Also, the termination with cause is always an exemplary action before other employees. The employer should only terminate an employment with cause when the misconduct is foreseen by law and serious enough to justify such a severe sanction.
In what regards the fixed-term employment relationship, it may terminate exactly on the last day of such term or may end before it. If it terminates on the last day of such term, the employee will be entitled to the severance payments set forth by law. However, if the termination occurs before the fixed-term, there are alternatives regarding the severance that vary in accordance with the wording of the employment agreement.
Brazilian Labor legislation is silent about the concept of mass termination (collective dismissal). It is possible to infer that the employer may legally terminate all employments without cause, provided it pays all mandatory severance. In accordance with the Labor Reform, collective dismissal does not require prior negotiation with the union. However, mass termination is still a very controversial matter in Brazilian Labor Courts and depending on the industry and number of employees involved, a prior negotiation with the union may still be recommendable.
Since employment agreements are at will, an employer can terminate an employment agreement at any time, provided that the notice period is verified. Some employees cannot be terminated without cause due to temporary job stability: Union representatives; members of the Internal Committee for Accidents Prevention (CIPA); pregnant employees; and employees that have work-related accidents; among other situations that may be set forth in the applicable collective bargaining agreement.
Termination with cause and resignation are allowed even if an employee has temporary job stability. A termination with or without cause or resignation should be communicated to the other party in writing. No prior communication or requests of authorization to the employees’ union or Ministry of Labor are required to perform any type of termination.
The Labor Reform introduced a new type of termination called ”termination by mutual agreement’’ in which both parties decide to end the employment agreement.
Is severance pay required?
In Brazil, severance pay is mandatory, but the amount differs based on the circumstances, i.e. in case of resignation, termination by mutual agreement, without cause, and with cause of an indefinite term agreement and a fixed-term agreement.
Is a Separation Agreement required or considered best practice?
Brazilian Labor Law does not require a Separation Agreement. However, it may be considered good practice in the event of termination of a high-level employee/worker, which will be entitled to a special severance package beyond the severance payments determined by Brazilian Labor Law or by the contract executed between the parties. However, the Separation Agreement is not binding. Despite its unenforceability, the Separation Agreement has a moral effect upon the employee/worker and is very useful to avoid claims. If the employee/worker feels satisfied with the negotiation he/she will likely not file a claim after signing the Separation Agreement.
Remedies for employee seeking to challenge wrongful termination
There is no specific provision about wrongful termination in Brazil. However, since the Brazilian Federal Constitution prohibits any type of discrimination if an employee evidences that his/her termination has resulted from a discriminatory act, he/she may file a lawsuit against the company claiming reinstatement and moral damage indemnification.
There is no law regulating whistleblowing systems. The Brazilian Clean Company Act provides credits for companies that have implemented a compliance program. In this context, a whistleblowing channel is an important element of a compliance program. Internal policy should regulate it, establishing provisions about confidentiality, privacy, non-retaliation, among others. The Federal Constitution’s principles such as the right of privacy and intimacy, the protection of image and reputation, and non-discrimination rights should be complied with when implementing a whistleblowing program.