Brazilian labor laws – theory and practice

Author: Sirlei Pitteri

The ideological burden that Brazilian labor laws have endured along their 70 years of existence has been giving rise to hot debates among groups either favorable or contrary to adapting these laws into a heterogeneous job market, being modified by innumerous factors.

The most recent attempt to equalize the juridical apparatus of business reality was the approval of the Project of Law 4.330/2004 about labor outsourcing. Under strong pressure from some segments that objected to it, the project was forwarded to the senate, generating controversy between experts and entities that represented some sectors. The issue involved in the debate is to make job relations less rigid by means of outsourcing any business activity, so far classified as core business and secondary activities. Convincing opinions from both sides suggest two questions: Is it really necessary to make labor laws less rigid? Do labor laws ensure Brazilian workers’ rights?

The first question is easy to answer because it is known that making labor laws less rigid is necessary since the world has changed in these last 70 years, and labor relations today are quite different from those of the last century’s.

The second question is hard to answer, and this study tried to search for some elements to deal with that. Considering the preliminary data, it is already possible to answer ‘No’: labor laws do not ensure Brazilian workers’ rights. It suffices to follow the news about the growing unemployment and the increase of individual microentrepreneurs that make up the most dramatic stronghold of informal employment, now, with some refinement – the wishful thinking that the ‘pejotizados’ can count on their social rights being protected. So, these are wrong questions.

Another way to look into labor rights issues is to search for answers whether there is coherence between speech and practice. There is already a major contradiction between the 1988 Federal Constitution (FC) and Labor Laws. It is laid down in Article 1 of the FC that social values of work and free enterprise are fundamental principles of a Democratic State with Rule of Law; however, what is meant by ‘free initiative’ is not mentioned.

This assumption is reinforced in Article 170, which reads: […]“The economic order, founded on the value of human work and on free enterprise, is intended to ensure to all a respectful existence, as per the directives for social justice”[…]. However, in Article 7, which deals with the workers’ rights, 34 principles are listed to regulate free enterprises based on the preconditions of CLT (Consolidation of Labor Laws). Thus, one can conclude that there is a paradox between the expression ‘free enterprise’ and the juridical regulation, that is, employers and employees should be free to negotiate provided that the 34 principles of CLT should be complied with.

A second contradiction can be found between the two Brazils: the real Brazil and the Brazil existent in the collective imaginary. It is frequently stated that Brazilian problems would be solved if the government created a law to tax on large fortunes, making it clear that the inequalities of capital-work relations are promoted by business corporations. In other words, businessmen obtain profits by work exploitation. In thesis, this was true at the time of industrial revolution and gave rise to innumerous sociological studies.

We are now proposing to analyze the demography of the Brazilian workers catalogued in the Instituto Brasileiro de Geografia e Estatística (IBGE) – Brazilian Institute of Geography and Statistics – in 2013, to check on employers by size distribution (amount of employees) and by Brazilian geographical distribution.

More than two thirds (74%) of the 5.4 million Brazilian employers are micro and small businesses, and the formal job level of them is extremely low (30%). One can infer that a great part of this population is consisted of freelancers and self-employed professionals that appear in the statistics because they are registered at Federal Revenue as legal entity – the system of individual microentrepreneur (MEI), the taxation system of which is called SIMPLE (SIMEI).

All tax duties are calculated based on the microentrepreneur’s gross invoicing and the division of funds for the social protection system is done at federal level in compliance with the union-budget-based targets.

This trend has been strengthened in the last years as the 2016 FENACOM data point out that the number of individual microentrepreneurs (MEIs) has exceeded the number of micro and small businesses (MPEs). Since MEI was created in 2008, and up to 2016, over 5.7 million of individual microentrepreneurs have been made formal, that is to say, almost 20% more than the 4.7 million MPEs opened in the same period

The strategy of hiring self-employed professionals is being adopted by most companies in order to contract qualified people whose salaries are above the 10-minimum-wage limit or projects for a certain period of time. In colloquial language it is called ‘pejotização’, considered illegal by most legal experts.

Small companies’ percentage (up to 29 employees) is estimated to be around 97% of the total; medium-sized companies amount to 2.8%; and the big companies do not reach 0.4%. Small and medium-sized companies employ 30 million people; however, only 22 million have got their Labor Cards signed.

It is worth highlighting the difficulties that small entrepreneurs have in order to comply with the laws, mainly because their companies lack enough juridical structure; or, in most cases, they have no juridical structure whatsoever to follow the complicated and changing labor rules.

Thus, it is now possible to state that 97% of the Brazilian companies (micro and small) consider irrelevant to discuss the outsourcing based on core business and secondary activities. For this segment, all its business demands are core business, and labor rights do not catch up with them. Micro- and small entrepreneurs work whenever the market requires it: day period, night period, holidays, weekends… They do not have 40-hour-a-week benefits, nor paid holidays with the additional one-third bonus, and nor the Christmas bonus salary; besides, the participation on profits is uncertain because to generate income they depend on their own performance and the market forces.

What these data explain is that little attention has been given towards the labor rights inequalities, the roots of which lay in the very history of the Brazilian labor laws. Inequalities and differences, as labor and social rights are concerned, result from the selective way the labor legislation has been applied by the Brazilian State. Labor regulation by CLT followed the selective hedge model of the professional categories recognized back then – big companies’ workers, transport system operators, financial systems officers, and, mainly, public servants.

The Consolidation of Labor Laws (CLT) was created in 1943, when the Brazilian economic development was being planned, stemming from the industrial base expansion with public policies centralized in the federal government and focused on the development of infrastructures to serve the big industrial works. Such strategy did not result in creating a hegemonically industrialized country.

Article 170 of the Federal Constitution “[…] contemplates that the economic order shall be founded on the appreciation of the value of the human work and on free enterprise, and is intended to ensure to all a respectful existence, as per the directives for social justice” […]. Among the principles of the referred Article, we can highlight VII, VIII, and IX, which proclaim the reduction of regional and social inequalities; the search for full employment; and favorable treatment for small businesses.

Since the enactment of the 1988 Federal Constitution 30 years ago, Brazil still has not found a way to unlock the system at federal level and to decentralize the social and labor policies in accord with the job market reality, let alone with the regional specificities.

The economically active population (PEA) amounted to approximately 102.5 million people in 2013. If only 48 million formal jobs appear in the statistics, the formal job level is 46%. That is to say, more than half of the Brazilians available for work are out of the formal job system.

There is a lot to be done for the Brazil-of-the-laws to reach the Brazil-of-the-reality and for the Constitution principles to be accomplished. This debate needs to be faced despite its complexity and the ideological burden it brings along. These issues endanger the basic precepts of citizenship, which are independent of the conservative, liberal, or forward-looking convictions that prevail in this or in that period of the Brazilian History.

References

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This article was developed with the support of CEST (Study Center Society and Technology) of the University of São Paulo (CEST-USP).